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

Compatibility of Fixed-Term Contracts in Football with Directive 1999/70/EC. Part.1: The General Framework. By Piotr Drabik

Introduction
On 25 March 2015, the Labour Court of Mainz issued its decision in proceedings brought by a German footballer, Heinz Müller, against his (now former) club 1. FSV Mainz 05 (Mainz 05). The Court sided with the player and ruled that Müller should have been employed by Mainz 05 for an indefinite period following his 2009 three year contract with the club which was subsequently extended in 2011 to run until mid-2014. The judgment was based on national law implementing Directive 1999/70 on fixed-term work[1] (Directive) with the latter being introduced pursuant to art. 155(2) TFEU (ex art. 139(2) TEC). On the basis of this article, European social partners’ may request a framework agreement which they conclude to be implemented on the European Union (EU, Union) level by a Council decision on a proposal from the Commission. One of the objectives of the framework agreement,[2] and therefore of the Directive, was to establish a system to prevent abuse arising from the use of successive fixed-term employment contracts or relationships[3] which lies at the heart of the discussed problem.[4] More...

UEFA’s FFP out in the open: The Dynamo Moscow Case

Ever since UEFA started imposing disciplinary measures to football clubs for not complying with Financial Fair Play’s break-even requirement in 2014, it remained a mystery how UEFA’s disciplinary bodies were enforcing the Club Licensing and Financial Fair Play (“FFP”) regulations, what measures it was imposing, and what the justifications were for the imposition of these measures. For over a year, the general public could only take note of the 23 settlement agreements between Europe’s footballing body and the clubs. The evidential obstacle for a proper analysis was that the actual settlements remained confidential, as was stressed in several of our previous Blogs.[1] The information provided by the press releases lacked the necessary information to answer the abovementioned questions.

On 24 April 2015, the UEFA Club Financial Control Body lifted part of the veil by referring FC Dynamo Moscow to the Adjudicatory Body. Finally, the Adjudicatory Body had the opportunity to decide on a “FFP case. The anxiously-awaited Decision was reached by the Adjudicatory Chamber on 19 June and published not long after. Now that the Decision has been made public, a new stage of the debate regarding UEFA’s FFP policy can start.More...

Policing the (in)dependence of National Federations through the prism of the FIFA Statutes. By Tine Misic

…and everything under the sun is in tune,

but the sun is eclipsed by the moon…[1] 


The issue

Ruffling a few feathers, on 30 May 2015 the FIFA Executive Committee rather unsurprisingly, considering the previous warnings,[2] adopted a decision to suspend with immediate effect the Indonesian Football Federation (PSSI) until such time as PSSI is able to comply with its obligations under Articles 13 and 17 of the FIFA Statutes.[3] Stripping PSSI of its membership rights, the decision results in a prohibition of all Indonesian teams (national or club) from having any international sporting contact. In other words, the decision precludes all Indonesian teams from participating in any competition organised by either FIFA or the Asian Football Confederation (AFC). In addition, the suspension of rights also precludes all PSSI members and officials from benefits of any FIFA or AFC development programme, course or training during the term of suspension. This decision coincides with a very recent award by the Court of Arbitration for Sport (CAS) in this ambit, which shall be discussed further below.[4]More...


The Brussels Court judgment on Financial Fair Play: a futile attempt to pull off a Bosman. By Ben Van Rompuy

On 29 May 2015, the Brussels Court of First Instance delivered its highly anticipated judgment on the challenge brought by football players’ agent Daniel Striani (and others) against UEFA’s Club Licensing and Financial Fair Play Regulations (FFP). In media reports,[1] the judgment was generally portrayed as a significant initial victory for the opponents of FFP. The Brussels Court not only made a reference for a preliminary ruling to the European Court of Justice (CJEU) but also imposed an interim order blocking UEFA from implementing the second phase of the FFP that involves reducing the permitted deficit for clubs.

A careful reading of the judgment, however, challenges the widespread expectation that the CJEU will now pronounce itself on the compatibility of the FFP with EU law. More...

A Bridge Too Far? Bridge Transfers at the Court of Arbitration for Sport. By Antoine Duval and Luis Torres.

FIFA’s freshly adopted TPO ban entered into force on 1 May (see our Blog symposium). Though it is difficult to anticipate to what extent FIFA will be able to enforce the ban, it is likely that many of the third-party investors will try to have recourse to alternative solutions to pursue their commercial involvement in the football transfer market. One potential way to circumvent the FIFA ban is to use the proxy of what has been coined “bridge transfers”. A bridge transfer occurs when a club is used as an intermediary bridge in the transfer of a player from one club to another. The fictitious passage through this club is used to circumscribe, for example, the payment of training compensation or to whitewash a third-party ownership by transforming it into a classical employment relationship. This is a legal construction that has gained currency especially in South American football, but not only. On 5 May 2015, in the Racing Club v. FIFA case, the Court of Arbitration for Sport (CAS) rendered its first award involving directly a bridge transfer. As this practice could become prevalent in the coming years we think that this case deserves a close look. More...

20 Years After Bosman - The New Frontiers of EU Law and Sport - Special Issue of the Maastricht Journal of European and Comparative Law

Editor's note: This is a short introduction written for the special Issue of the Maastricht Journal of European and Comparative Law celebrating the 20 years of the Bosman ruling and dedicated to the new frontiers of EU law and Sport (the articles are available here). For those willing to gain a deeper insight into the content of the Issue we organize (in collaboration with Maastricht University and the Maastricht Journal) a launching event with many of the authors in Brussels tomorrow (More info here).More...

ASSER Exclusive! Interview with Charles “Chuck” Blazer by Piotr Drabik

Editor’s note: Chuck Blazer declined our official interview request but thanks to some trusted sources (the FIFA indictment and Chuck’s testimony) we have reconstructed his likely answers. This is a fictional interview. Any resemblance with real facts is purely coincidental.



Mr Blazer, thank you for agreeing to this interview, especially considering the circumstances. How are you doing?

I am facing ten charges concerning, among others, conspiracy to corrupt and money laundering. But apart from that, I am doing great (laughs)!

 

It is good to know that you have not lost your spirit. And since you’ve been involved in football, or as you call it soccer, for years could you please first tell us what was your career at FIFA and its affiliates like?

Let me see… Starting from the 1990s I was employed by and associated with FIFA and one of its constituent confederations, namely the Confederation of North, Central American and Caribbean Association Football (CONCACAF). At various times, I also served as a member of several FIFA standing committees, including the marketing and television committee. As CONCACAF’s general secretary, a position I proudly held for 21 years, I was responsible, among many other things, for negotiations concerning media and sponsorship rights. From 1997 to 2013 I also served at FIFA’s executive committee where I participated in the selection process of the host countries for the World Cup tournaments. Those years at the helm of world soccer were truly amazing years of travel and hard work mainly for the good of the beautiful game. I might add that I even managed to document some of my voyages on my blog. I initially called it “Travels with Chuck Blazer” but Vladimir (Putin) convinced me to change the name to “Travels with Chuck Blazer and his Friends”. You should check it out.

 More...



Financial Fair Play: Lessons from the 2014 and 2015 settlement practice of UEFA. By Luis Torres

UEFA announced on 8 May that it had entered into Financial Fair Play settlement agreements with 10 European football clubs. Together with the four other agreements made in February 2015, this brings the total to 14 FFP settlements for 2015 and 23 since UEFA adopted modifications in its Procedural rules and allowed settlements agreements to be made between the Clubs and the Chief Investigator of the UEFA Club Financial Control Body (CFCB).[1] 

In the two years during which UEFA’s FFP regulations have been truly up and running we have witnessed the centrality taken by the settlement procedure in their enforcement. It is extremely rare for a club to be referred to the FFP adjudication chamber. In fact, only the case regarding Dynamo Moscow has been referred to the adjudication chamber. Thus, having a close look at the settlement practice of UEFA is crucial to gaining a good understanding of the functioning of FFP. Hence, this blog offers a detailed analysis of this year’s settlement agreements and compares them with last year’s settlements. More...

Book Review: Reforming FIFA, or Not

Editor’s note: This short book review will be published in a different format in the International Sports Law Journal, due to its timeliness we decided to reproduce it here. 

Reforming FIFA, or Not

 Antoine Duval

Book Review: Mark Pieth (ed.), Reforming FIFA, Dike Verlag, St. Gallen, 2014, 28.00 CHF, p.178

 


This book looks back at the work of the Independence Governance Committee (IGC). This Committee, constituted in 2011, had as primary objective to drive a reform process of FIFA initiated by its President Sepp Blatter. After ordering from the Swiss anti-corruption expert Mark Pieth, a report on the state of FIFA’s governance, FIFA decided to mandate him with the leadership of a consulting body composed of a mix of independent experts and football insiders, which would be accompanying and supervising the internal reform process of FIFA. The IGC was officially dissolved at the end of 2013, after completing its mandate. The book is composed of eight chapters, written by former members of the IGC, including former chairman Mark Pieth. In addition to the chapters, it includes the different reports (available here, here and here) submitted by the IGC to FIFA across the years. In the words of Pieth, this account is “fascinating because it gives a hands-on, realistic perspective of the concrete efforts, the achievements and the remaining challenges in the struggle for the reform of this organization [FIFA], avoiding the usual glorification or vilification.”[1] This review will first summarize the core of the account of the FIFA reform process provided by the book, before critically engaging with the outcome of the process and outlining the deficiencies that culminated on 29 May 2015 with the re-election of Sepp Blatter as FIFA president.More...



The Spanish TV Rights Distribution System after the Royal Decree: An Introduction. By Luis Torres

On the first of May 2015, the Spanish Government finally signed the Royal Decree allowing the joint selling of the media rights of the Spanish top two football leagues. The Minister for Sport stated that the Decree will allow clubs to “pay their debts with the social security and the tax authorities and will enable the Spanish teams to compete with the biggest European Leagues in terms of revenues from the sale of media rights”.[1]Although the signing of the Royal Decree was supposed to close a very long debate and discussion between the relevant stakeholders, its aftermath shows that the Telenovela is not entirely over. 

This blog post will first provide the background story to the selling of media rights in Spain. It will, thereafter, analyse the main points of the Royal Decree and outline how the system will work in practice. Finally, the blog will shortly address the current frictions between the Spanish League (LFP) and the Spanish football federation (RFEF).More...

Asser International Sports Law Blog | Blog Symposium: Third Party Investment from a UK Perspective. By Daniel Geey

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

Blog Symposium: Third Party Investment from a UK Perspective. By Daniel Geey

Introduction: FIFA’s TPO ban and its compatibility with EU competition law.
Day 1: FIFA must regulate TPO, not ban it.
Day 2: Third-party entitlement to shares of transfer fees: problems and solutions
Day 3: The Impact of the TPO Ban on South American Football.
Day 5: Why FIFA's TPO ban is justified.

Editor's note: In this fourth part of our blog symposium on FIFA's TPO ban Daniel Geey shares his 'UK perspective' on the ban. The English Premier League being one of the first leagues to have outlawed TPO in 2010, Daniel will outline the regulatory steps taken to do so and critically assess them. Daniel is an associate in Field Fisher Waterhouse LLP's Competition and EU Regulatory Law Group. As well as being a famous 'football law' twitterer, he has also published numerous articles and blogs on the subject.

 

What is Third Party Investment?
In brief Third Party Investment (TPI) in the football industry, is where a football club does not own, or is not entitled to, 100% of the future transfer value of a player that is registered to play for that team. There are numerous models for third party player agreements but the basic premise is that companies, businesses and/or individuals provide football clubs or players with money in return for owning a percentage of a player’s future transfer value. This transfer value is also commonly referred to as a player’s economic rights. There are instances where entities will act as speculators by purchasing a percentage share in a player directly from a club in return for a lump sum that the club can then use as it wishes.

Why did the Premier League ban the practice?
The Premier League, Football League, Football Association, the Polish and French leagues have all brought in TPI bans. The original ban in the Premier League came as a result of the Tévez affair where a third party owner had the contractual right to force West Ham to sell the player if a suitable bid was received. This was against the 'material influence' regulations that were in place at the time. Previously, there was no express clause prohibiting TPI; only the act of influencing a club’s policies or performance was forbidden. Tévez’s third party contract contained a clause giving exclusive power to the third party owners, MSI and Just Sports, to facilitate the transfer of the player. West Ham did not have a veto over this right and such a stipulation breached the above Premier League rule as it meant that outside parties had material influence over the decision making of West Ham.
A common misconception throughout and after the Tévez case was that any third party player owner would have been in breach of the Premier League rules. This was not the case. It was the clause giving the owners of Tévez influence over West Ham which incurred the Premier League’s wrath (plus the non-disclosure of the agreement itself). It was for this reason that West Ham was judged to have breached the old Premier League rule Rule U18 and fined £5.5 million by the Premier League.
Subsequently, the Premier League significantly strengthened its regulations to prohibit any type of TPI. Other leagues followed as a result. The Premier League decided that from the beginning of the 2008/9 season an absolute ban on TPI was required. A spokesman stated:
“The clubs decided that third-party ownership was something they did not want to see. It raises too many issues over the integrity of competition, the development of young players and the potential impact on the football pyramid. It was felt the Premier League was in a position to take a stand on this. No one wants to see what has happened to club football in South America repeated over here”.

There are also Football League and Football Association rules prohibiting TPI but the below analysis takes the Premier League rules by way of example. Current Premier League Rules U39-40 (which at the time were rules L34-35) govern the actual prohibition and buy-out mechanism.
Premier League Rule U39 is the exemption rule which covers scenarios where clubs are allowed to receive money or incur a liability, for example, for the player registration or transfer of a player registration. Such instances include payments or receipts of transfer fees, loan fees and sell-on fees, payments for image rights contracts, payments for agency/intermediary work and payment of training compensation and solidarity contributions as set out in the FIFA regulations.
Premier League rule U40 is the mechanism to enable a third party owned player to transfer to a Premier League club. This can occur so long as the Premier League club purchases the third party’s economic interest in the player. It states:
"In respect of a player whom it applies to register as a Contract Player, a Club is permitted to make a payment to buy out the interest of a person or entity who, not being a Club or club, nevertheless has an agreement either with the club with which the player is registered, or with the player, granting it the right to receive money from a new Club or club for which that player becomes registered. Any such payment which is not dependent on the happening of a contingent event may be made either in one lump sum or in instalments provided that all such instalments are paid on or before the expiry date of the initial contract between the Club and the player. Any such payment which is payable upon the happening of a contingent event shall be payable within 7 days of the happening of that event".
This ensures that any future transfer sums, should the player be subsequently sold, would be kept by the selling Premier League club and eliminates any third party element to any future sale transaction. Interestingly, the Premier League club who 'buys-out' the third party interest may still be paying the third party investor through installments during the period that the player is playing for his new Premier League club. Whilst the player is owned by the club and no third party interest is possible, there is still the eventuality that a club could default on the installment plan and then the third party investor could sue based on the buy-out obligations in the contract. It would be unlikely yet is unclear from the regulations whether the investment stake could be transferred back to third party investor if default occurred or what other alternative recourse that an investor may have.
Nonetheless, any player registered to play in the Premier League cannot be third party owned by a TPI company. It means that the buying Premier League club has to satisfy the football authorities that all other economic interests have been extinguished. This occurred over the summer when TPI players Markovic and Mangala were transferred to Liverpool and Manchester City respectively. Premier League clubs undertake to the football authorities that it is the only entity that owns the player’s economic rights and only then can the transfer can be completed. It is likely that Falcao had a TPI contract whilst he was at Porto but as the French league also prohibits TPI, when Monaco bought him, there may well have been a requirement in place to extinguish any third party rights. As such, when he was then loaned to Manchester United this summer, his TPI rights would certainly have been extinguished to ensure there were no major complications with his Premier League registration.

Why is it such a problem?
As the Premier League spokesman explained above, their major concerns related to integrity, youth player development and money flowing out of the game. An internal FIFA report recently concluded that TPI trapped clubs in a “vicious cycle of debt and dependence” and “posed risks to players and to the integrity of the game”.
The main concerns about TPI include:
1. Conflicts of interests can potentially occur between investors, club owners, agents and coaches. For example, what if the owner of Club A also owns an economic stake in Player B playing against his club? What if an agent of a manager who buys TPI players is also an advisor of a TPI fund? Regardless of any actual conflict, there is certainly a perceived conflict which may damage the image of the game, public confidence in integrity of competitions and even lead to potential match-fixing or insider trading concerns. Questions continue to be asked over the transparency of the TPI funds and what role they have, if any, in influencing clubs.
2. Clubs become reliant on such funding which in turn leads to dependence on external owners to continue to assist in such financing arrangements. As such, TPI encourages short-term profit making with economic owners looking to the club to sell its players to realise their ‘asset’ ahead of purely on-field sporting concerns. The consequence is that the rapid turnover of TPI players at certain clubs means fans become less loyal to the players who know they will be transferred when the right offer is received. Clubs are seen as a short term ‘speculation tools’ with the result that money leaves the football family.

Why is the practice necessary?
To counter the arguments set out above, the following points demonstrate are why TPI is so vital for many clubs around the world.
1. A growing number of clubs cannot compete with the larger commercial and broadcasting deals of the bigger European leagues. Clubs in so-called smaller European leagues, for example, need to leverage their assets and find innovative ways to find competitive advantage for playing against teams in the Champions League.
2. Purchasing players is an inherently risky business. Clubs with less money to spend would therefore usually be more risk-averse when having to invest heavily in transfers. One way of limiting such risk, is to share the financial burden. Therefore contracts are entered into between economic owners and clubs to either help the club with the purchase price for a talented individual or free up capital and ‘monetise’ a current players value whilst he still remains at the club. In either event, the club benefits from external finance that cushions the club’s position if the player is not a world beater. Both the club and the fund then benefit if the player is a success through a large transfer fee received that is shared according to the contract.
3. There are various ways to alleviate conflict of interest, integrity and transparency issues. Instead of banning TPI, many believe regulation through a transparent approach to TPI by disclosing a register of interests would alleviate a number of concerns as well as making TPI contracts available to FIFA/UEFA to ensure ‘material influence’ issues are correctly dealt with in the TPI contracts.
With FIFA regulating to ban players who are third party owned, many are questioning whether regulation of the practice rather than an outright ban would be preferable. In addition, some believe that it is not a ban but total transparency of the arrangements that is required. This could even be expanded to include a list of the owners of such transfer rights. Such transparency could allow the football family to scrutinise any potential conflicts of interest between, for example, those who own the economic rights of a player and those who also own a stake in a football club. With FIFA’s regulation governing the TPI prohibition, UEFA and FIFPro have backed such a position too.

What is the current state of play?
The current FIFA Rule Article 18bis of FIFA’s Rules on the Status and Transfer of Players states that:
“No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer related matters its independence, its policies or the performance of its teams.”
This was not a specific ban on TPI but a ban on a third party owner from influencing a club’s employment or transfer related matters.
Throughout 2014, UEFA and FIFA made a number of public statements concerning their aim to outlaw TPI. In September FIFA’s President Sepp Blatter explained that:
“We took a firm decision that [TPI] should be banned but it cannot be banned immediately there will be a transitional period”.
FIFA then set up a working group to address the topic of TPI. At the time, in their press release there was no explicit mention of a ban but “to analyse all possible regulatory options in relation to this complex practice and to make preliminary suggestions”. It was to the surprise of many that in late December, whilst the working group was still debating several possibilities that FIFA announced that they were to ban TPI globally. It is important to set out the exact wording of the FIFA circular to grasp the wide scope of the prohibition. Specifically, a third party is defined as "a party other than the two clubs transferring a player from one to the other, or any previous club, with which the player has been registered".
"Article 18ter Third-party ownership of players' economic rights
1. No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation.
2. The interdiction as per paragraph 1 comes into force on 1 May 2015.
3. Agreements covered by paragraph 1 which predate 1 May 2015 may continue to be in place until their contractual expiration. However, their duration may not be extended.
4. The validity of any agreement covered by paragraph 1 signed between 1 January 2015 and 30 April 2015 may not have a contractual duration of more than 1 year beyond the effective date.
5. By the end of April 2015, all existing agreements covered by paragraph 1 need to be recorded within the Transfer Matching System (TMS). All clubs that have signed such agreements are required to upload them in their entirety, including possible annexes or amendments, in TMS, specifying the details of the third party concerned, the full name of the player as well as the duration of the agreement.
6. The FIFA Disciplinary Committee may impose disciplinary measures on clubs or players that do not observe the obligations set out in this article".
Article 18ter imposes a blanket global ban for TPI specifically forbidding any entity that is not a club from being entitled to future economic rights and/or transfer compensation. Whilst it has been explicitly considered that the prohibition only comes into force in May 2015, agreements entered into from 1 January can only be one year in length. This effectively reduces the possibility of new TPI contracts being entered into. Interestingly, Sporting Lisbon for example, recently announced that they had bought back a number of economic rights contracts from third party investors. They presumably considered that their position may well have been strengthened as a result of the new regulations.
Nonetheless, existing third party contracts will continue until expiry meaning that some players may still be subject to third party investment contracts for a number of seasons to come.  Such contracts will however be monitored through FIFA's TMS system as any club will be required to disclose a valid third party contract due to the mandatory disclosure obligations set out in paragraph 5 above. Such obligations are required to be adhered to in a relatively short time period (by the end of April 2015). The result of such disclosure may be that the contracts submitted to FIFA may themselves breach Article 18bis, for example, regarding TPI material influence clauses. Clubs will be faced with the obligation to provide all continuing TPI contracts to FIFA and will be subject to disciplinary measures if they do not. There is now an added compliance factor for clubs to adhere to under the new regulations and a variety of disciplinary cases against clubs should not be ruled out.
Lastly, the Portuguese and Spanish leagues are reported to have made a formal complaint to the European Commission, presumably assessing that Article 18ter is contrary to the free movement and competition rules. They will no doubt be arguing that the absolute ban that FIFA has imposed, is disproportionate i.e. that there are less restrictive ways of achieving the same objective.
Many have suggested that regulating TPI through transparency and disclosure obligations is a better alternative than an outright ban. It will be for the European Commission to decide whether to take the complaint forward and make a more substantive assessment or to reject the complaint. It should be noted that when the Premier League banned TPI, although there were some that argued that the prohibition breached competition law, no one actually came forward to challenge the regulation. A mere two months after FIFA announced the ban did the two Iberian associations challenge Article 18ter. That suggests, as many believe, that TPI has played an integral part in the way that clubs in those leagues use finance to 'de-risk' transfers and compete against clubs in associations with higher revenue generating capabilities. TPI has been an essential financing option.

Conclusion

Whilst the Premier League, as a reaction to the Tévez affair, made a strong policy decision to ban the practice in its league, a more fundamental shift is occurring on the global stage. Football specifically is very much in the European Commission's view with current Intermediary and TPI complaints and a previous Financial Fair Play complaint that was rejected but is now before the Belgian national courts. The TPI complaint will not be a quick process and in the meantime, unless interim relief is sought, existing TPI contracts will soon have to be lodged with FIFA and from 1 May, no new contracts can be entered into. Whether the practice is banned for good is now in the hands of the European Commission

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