Nearly twenty years after the European Court of Justice declared in the Bosman case that all professional athletes within the EU were given the right to a free transfer at the end of their contracts, the Spanish Tribunal Supremo[1] provided a judgment on 26 March 2014 that will heighten a new debate on the rights of professional athletes once their contract expires.

This case originates in a dispute between the Spanish Association of Professional Cycling Teams (Asociación de Equipos de Ciclismo Profesional) and the Spanish Association for Professional Cyclists (Asociación de Ciclistas Profesionales). The two parties had concluded a collective agreement for professional cycling in 2010. Even though it is common practice that cyclists would never sign employment contracts for an indefinite period of time, nor would cycling teams compensate their cyclists merely for contract expiration, article 15(2) of the agreement established that, at the end of the contract, the team is obliged to compensate the cyclist with the amount that is due to him based on the employment contract[2].

On 14 May 2012 the Association of Professional Cycling Teams, as applicant, requested from the Spanish Audiencia Nacional to pronounce itself on the correct interpretation of article 15.2 of the collective agreement, taking into account the Real Decreto 1006/1985 on the special employment relationship of professional athletes and article 49.1.c) of the Workers Statute (Disposición Transitoria Decimotercera del Estatuto de los Trabajadores). According to article 49.1.c) of the Workers Statute, after expiration of the contract, a worker shall have the right to receive a compensation of an amount equal to 12 days of salary for every year of service. One of the goals of this article was to promote indefinite contracts.

The applicant argued that, due to the nature of contracts of professional athletes, for which the duration is never indefinite, article 49.1.c) is not applicable to professional athletes. By contrast, article 6 of Real Decreto 1006/1985, which states that the duration of sporting contracts are always fix-term contracts, should be used for the interpretation of the collective agreement between the two cyclist associations.

In its judgment of 16 July 2012, the Social Chamber of la Audiencia Nacional[3] confirmed that professional athletes are not to be treated differently than regular employees, and should therefore be compensated at the end of their contract. However, the Audiencia Nacional recognized the specific nature of the employment contracts of professional athletes, whose employment conditions are specifically regulated in Real Decreto 1006/1985. Hence, it declared article 49.1.c) of the Workers Statute inapplicable to professional athletes.

The decision of the Audiencia Nacional being appealed, the Spanish Supreme Court was in turn confronted with the question whether a professional athlete is entitled to the compensation as stipulated in Article 49.1.c of the Workers Statute after expiration of the employment contract. In other words, are the general labour rules regarding the end of the employment contracts also applicable to professional athletes?

The Court answered this question affirmatively, seeing no reason whatsoever for the Workers Statute, including article 49.1.c) not to be equally applicable to professional athletes. Moreover, by applying the Workers Statute, the compensation will become an instrument for the promotion of contract extensions, thereby improving the employment stability of athletes. Lastly, and referring to point 6 of the preamble of Council Directive 1999/70/EC concerning the framework agreement on fixed-term work, the Court argued that indefinite contracts contribute to the quality of life of the affected workers[4], and is therefore in line with the original goals of article 49.1.c) of Workers Statute.

The consequences of this judgment are simple enough: A professional athlete who had a five year contract with a specific club or team for 100,000 Euros a year will, at the end of his contract, receive a compensation of approximately 16,438.36 Euros (100,000 / 365 x 12 x 5), or 16.4% of his yearly salary.

This ruling is an important step forward on the long and tangled road towards the full recognition of professional athletes as true workers deserving the same rights and duties as their peers.

[1] El Tribunal Supremo is the highest court in Spain for all matters not relating to the Spanish Constitution

[2] Article 15(2) …Al finalizar la relación laboral se liquidará el finiquito que contendrá todos los conceptos económicos que regule la legislación vigente.

[3] The Audiencia Nacional is a special and exceptional high court in Spain

[4] Sentencia del Tribunal Supremo de 26 de Marzo de 2014 (CASACION 61/2013), part 7, §1

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.

The two tables below provide an overview of last year’s nine settlement agreements (table 1) and this year’s settlement agreements (tables 2 and 3).  

Table2014.jpg (310KB)

Table2015(1).jpg (259.6KB)

Table2015(2).jpg (228.4KB)

DIFFERENCES WITH LAST YEAR’S SETTLEMENTS

The financial contribution (fines)

In 2015, the financial “sanctions” have been much lower than last year, especially with regard to the highest penalties. In 2014, Paris Saint-Germain and Manchester City agreed to pay an overall of €60 million (€40 million, subject to the fulfilment of the conditions imposed by UEFA to the club). This year, the two highest financial contributions will be those of FC Internazionale (€20 million) and AS Monaco (€13 million). Moreover, the contributions imposed on FC Internazionale and AS Monaco have a conditional element: should the clubs fulfil UEFA’s requirements, they will get €14 million and €10 million returned to them respectively.

Last year, the revenues derived by the clubs from participating in European competitions were withheld by UEFA in every settlement agreement. However, this year, UEFA will withhold revenue from the UEFA competitions in only some cases, namely for FC Krasnodar, FC Lokomotiv Moscow, Besiktas, AS Roma, AS Monaco and FC Internazionale.

Moreover, another difference concerns the way the club may pay the ‘conditional amount’ provided in the settlements. Last year, the conditional amounts were “withheld and returned” to the club, provided it fulfilled the “operational and financial measures agreed with the UEFA CFCB”. This year, however, these conditional amounts “may be withheld in certain circumstances depending on the club’s compliance”. This means that there is no a priori retention of the money by UEFA that is subject to the achievement of the objectives agreed.  

The deficit limits

As can be seen from the tables above, UEFA limits the total deficit that clubs are allowed to have. The clubs must comply with this UEFA obligation for one or two seasons, depending on the settlement agreement. This condition was imposed in both the 2014 and 2015 agreements. Yet, some differences arise with regard to the deficit allowed for clubs.

These differences become apparent when comparing FC Rubin Kazan (2014) with AS Roma (2015). Both clubs agreed to a three seasons duration of the settlement, a €6 million fine, a reduction of the squad (22 players for AS Roma and 21 for FC Rubin Kazan), and a limitation on the number of player registrations. However, the maximum allowed deficit for each club is different. As regards AS Roma, UEFA restricted the deficit authorized to €30 million. It should be noted that, according to UEFA’s own regulations, the maximum acceptable deviation is €30 million.[2] In other words, this is not a real sanction imposed on AS Roma, since every European club has the duty to comply with the maximum acceptable deviation rule. In its agreement with FC Rubin Kazan, on the other hand, UEFA imposed a deficit limit of €30 million for the first season and full break-even compliance for the following season. This is a harsher sanction than in the agreements found in 2015, in which a specific deficit is permitted for the second season of the settlements (see the FC Krosnodar, AS Roma, Besiktas and AS Monaco agreements).    

The salary cap

This salary cap measure is regulated in Article 29(1)(g) of the Procedural Rules Governing the UEFA Club Financial Control Body. According to this provision, a salary cap is a “restriction on the number of players that a club may register for participation in UEFA competitions, including a financial limit on the overall aggregate cost of the employee benefits expenses of players registered on the A-list for the purposes of UEFA club competitions”.

In 2014, every settlement reached by the clubs with UEFA prohibited the increase in salary expenses for the first season following the agreement. In 2015, this condition was not stipulated in all of the agreements. More concretely, the agreements settled with Ruch Chorzów, Panathinaikos, Hapoel Tel Aviv, and Hull City, do not include a salary cap.

Changes have also occurred regarding the structure of the salary cap imposed. In 2014, a unitary interpretation of the salary cap provision was used by UEFA. In the case of Manchester City, for of example, UEFA stated that “employee benefit expenses cannot be increased during two financial periods”.[3]

In 2015, however, UEFA used two different ways to ‘cap’ salaries:

1. In the cases of the FC Rostov, CSKA Sofia and Kardemir Karabükspor settlements, it held that “the total amount of the Club’s aggregate cost of employee benefits expenses is limited”.

2. With regard to FC Internazionale and Besiktas, the settlements hold that “the employee benefit expenses to revenue ratio is restricted and that the amortisation and impairment of the costs of acquiring players’ registration is limited.”

The first alternative is similar to the solution adopted in 2014 to cap players’ wages. As UEFA releases only some elements of the settlements, the precise levels of the cap imposed remain unknown, as was the case last year. The mechanism used by UEFA in the case of Besiktas and FC Internazionale is different. It is based on a fixed ratio between employee benefit-expenses and the clubs revenue. The cap becomes more dynamic, as it is coupled to another variable, the revenue of the club, but also less predictable. 

Is the settlement a sanction or an agreement?

According to UEFA’s regulations, the UEFA CFCB Investigatory Chamber has the power to negotiate with clubs who breached the break-even compliance requirement as defined in Articles 62 and 63 UEFA Club Licensing and Financial Fair Play Regulations. If a settlement is not reached, the CFCB Adjudicatory Chamber will unilaterally impose disciplinary sanctions to the respective clubs.

The ‘settlement procedure’ allows for a certain degree of negotiation between the parties. Settlements are likely to be in the interest of both parties. Firstly, by agreeing to UEFA’s terms, the club secures its participation in European competitions which, in many cases, are one of its main sources of revenue. Not agreeing to the terms would entail risking a much bigger sanction. Naturally, such a sanction can be appealed in front of the Court of Arbitration for Sport (CAS), but such a procedure would be expensive, time consuming and does not guarantee a better outcome. To UEFA, a settlement is a guarantee that the case ends there, that its FFP regulations do not get challenged in front of the CAS, but also that it does not need to invest resources to fight a long and costly legal battle. Moreover, the settlement procedure provides the flexibility needed for a case-by-case approach to the sanctions. 

CONCLUSION 

The settlement procedure is a key element to the current implementation process of the UEFA FFP regulations. UEFA is still in the learning phase concerning FFP and the recourse to settlements is a way to provide for much needed regulatory flexibility. Even if the settlements have many advantages for all the parties involved, they also have detrimental effects. It is regrettable that they are not published in full, even if slightly redacted, so that clubs may enjoy a higher legal certainty when facing an FFP investigation. This lack of transparency makes it harder to predict and rationalize the sanctions imposed and exposes UEFA to the risk of being criticized for the arbitrariness of its settlement practice.

This year’s settlement harvest was undoubtedly more lenient than in 2014. UEFA has apparently decided to water down its FFP sanctions, maybe to make sure that FFP survives the many legal challenges ahead. The balance between under-regulation, that would render FFP toothless, and over-regulation, that would make it difficult for clubs to invest and take risks, is indeed very difficult to find. UEFA’s settlement practice is a soft way to walk this complex line. 

[1] Article 14(1)(b) and Article 15 of the Procedural Rules Governing the UEFA Club Financial Control Body – Edition 2014.

[2] Article 61 UEFA Club Licensing and Financial Fair Play Regulations

[3] Decision of the Chief Investigator of the CFCB Investigatory Chamber: Settlement Agreement with Manchester City Football Club Limited (2014)