Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

The Olympic Agenda 2020: The devil is in the implementation!

The 40 recommendations of the Olympic Agenda 2020 are out! First thought: one should not underplay the 40 recommendations, they constitute (on paper at least) a potential leap forward for the IOC. The media will focus on the hot stuff: the Olympic channel, the pluri-localisation of the Games, or their dynamic format. More importantly, and to some extent surprisingly to us, however, the IOC has also fully embraced sustainability and good governance. Nonetheless, the long-term legacy of the Olympic Agenda 2020 will hinge on the IOC’s determination to be true to these fundamental commitments. Indeed, the devil is always in the implementation, and the laudable intents of some recommendations will depend on future political choices by Olympic bureaucrats. 

For those interested in human rights and democracy at (and around) the Olympics, two aspects are crucial: the IOC’s confession that the autonomy of sport is intimately linked to the quality of its governance standards and the central role the concept of sustainability is to play in the bidding process and the host city contract.  More...

UEFA’s tax-free Euro 2016 in France: State aid or no State aid?

Last week, the French newspaper Les Echos broke the story that UEFA (or better said its subsidiary) will be exempted from paying taxes in France on revenues derived from Euro 2016. At a time when International Sporting Federations, most notably FIFA, are facing heavy criticisms for their bidding procedures and the special treatment enjoyed by their officials, this tax exemption was not likely to go unnoticed. The French minister for sport, confronted with an angry public opinion, responded by stating that tax exemptions are common practice regarding international sporting events. The former French government agreed to this exemption. In fact, he stressed that without it “France would never have hosted the competition and the Euro 2016 would have gone elsewhere”. More...

The New Olympic Host City Contract: Human Rights à la carte? by Ryan Gauthier, PhD Researcher (Erasmus University Rotterdam)

Three weeks ago, I gave a talk for a group of visiting researchers at Harvard Law School on the accountability of the IOC for human rights abuses caused by hosting Olympic Games. On the day of that talk, Human Rights Watch announced that the International Olympic Committee (“IOC”) would insert new language into the Host City Contract presumably for the 2022 Olympic Games onwards. The new language apparently requires the parties to the contract to:

“take all necessary measures to ensure that development projects necessary for the organization of the Games comply with local, regional, and national legislation, and international agreements and protocols, applicable in the host country with regard to planning, construction, protection of the environment, health, safety, and labour laws.”More...

The UN and the IOC: Beautiful friendship or Liaison Dangereuse?

The IOC has trumpeted it worldwide as a « historical milestone »: the United Nations has recognised the sacrosanct autonomy of sport. Indeed, the Resolution A/69/L.5 (see the final draft) adopted by the General Assembly on 31 October states that it  “supports the independence and autonomy of sport as well as the mission of the International Olympic Committee in leading the Olympic movement”. This is a logical conclusion to a year that has brought the two organisations closer than ever. In April, UN Secretary General Ban Ki-moon appointed former IOC President, Jacques Rogge, Special Envoy for Youth Refugees and Sport. At this occasion, the current IOC President, Thomas Bach, made an eloquent speech celebrating a “historic step forward to better accomplish our common mission for humanity” and a memorandum understanding was signed between the UN and the IOC. This is all sweet and well, but is there something new under the sun?More...

Image Rights in Professional Basketball (Part I): The ‘in-n-out rimshot’ of the Basketball Arbitral Tribunal to enforce players’ image rights contracts. By Thalia Diathesopoulou

A warning addressed to fans of French teams featuring in the recently launched video game NBA 2K15: Hurry up! The last jump ball for Strasbourg and Nanterre in NBA 2K 15 may occur earlier than expected. The French Labour Union of Basketball (Syndicat National du Basket, SNB) is dissatisfied that Euroleague and 2K Games did not ask (nor paid) for its permission before including the two teams of Pro A in the NBA 2K15 edition. What is at issue? French basketball players’ image rights have been transferred to SNB, which intends to start proceedings before the US Courts against 2K Games requesting 120.000 euros for unauthorized use of the players’ image rights. SNB is clear: it is not about the money, but rather to defend the players’ rights.[1] Strasbourg and Nanterre risk to “warm up” the virtual bench if this litigation goes ahead. 

Source: http://forums.nba-live.com/viewtopic.php?f=149&t=88661&start=250 More...

Sport and EU Competition Law: uncharted territories - (II) Mandatory player release systems with no compensation for clubs. By Ben Van Rompuy

The European Commission’s competition decisions in the area of sport, which set out broad principles regarding the interface between sports-related activities and EU competition law, are widely publicized. As a result of the decentralization of EU competition law enforcement, however, enforcement activity has largely shifted to the national level. Since 2004, national competition authorities (NCAs) and national courts are empowered to fully apply the EU competition rules on anti-competitive agreements (Article 101 TFEU) and abuse of a dominant position (Article 102 TFEU).

Even though NCAs and national courts have addressed a series of interesting competition cases (notably dealing with the regulatory aspects of sport) during the last ten years, the academic literature has largely overlooked these developments. This is unfortunate since all stakeholders (sports organisations, clubs, practitioners, etc.) increasingly need to learn from pressing issues arising in national cases and enforcement decisions. In a series of blog posts we will explore these unknown territories of the application of EU competition law to sport.

In this second installment of this blog series, we discuss a recent judgment of the regional court (Landgericht) of Dortmund finding that the International Handball Federation (IHF)’s mandatory release system of players for matches of national teams without compensation infringes EU and German competition law.[1] More...

The CAS Ad Hoc Division in 2014: Business as usual? – Part.1: The Jurisdiction quandary

The year is coming to an end and it has been a relatively busy one for the CAS Ad Hoc divisions. Indeed, the Ad Hoc division was, as usual now since the Olympic Games in Atlanta in 1996[1], settling  “Olympic” disputes during the Winter Olympics in Sochi. However, it was also, and this is a novelty, present at the Asian Games 2014 in Incheon.  Both divisions have had to deal with seven (published) cases in total (four in Sochi and three in Incheon). The early commentaries available on the web (here, here and there), have been relatively unmoved by this year’s case law. Was it then simply ‘business as usual’, or is there more to learn from the 2014 Ad Hoc awards? Two different dimensions of the 2014 decisions by the Ad Hoc Division seem relevant to elaborate on : the jurisdiction quandary (part. 1) and the selection drama (part. 2). More...

Sports Politics before the CAS II: Where does the freedom of speech of a Karate Official ends? By Thalia Diathesopoulou

On 6 October 2014, the CAS upheld the appeal filed by the former General Secretary of the World Karate Federation (WKF), George Yerolimpos, against the 6 February 2014 decision of the WKF Appeal Tribunal. With the award, the CAS confirmed a six-months membership suspension imposed upon the Appellant by the WKF Disciplinary Tribunal.[1] At a first glance, the case at issue seems to be an ordinary challenge of a disciplinary sanction imposed by a sports governing body. Nevertheless, this appeal lies at the heart of a highly acrimonious political fight for the leadership of the WKF, featuring two former ‘comrades’:  Mr Yerolimpos and Mr Espinos (current president of WKF). As the CAS puts it very lucidly, "this is a story about a power struggle within an international sporting body"[2], a story reminding the Saturn devouring his son myth.

This case, therefore, brings the dirty laundry of sports politics to the fore. Interestingly enough, this time the CAS does not hesitate to grapple with the political dimension of the case. More...

The new “Arrangement” between the European Commission and UEFA: A political capitulation of the EU

Yesterday, the European Commission stunned the European Sports Law world when it announced unexpectedly that it had signed a “partnership agreement with UEFA named (creatively): ‘The Arrangement for Cooperation between the European Commission and the Union of European Football Associations (UEFA)’. The press release indicates that this agreement is to “commit the two institutions to working together regularly in a tangible and constructive way on matters of shared interest”. The agreement was negotiated (as far as we know) secretly with UEFA. Despite recent meetings between EU Commissioner for sport Vassiliou and UEFA President Platini, the eventuality of such an outcome was never evoked. It is very unlikely that third-interested-parties (FIFPro, ECA, Supporters Direct etc.) were consulted in the process of drafting this Arrangement. This surprising move by an outgoing Commission will be analysed in a three-ponged approach. First, we will discuss the substance of the Arrangement (I). Thereafter, we will consider its potential legal value under EU law (II). Finally, and maybe more importantly, we will confront the political relevance of the agreement (III).  More...

Sports Politics before the CAS: Early signs of a ‘constitutional’ role for CAS? By Thalia Diathesopoulou

It took almost six months, a record of 26 witnesses and a 68 pages final award for the CAS to put an end to a long-delayed, continuously acrimonious and highly controversial presidential election for the Football Association of Thailand (FAT). Worawi Makudi can sit easy and safe on the throne of the FAT for his fourth consecutive term, since the CAS has dismissed the appeal filed by the other contender, Virach Chanpanich.[1]

Interestingly enough, it is one of the rare times that the CAS Appeal Division has been called to adjudicate on the fairness and regularity of the electoral process of a sports governing body. Having been established as the supreme judge of sports disputes, by reviewing the electoral process of international and national sports federations the CAS adds to its functions a role akin to the one played by a constitutional court in national legal systems. It seems that members of international and national federations increasingly see the CAS as an ultimate guardian of fairness and validity of internal electoral proceedings. Are these features - without prejudice to the CAS role as an arbitral body- the early sign of the emergence of a Constitutional Court for Sport? More...

Asser International Sports Law Blog | Bailing out your local football club: The Willem II and MVV State Aid decisions as blueprint for future rescue aid (Part 2)

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Bailing out your local football club: The Willem II and MVV State Aid decisions as blueprint for future rescue aid (Part 2)

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.


The 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”[1]. 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.[2]

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 Guidelines”.[3]

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 difficulties

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.[4]

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.”[5]

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.[6] 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 medium-sized enterprises

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 2008/2009.[7] 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.[8]

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.[9] 


Restructuring plans

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%.[10] 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.[11] 


Compensatory measures

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.[12] 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”.[13] 


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.[14] 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.[15] 


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.[16] 


Conclusion

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.[17] 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.[18]

In this regard it is important to highlight that the Commission seems to take into account “the peculiar nature of professional football”[19] 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[20] 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 measures (yet).[21] 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,[22] 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 in practice.

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.



[1] Commission 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.

[2] Commission 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.

[3] Ibid, para. 77.

[4] SA.40168, para. 45.

[5] Commission 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.

[6] SA.33584, para. 11.

[7] SA.40168, para. 9.

[8] 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.

[9] SA.41612, para. 9.

[10] SA.40168, para. 48.

[11] SA.41612, para. 52.

[12] SA.40168, 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.

[13] Ibid.

[14] SA.40168, para. 52.

[15] SA.41612, para. 54.

[16] SA.40168, para. 55 and SA.41612, para. 61.

[17] Commission 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, SA.35135 Multifunktionsarena der Stadt Erfurt; Commission Decision of 20 March 2013, SA.35440 Multifunktionsarena der Stadt Jena; Commission Decision of 18 December 2013, SA.35501 Financement 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, SA.37342 Regional Stadia Development in Northern Ireland; and Commission Decision of 13 December 2013, SA.37373 Contribution to the renovation of ice arena Thialf in Heerenveen.

[18] 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.

[19] SA.40168, para. 50.

[20] In paragraph 51 of SA.40168, the Commission referred to a UEFA rule, which holds that the cost of salaries should not exceed 70%.

[21] 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?”.

[22] For more information on the FC Dynamo case, see our blog “UEFA’s FFP out in the open: The Dynamo Moscow Case”.

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