Sport is often presented by Sports Governing Bodies (SGBs), and in particular the International Olympic Committee, as apolitical. A neutral endeavor, which ignores the whims of politics and keeps national governments at arm’s length. In short, it is thought of as an autonomous sphere of transnational society wishing to remain unaffected by the political turbulences out there. In fact, many SGBs enforce strict rules banning political speech by individuals, and in the spaces, subjected to their contractual power. Moreover, FIFA, for example, regularly issues effective sanctions against states which are perceived as threatening the autonomy of the governance of football on their territory. Hence, this apolitical ideal of international sports is not only a founding myth of the Olympic Movement, it is actively pursued by SGBs through their private regulatory powers and has hard consequences for athletes, clubs, sport officials alike.

Yet, on 24 February, Russia decided to invade Ukraine, in what has become the most important land war in Europe since the implosion of ex-Yugoslavia. This invasion was quickly followed by condemnations from the IOC and many other SGBs, leading in many cases, most prominently by UEFA and FIFA, to the exclusion of Russian teams and athletes from international sporting competitions. This reaction is difficult to square with the neutrality and autonomy of sport so vigorously defended by the international SGBs until recently. It raises also many questions of double standards: why did this illegal invasion lead to sporting consequences and not others? Furthermore, the Court of Arbitration of Sport recently released two orders (available here and here) concerning UEFA and FIFA’s decisions to exclude Russian national teams and clubs from their football competitions, which outline the legal strategies pursued by the SGBs to reconcile the public urge to exclude Russia(ns) from international sporting competitions, and their commitments to political neutrality.

We are very happy to welcome three outstanding scholars to discuss these issues with us from different methodological perspectives.

Speakers:

• Prof. Carmen Pérez (Universidad Carlos III de Madrid), who wrote a blog on the reactions of SGBs to Russia’s invasion
• Dr. Daniela Heerdt (Asser Institute and Centre for Sports and Human Rights), who is the co-author of a blog mapping the reactions of SGBs to Russia’s invasion
• Carole Gomez (University of Lausanne and Institut de Relations Internationales et Strategiques), who has been interviewed numerous times by international media on the issue (see here and here)

Moderators:

• Dr. Marjolaine Viret (University of Lausanne)
• Dr. Antoine Duval (Asser Institute)

Register for free HERE!

After a decade of financial misery, it appears that Valencia CF’s problems are finally over. The foreign takeover by Singaporean billionaire Peter Lim will be concluded in the upcoming weeks, and the construction on the new stadium will resume after five years on hold due to a lack of money. On 3 June Bankia, the Spanish bank that “saved” Valencia CF in 2009 by providing a loan of €81 million, gave the green light for the takeover. However, appearances can be deceiving. Indeed, Valencia CF has been the subject of numerous Spanish Court decisions since March 2013, the latest dating from 22 May 2014. The cases concern a guarantee given by the local authorities and whether this guarantee should be relied upon since Valencia CF is incapable of repaying its debt. Meanwhile, the European Commission announced that it will soon reach a final decision regarding the formal investigations into alleged State aid measures granted to the club. Strangely enough, the Spanish Courts are showing little interest in the pending Commission Decision and Mr Lim seems to be ignoring it as well. True, EU institutions have so far never sanctioned public authorities of Member States for granting aid to football clubs, but the evidence in this case is so damning that it will be difficult to overlook. Our aim in this blog-post is to disentangle the legal complexity of a case fought both at the national and the European level.  

Saving Valencia CF with public money

The aid measure has its origins in 2009, when Valencia CF, aiming to reduce the clubs total debt of €596 million and continue the construction works on a new stadium, decided to sell new shares for a total capital injection of €92 million. Unfortunately, club members only subscribed €18 million in shares. The majority of the shares were acquired by La Fundación del Valencia Club de Fútbol, (a foundation especially created by the club for this purpose) becoming majority shareholder of the club (70%) for the sum of €75 million. The money was loaned by BANCAJA, the largest financial institution of the autonomous region of Valencia. The loan was later increased to €81 million in November 2010. The Fundación and BANCAJA also agreed that the revenues for the old “Mestalla” stadium, which was for sale, would go to the bank. Furthermore, on 26 August 2009, the Instituto Valenciano de Finanzas (hereafter: IVF[1]) had issued a guarantee on the controversial loan.[2] In case of a default by the Fundación, the IVF was to pay back to the bank the outstanding amount. In return, the IVF would receive an annual premium of 0.5% and the Fundación is prevented to selling shares without the previous consent by the IVF.[3]

In September 2012, Bankia (the new name of the bank following a merger in 2010) was forced to restructure the deal it had with the Fundación. Bankia was suffering heavily from the financial crisis and, after being rescued by the Spanish Government, was forced to decrease its financial debt by increasing its liquidity and reducing its real estate portfolio. Thus, Valencia CF was to negotiate the refinancing of its debt, given that the Fundación was unable to repay the loan to Bankia.

By February 2013 the total of Valencia’s debts reached €387 million owed to different creditors, including the €81 million it owed to Bankia. In light of the guarantee issued, the Consell de la Generalitat de la Comunidad Autónoma de Valencia (the local government of the autonomous region of Valencia, also known as the Generalitat) was asked to transfer €4.8 million to Bankia to cover interest payments. Even worse, the Generalitat might have to bear the full debt of €81 million the Fundación owed to Bankia. As a result, the Generalitat would hold 70% of the shares in Valencia CF, thereby making the football club state-owned.[4]

Claiming that the guarantee breached both Spanish and EU law and should therefore be declared void, two club shareholders lodged a complaint against the local government of Valencia.[5] In its judgment, dating from 8 March 2013, the Administrative Court of Valencia annulled the guarantee, arguing inter alia that the operation would not generate benefits for the IVF and that the restrictions placed by the public authorities on the selling of shares by Valencia CF will distort competition.^[6] Finally, the duty to evaluate whether the operation was subject to EU State aid rules had not been complied with.^[7]

This last argument by the Administrative Court is no surprise, in light of the blatant State aid. Indeed, both the press and Members of the European Parliament quickly jumped onto the allegations that State aid in the form of loan guarantees was granted by Spanish public authorities. The European Commission forced by this judgment, press reports and a flood of information sent by Spanish citizens officially asked Spain to comment on these reports on 8 April 2013.[8] After analysing all the information the Commission decided to initiate the procedure laid down in Article 108(2) TFEU on alleged illegal State aid on 18 December 2013. Now that the Commission has announced in its Management Plan 2014 that the final decision will be published in 2014, one can reasonably expect the case to draw to its close.

The strategy of the Spanish Courts: Let’s ignore State aid rules and the Commission

The judgment by the Administrative Court of Valencia was only the first in a whole string of judgments by the Spanish Courts. The most important ones date from 15 November 2013, 19 December 2013, and 22 May 2014. 

Bankia appealed the judgment of 8 March 2013, claiming it should have been invited as a party at the trial. At first, the Administrative Court of Valencia upheld the previous decision annulling the guarantee, but Bankia’s second appeal, this time in front of the Tribunal Superior de Justicia de la Comunidad Valenciana, sala de lo Contencioso (the High Administrative Court of the autonomous region of Valencia) was successful. On 15 November 2013, the High Court, found the judgments by the Administrative Court to be void due to a procedural deficiency. Indeed, as Bankia was not provided the opportunity to present its views at the first trial, the tribunal violated Bankia’s right to be heard. More precisely the High Court considered that the IVF had not informed Bankia adequately when, as a public authority, it had the obligation to do so; Bankia’s own financial troubles and instability were too important for it to be left out of the procedure; and the fate of the football club would be at stake if the guarantee is revoked.[9] Hence, the guarantee provided by the local authorities on the loan was considered legally valid and Valencia CF’s bankruptcy risk dismissed. That the guarantee probably is in breach of EU State aid rules was irrelevant to the High Court.

In response to this latest judgment the same shareholders demanded an injunction that consisted in suspending the execution of the guarantee since it could constitute illegal State aid. Once again the demanding parties won the day and the execution of the guarantee was suspended in a decision dating from 19 December 2013. The timing by the Administrative Court to suspend the execution could not have been better. Indeed, the decision occurred only 24 hours after the Commission announced a formal investigation into the Valencia F.C case, thus, the alleged state aid could have been used as a fitting legal justification to suspend the guarantee. However, strangely enough, the Administrative Court did not refer to the State aid constellation. In the fourth paragraph of its judgment, the Court did recognize that procedural rules were breached including the European procedural rules on State aid[10], but the reasoning used to freeze the guarantee was based on national law. 

Peter Lim appears on stage: the end of all the trouble?

By January of this year, the IVF received a formal offer from Mr Lim to invest €210 million in the club. Mr Lim would, thus, take over IVF’s debt with Bankia. The Valencian government must have hoped for the end of their troubles. Indeed, it appeared that it was only the Commission decision it had to worry about.

But, Bankia, on the other hand, still believed it had a right to compensation by the Valencian government for refusing to execute the guarantee and launched a new civil procedure. In a ruling dating from 22 May 2014, the high Civil Court in Valencia sided with the bank and upheld the validity of the guarantee (yet again). Furthermore, the judge ordered the local government to pay €4.2 million as a compensation for loss of opportunities.[11] To make the legal uncertainty certain, the Valencian government quickly reaffirmed its refusal to pay any compensation to Bankia since it considered the execution of the guarantee as suspended by the Administrative Court.[12]

The ball in the Commission’s Court

From a substantive perspective, the Valencia State aid case seems quite straightforward. Valencia CF is a professional football club engaged in economic activities and should therefore be considered an undertaking under EU State aid rules. The guarantee provided by the local government constitutes an economic advantage for the football club over its competitors, as it is technically shield from the possibility of going bankrupt. The measure is selective, distorts competition towards clubs not enjoying a similar guarantee and is funded by State (more precisely the regional governments) resources. In other words, the criteria of article 107(1) TFEU can be considered as fulfilled. Finally, the measure does not appear to fall under any of the exemptions of articles 107(2) and 107(3) nor under any provisions of the General Block Exemption Regulation. 

It remains to be seen, however, whether the Commission will take an unprecedented action and sanction the local authorities of a Member State for supporting financially a professional football club. The Valencia case certainly provides an outstanding opportunity to do so. First of all, the facts of the case cast little doubt as to whether or not the measure breached EU State aid law. Second, even though the Commission cannot decide the matter in place of the Spanish Courts, any decision will create a guiding precedent hopefully putting a final point to the prevailing legal uncertainty of a long-lasting and protracted legal saga.

[1] The IVF is the Public Entity that  performs the public credit policy of the government of the autonomous region of Valencia

[2] Memoria de Actividades: Institut Valencià de Finances, Informe Anual 2009, page 48

[3] Sentencia N° 103/2013, N° de Recurso 239/2010, 8 March 2013, §5

[4] Ibid

[5] J. M. Bortvalencia, “Creo que Bankia no puede recurrir esta sentencia”, Levante – EMV, 21 March 2013

[6] Supra Nº3, §7

[7] Ibid

[8] Commission Decision State aid SA.36387 – Spain: Alleged aid in favour of three Valencia football clubs

[9] Las Provincias, El Valencia gana tranquilidad al decretar el TSJ que la Generalitat vuelve a ser avalista, 16 November 213

[10] Auto N° 239/2010,  19 December 2013, §4

[11] Iusport, Bankia levanta el hacha de guerra y ejecuta parte del aval del Valencia, 27 May 2014

[12] Las Provincias, La Generalitat «no se plantea pagar nada» por el aval a la Fundación del Valencia CF, 27 May 2014

Star Lawyer Jean-Louis Dupont is almost a monopolist as far as high profile EU law and football cases are concerned. This year, besides a mediatised challenge against UEFA’s FFP regulations, he is going after FIFA’s TPO ban on behalf of the Spanish and Portuguese leagues in front of the EU Commission, but also before the Brussels First Instance Court defending the infamous Malta-based football investment firm Doyen Sport. FIFA and UEFA’s archenemy, probably electrified by the 20 years of the Bosman ruling, is emphatically trying to reproduce his world-famous legal prowess. Despite a first spark at a success in the FFP case against UEFA with the Court of first instance of Brussels sending a preliminary reference to the Court of Justice of the EU (CJEU), this has proven to be a mirage as the CJEU refused, as foretold, to answer the questions of the Brussels Court, while the provisory measures ordered by the judge have been suspended due to UEFA’s appeal. But, there was still hope, the case against FIFA’s TPO ban, also involving UEFA and the Belgium federation, was pending in front of the same Brussels Court of First Instance, which had proven to be very willing to block UEFA’s FFP regulations. Yet, the final ruling is another disappointment for Dupont (and good news for FIFA). The Court refused to give way to Doyen’s demands for provisional measures and a preliminary reference. The likelihood of a timely Bosman bis repetita is fading away. Fortunately, we got hold of the judgment of the Brussels court and it is certainly of interest to all those eagerly awaiting to know whether FIFA’s TPO ban will be deemed compatible or not with EU law.

I.               Facts and Procedure

The case was introduced in March 2015 by Doyen Sports Investments Limited, the Maltese investment fund specialised in football and an obscure Belgium football club, the RFC Seresien/Seraing United, against the Belgium federation (URBSFA), FIFA and UEFA. For its part, FIFPro decided to voluntarily intervene in the debates.

Seraing United plays in the Proximus League, the Belgium Second Division, and signed a specific collaboration contract with Doyen Sports on 30 January 2015. This collaboration contract foresees that Doyen and Seraing United will collaborate to select at least two players in each summer transfer window to be recruited by Seraing via a TPI (Third-Party Investment). In return, Doyen will contribute 300 000€ for the 2015/2016 season to Seraing’s budget and own 30% of rights of the players it has picked. For example, during this summer’s transfer window Seraing and Doyen have concluded a TPI contract to finance the recruitment of Ferraz Pereira. It is this contract that led to the present dispute. Indeed, as Seraing indicated in its filing for registration that Ferraz Perreira was recruited via a TPI contract, the URBSFA decided to block the registration of the player in the FIFA TMS system. The procedure regarding the release of an International Transfer Certificate is still on-going in front of FIFA’s internal bodies.

The claimants demanded that the judge blocked any attempt of FIFA, UEFA and the Belgium federation to implement the TPO ban (in the form of FIFA Circular 1464) and, if necessary, to send a preliminary reference to the CJEU.

II.             Jurisdiction of the Brussels Court

The first key question, as in the FFP case, was whether the Brussels Court had jurisdiction over the matter. This was unproblematic as far as the demands against the Belgium federation are concerned, as it is seated in Belgium and a potential arbitration clause does not hinder the demand of provisory measures to the national judge under Belgium law.

As far as UEFA and FIFA are concerned, however, the question is more complex. The Brussels Court quickly side-lined the objection based on a putative CAS arbitration clause, but it went into greater details concerning its international jurisdiction on the basis of the Lugano Convention. Under article 6 par. 1 of the Lugano Convention a defendant can be sued in the court of a place where one of the defendants is domiciled if “the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings”. In the FFP case, it is this close connection between the claims raised against UEFA and the Belgium Federation that could not be decisively proven and that led the Court to declare itself incompetent to deal with the matter. In the present case, the Court clearly distinguishes between FIFA and UEFA.

Concerning the claims raised against FIFA, the Court considers that:

“The relations between FIFA and the URBSFA are characterized by the fact that FIFA is the association adopting the international regulations which national federations, members of FIFA, including the URBSFA, have the duty to respect and enforce against their own members, i.e. the football clubs.” (para.42 of the judgment)

It deduces from this consideration that the URBSFA will have to implement FIFA’s TPO ban. However, this close connection exists only insofar as the claims raised are connected with provisory measures to be applied on the Belgian territory. In the eyes of the Court, FIFA’s objections to its jurisdiction based on article 22.2 of the Lugano Convention are not relevant, insofar that the case does not involve primarily a question of company or association law. The Court, contrary to the FFP case against UEFA, concludes that it has jurisdiction to deal with the claims raised against FIFA. This is a first, clear, legal victory for Jean-Louis Dupont. Yet this does not apply to UEFA as it did not adopt the regulations challenged, nor is the Belgium federation implementing its rules when enforcing the TPO ban. Thus, a close link in the sense of article 6 par. 1 of the Lugano Convention is missing[1]. Neither is article 31 of the Lugano Convention suitable to ground the Court’s jurisdiction against UEFA[2]. Hence, the Court declares itself incompetent to deal with the claims raised against UEFA.

The Court’s recognition that it has jurisdiction to deal with the claims directed against FIFA’s TPO ban insofar as FIFA’s rules have to be implemented by the URBSFA on the Belgium territory meant that this time Dupont could hope for a viable preliminary reference. Yet, as we will see, this did not lead to the award of the provisory measures hoped by the claimants.

III.           The conditions for awarding provisory measures under Belgium law

Under Belgium law two main conditions need to be fulfilled to lead to the granting of provisory measures: there need to be urgency and “appearance of right” (condition de l’apparence), which is analogous to the likelihood to prevail. There is urgency when it is feared that harm of certain intensity, or the likelihood of a serious inconvenience, make an immediate decision preferable. In the present case, the Court considers that Doyen is necessarily negatively affected by the TPO ban, as it is unable to exercise its economic activity[3]. The ban prejudices also Seraing United, which is deprived of an opportunity to finance its activities in a difficult context (URBSFA’s new regulations restricting the conditions to be considered a professional club). Thus, the Court finds that the urgency of the matter is given.

However, and this is the crux of the case, the judge refuses to consider that there is an appearance of right. In other words, he denied that the claimants are likely to prevail on the substance of the application of EU competition law. This is the most important part of the judgment, as it is the first time that a judicial authority adopts a legally binding (though provisional) opinion on the potential compatibility of the TPO ban with EU competition law (the much-cited Spanish’s Competition Authority opinion is advisory and does not cover the application of EU competition law). The claimants argued that the TPO ban is contrary to EU competition law (Article 101 and 102 TFEU) and to the EU free movement rights (Article 63, 56 and 45 TFEU). While, FIFPro, to which the Court recognized the privilege of expressing the collective opinion of professional players, FIFA and UEFA considered that it is compatible with EU law. 

The Court, first, refers to the Piau ruling of the CJEU to affirm that FIFA has a dominant position on the market for the services of players’ agents[4]. This is not surprising. In fact the judge insists that the key legal question is whether there is an abuse of this dominant position. In this regard it considers that both abuses of dominant position under article 102 TFEU and restrictions on free competition under article 101 par. 1 TFEU must be analysed with due consideration to the specific sector in which FIFA is active and to the legitimate objectives it claims to pursue.[5] Subsequently, the judgment lists a number of factors highlighted by FIFA and FIFPro underlying the legitimate objectives of the ban:

·      These practices are mainly the deed of investment firms

·      From which we do not know the shareholders

·      Which conclude contracts with different clubs, potentially directly competing against each other on the field

·      These contracts are opaque as they are not registered

·      They can be easily transferred

·      The third-party investors are interested in the players’ quick transfers, in short sequences, as they will then reap their benefits

·      This is contradictory with the objective of contractual stability during the players contract with their club

·      If the transfer is not effectuated before the end of the employment contract (knowing that at this time the player recovers his full contractual freedom), the clubs are due to pay compensation […].[6]

The Court concludes that it is likely that third-party investors/owners will be in a conflict of interest, with equally important risks of manipulations and match-fixing arising, all of this in a totally opaque environment. Thus, though the TPI/TPO practice is apparently of financial nature, it is deemed to have important sporting consequences. Moreover, the Court remarks that the ban on the influence of third parties on clubs introduced by FIFA a few years ago via article 18 bis of the FIFA RSTP has proven ineffective. This hints at the necessity of a total ban. Additionally, it referred to the legitimate objectives of the ban invoked by FIFPro as representative of the point of view of the players.

In fine, the Court concluded that the likelihood that FIFA’s TPO ban would fail the tests of proportionality and necessity is not proven “with the force necessary” to warrant awarding provisional measures and, subsequently, rejects the demands of the claimants.

Conclusion: EU law is no magic bullet against FIFA’s regulations

Jean-Louis Dupont lost a new battle, but as far as FIFA’s TPO ban is concerned it is only the beginning of a long legal war. He still has a case to defend in the main proceedings and the opening of an investigation of the EU Commission to hope for (as well as a potential appeal to the CJEU in case the complaint on behalf of Doyen and the Iberian leagues is rejected). Nevertheless, this decision is no good omen for the future of his case. It is a worthy reminder that EU law is no magic bullets against the regulations of Sports Governing Bodies (SGBs), and FIFA in particular. The Meca-Medina/Wouters inherency test prevailing in competition cases and the similar proportionality test applied in the context of free movement rights ensure that the legitimate objectives of the regulatory practices of the SGBs are duly taken into account in the judicial or administrative review process. In fact, despite the recurrent complaints voiced by SGBs against EU law’s deregulatory bias and insensitivity to sports’ specificity, in reality the case law of the CJEU and the decisional practice of the Commission has been rather (too?) accommodating with sport’s specificities, regulatory needs and ideals. What EU law imposes is a duty to properly justify private regulations that find no sufficient legitimacy, to say the least, in the democratic nature of their legislative process[7]. Yet, especially when the diverse set of stakeholders active in a specific sporting field converge in favour of a particular policy orientation, as is the case with the TPO ban, which is supported by ECA and FIFPro, there is a strong presumption that the regulations concerned will be deemed proportionate and in the general interest. The implicit presumption of legitimacy and necessity of FIFA’s TPO ban can only be rebutted with extremely thorough arguments from the part of the claimants and will probably require that they convincingly demonstrate the easy availability of a less restrictive alternative system to deal with the perceived risks resulting from the widespread recourse to TPO/TPI agreements. As the Belgium Court aptly put it, the EU free movement rights are not absolute; if necessary they can, and will, be restricted in the name of the general interest[8].

[1] Ordinance, Brussels Court of First Instance, n°15/67/C, 24.07.2015, para.53-54

[2] Ibid, para. 55-57

[3] Ibid, para. 87.

[4] Ibid, para.94

[5]« L’existence d’un éventuel abus de position dominante (article 102 TUE) mais également celle d’une éventuelle restriction de la concurrence (article 101.1 TUE) sont notamment analysées au regard du secteur spécifique dans lequel la Fifa est active et des objectifs légitimes qui sous-tendent l’interdictiom nouvelle des TPI/TPO », Ibid, para.95.

[6] My translation of the bullet points included at para.95 of the decision.

[7] On this important role of EU law, see B. Van Rompuy, ‘The Role of EU Competition Law in Tackling Abuse of Regulatory Power by Sports Associations’, Maastricht Journal of European and Comparative Law, Vol.22, Issue 2, 2015 pp.179-208.

[8] « Ces droits ne sont pas absolus, mais peuvent connaître des limites nécessitées par l’intérêt général ». Para.99 of the decision.