This is part two of the blog on the Willem
II and MVV State Aid decisions. Where
part one served as an introduction on the two cases, part two will analyze the
compatibility assessment made by the Commission in two decisions.
compatibility of the aid to MVV and Willem II (re-)assessed
Even though it was the Netherlands’
task to invoke possible grounds of compatibility and to demonstrate that the
conditions for such compatibility were met, the aid granted to both Willem II
and MVV was never notified. The Netherland’s failure to fulfill its notification
obligation, therefore, appears to be at odds with the Commission’s final
decision to declare the aid compatible with EU law. Yet, a closer look at the
Commission’s decision of 6 March 2013 to launch the formal investigation shows
that the Commission was giving the Netherlands a ‘second chance’ to invoke
grounds that would lead to a justification of the measures. In paragraph 74,
the Commission itself reached the conclusions that the clubs in question faced
financial difficulties, consequently indicating that the Rescue and
Restructuring Guidelines might apply. In fact, the Commission even suggested
possible compensatory measures, which are very much related to “the peculiar
nature of professional football”.
These suggested compensatory measures included:
- limiting the club’s number of registered
players for a season or several seasons;
- accepting a cap on the relation
between salaries and turnover;
- banning the payment of transfer fees
for a certain period;
- offering additional expenditure on
“pro bono” activities to the benefit of the community and training of amateurs.
Furthermore, it invited the Dutch
authorities “to provide all useful information allowing the Commission to
decide whether the aid measures can be considered compatible with the
The observations and information
submitted by the Netherlands between March 2013 and July 2016 proved more than
sufficient for the Commission to carry out its compatibility assessment. As was
insinuated in the decision to launch a formal investigation, the Rescue and
Restructuring Guidelines proved fundamental to this assessment.
Willem II and MVV as firms in financial
This first condition of the Guidelines was easily complied with. As
regards Willem II, in the accounting year 2008/2009, it made a loss of €3.9
million on a turnover of €11.4 million. Meanwhile, its own equity decreased
from €4.1 million to €200.000. The losses increased to €4.4 million on a
turnover of €9.9 million for the 2009/2010 season, while its own equity
decreased further from €200.000 to minus €2.1 million.
MVV clearly was financially not doing much better. As the Commission
itself summarizes in the MVV decision,
“in 2008/2009, MVV made a loss of €1.1 million and its own equity was minus €3.8
million. By March 2010 additional losses amounting to €1.3 million had occurred
and the own equity had dropped to minus €5.17 million. In April 2010, MVV was
no longer able to pay salaries and other current expenditure and was on the
brink of bankruptcy.”
Another consequence of being in financial difficulties relates to the
licensing system put in place by the Dutch football federation KNVB. As is
explained in paragraph 11 of the decision to open a formal investigation, one
of the obligations for clubs under the current system is submitting three
financial reports a year to the KNVB. On the basis of these reports clubs are
scaled in three categories (I: insufficient, II: sufficient, III: good). Clubs
in category I may be obliged to present a plan for improvement in order to reach
categories II or III. If the club fails to comply with the plan, sanctions may
be imposed by the KNVB, including an official warning, a reduction of
competition points and – as ultimate sanction – withdrawal of the licence. At
the time the State aid was granted, both Willem II and MVV were scaled in the
insufficient category I.
Willem II and MVV as small enterprises or
This particular assessment is important for the two conditions below,
i.e. the introduction of restructuring plans and compensatory measures.
Depending on the size of the firm (or enterprise), different conditions apply. Willem
II employed 53 people in 2012 and had an annual turnover of €11.4 million in
Pursuant to the Annex of
the Commission Recommendation concerning
the definition of micro, small and medium-sized enterprises, Willem II just managed to be
considered a medium-sized enterprise.
MVV, on the other hand, is
considered a small enterprise. In the season 2009/2010 it had 38 employees and
in the season 2010/2011 it had 35 employees. Its turnover and balance sheet
total remained well below €10 million in both years.
Though not initially communicated to the Commission, both rescue
measures were subject to certain restructuring conditions. In principle, these
consisted of reducing personnel costs, by introducing new managements, selling
players, and signing players free of transfer payments. In the case of Willem
II, in the two years following the rescue measure personnel costs were reduced
by 30%. The
effects of MVV’s restructuring plan were even better, since it managed to book
profits for the three seasons following the aid and was scaled in the highest
category (III) by the KNVB in the beginning of the season 2011/2012.
For the compensatory measures it is important to take into account point
41 of the Rescue and Restructuring Guidelines. Under this provision, small
enterprises, such as MVV, are not required to take compensatory measures.
However, this exception did not apply to Willem II. The Commission noted more
expenditure of Willem II for public benefit by the training of amateurs and a
reduction of the number of registered players from 31 to 27. Similarly, no
transfer payments were made during the restructuring period.
Potentially as a result of this, Willem II was relegated to the second league
in 2011 and again in 2013. In the end, the Commission concluded that “the
compensatory measures required by the Guidelines were taken, which had the
effect of weakening Willem II's competitive position in professional football”.
Aid limited to a minimum
Since the aid measures rescued both football clubs from bankruptcy
without creating equity surplus, the Commission believed the amount of aid
granted limited to what was necessary. Furthermore, the Commission highlighted
that the restructuring plans were to a large extent financed by external
contributors just as the Rescue and Restructuring Guidelines requested. Private
entities had agreed to lend €2.25 million to Willem II for the restructuring,
which is well over the 40% of €2.4 million (the total amount of State aid
granted) required for medium-sized enterprises under the Guidelines. In
the case of MVV, several private creditors decided to waive (part of) their
debt, which amounted to €2.25 million. This amount is more than 25% of the €5.8
million granted by the Netherlands, the minimum requirement for a small
enterprise like MVV.
One time, last time
The Commission believes this condition to be fulfilled, as the
Netherlands specified that Willem II and MVV did not receive rescue or
restructuring aid in the ten years before the aid measures, nor will it award
any new rescue or restructuring aid to the clubs during a period of ten years.
At the time of writing, the non-confidential versions of the positive
decisions regarding State aid granted in favour of the Dutch professional
football clubs FC Den Bosch and NEC Nijmegen are not published. Nonetheless,
this does not prevent us from drawing the following lessons from the Willem II and MVV decisions.
First of all, these decisions show that there is no need to draft sector
specific guidelines for State aid to professional football clubs in difficulty.
The Rescue and Restructuring Guidelines are all the Commission needs in order
to carry out the compatibility assessment. This approach is radically different
when compared to the Commission’s decisional practice for the State aid to sport infrastructure cases
between 2011 and 2013. Only after the Commission dealt with ten different cases, was its approach (to a large extent) codified in Article 55 of the 2014 General Block Exemption Regulation.
In this regard it is important to highlight that the Commission seems to
take into account “the
peculiar nature of professional football”
when assessing the compatibility of State aid measures under the Rescue and
Restructuring Guidelines. For example, it showed demonstrated its awareness of
the UEFA Club Licensing and Financial
Fair Play Regulations as well as national (KNVB)
licensing rules when assessing the compensatory measures taken by Willem II. Moreover,
it clearly endorsed the decision taken by the club not to make transfer
payments during the restructuring period, since this prevents the club from
spending money it might not have, while simultaneously limiting the club’s
competitiveness on the field.
A further lesson that can be drawn
from these decisions is that, in my opinion, the threshold to ‘pass the
compatibility test’ under the Rescue and Restructuring Guidelines is quite low.
With regard to the condition that the club needs to be in financial
difficulties in order to get the State aid, it is clear that granting State aid
to professional football clubs in financial difficulties is one of the most (if
not the most) common form of State
aid in the sector. This was the case for the five Dutch clubs scrutinized by
the Commission, as well as the three clubs from Valencia of which the non-confidential
version of the decision still needs to be published. Other clubs like FC Twente and Sporting de Gijón have also received State aid over
financial difficulties, even though the Commission did not investigate these
In other words, a majority of the cases are assessable under these Guidelines.
The condition that the beneficiary
football club needs to stick to a restructuring plan in order to receive the
State aid is key. As is elucidated in the two decisions, the restructuring
plans consisted of selling players, reducing the costs of wages and not paying
transfer fees for new players for a period of three years. In my view, these
conditions are rather proportionate when considering that the clubs in question
were on the verge of bankruptcy prior to the State aid measures. In fact, one
could argue that FIFA’s transfer ban imposed on FC Barcelona for international
transfers of minors,
or excluding FC Dynamo from the next UEFA club competition
for which the club would otherwise qualify in four seasons (i.e. the 2015/16, 2016/17,
2017/18 and 2018/19 seasons) for breaching UEFA’s FFP Regulations,
are harsher than the restructuring conditions accepted by the Commission.
The same can be said about the need to take compensatory measures. The
measures taken by Willem II (reducing the number of employees and players, and
reducing the cost of wages to 48% of the turnover) could be considered a direct
consequence of the abovementioned restructuring plans. The only additional
compensatory measure taken by Willem II was increasing expenditure of the club
for the training of amateurs, though the decision does not specify what this implied
Perhaps the only condition that could be problematic for some football
clubs is the “one time, last time” criterion. Under this condition, the public
authorities cannot rescue Willem II and MVV again until at least 2020. Although
Willem II and MVV are currently in category III and II on the KNVB’s
scale respectively, falling back to category I before 2020
could have dramatic consequences.
Be that as it may, now that the Commission’s approach for the assessment
of State aid to professional football clubs in financial difficulties is out in
the open, public authorities and football clubs alike should use this knowledge
to their own advantage. They should remember that the Commission is willing to
accept rescue aid and that the restructuring conditions are far from impossible
to match. One can even wonder whether a club like FC Twente would have turned to Doyen when it was facing financial difficulties, if it had been aware of the
conditions imposed by the European Commission for receiving compatible State aid
under the Rescue and Restructuring Guidelines.
Decision on State Aid SA.40168 of 4 July 2016 implemented by the Netherlands in
favour of the professional football club Willem II in Tilburg, para. 50.
Decision SA.33584 of 6 March 2013 – The Netherlands Alleged municipal aid to the
Professional Dutch football clubs Vitesse, NEC, Willem II, MVV, PSV and FC Den
Bosch in 2008-2011, para. 80.
 Ibid, para. 77.
 SA.40168, para. 45.
Decision on State Aid SA.41612 of 4 July 2016 implemented by the Netherlands in
favour of the professional football club MVV in Maastricht, para. 13.
 SA.33584, para. 11.
SA.40168, para. 9.
 A firm
is not considered a small enterprise i fit has more than 50 employees and an
annual turnover of more than €10 million. See footnote 27.
para. 51. Indeed, according to www.transfermarkt.de, Willem
II only paid a mere €20.000 for the signing of Kevin Brands in July 2012.
para. 55 and SA.41612, para. 61.
Decision of 9 November 2011, SA.31722 – Hungary - Supporting
the Hungarian sport sector via tax benefit scheme;
Commission Decision of 2 May 2013, SA.33618 Uppsala
arena; Commission Decision of 15 May 2013, SA.33728 Multiarena
in Copenhagen; Commission Decision of 20 March 2013,
der Stadt Erfurt; Commission Decision of 20 March 2013,
der Stadt Jena; Commission Decision of 18 December 2013,
de la construction et de la renovation des stades pour l’EURO 2016;
Commission Decision of 2 October 2013, SA.36105 Fuβballstadion
Chemnitz; Commission Decision of 20 November 2013, SA.37109 Football
stadiums in Flanders; Commission Decision of 9 April 2014,
Stadia Development in Northern Ireland; and Commission
Decision of 13 December 2013, SA.37373 Contribution
to the renovation of ice arena Thialf in Heerenveen.
 For a deeper analysis of whether sport-specific
guidelines are necessary, see Oskar van Maren, “EU State Aid Law and Professional Football: A threat or a Blessing?”, European State Aid Law Quarterly,
Volume 15 1/2016, pages 31-46. To find out how sector-specific rules for
State aid are usually articulated, see Ben Van Rompuy and Oskar van Maren, “EU
Control of State Aid to Professional Sport: Why Now?” In: “The Legacy of
Bosman. Revisiting the relationship between EU law and sport”, T.M.C.
Asser Press, 2016.
 SA.40168, para. 50.
paragraph 51 of SA.40168, the Commission referred to a UEFA rule, which holds
that the cost of salaries should not exceed 70%.
 For more
information of the precarious financial situation of these two clubs, see our
previous blogs: “Unpacking
Doyen’s TPO Deals: FC Twente's Game of Maltese Roulette”, and “TPO and
Spanish football, friends with(out) benefits?”.
 For more
information on the FC Dynamo case,
see our blog “UEFA’s
FFP out in the open: The Dynamo Moscow Case”.