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

Case note: State aid Decision on the preferential corporate tax treatment of Real Madrid, Athletic Bilbao, Osasuna and FC Barcelona

On 28 September 2016, the Commission published the non-confidential version of its negative Decision and recovery order regarding the preferential corporate tax treatment of Real Madrid, Athletic Bilbao, Osasuna and FC Barcelona. It is the second-to-last publication of the Commission’s Decisions concerning State aid granted to professional football clubs, all announced on 4 July of this year.[1] Contrary to the other “State aid in football” cases, this Decision concerns State aid and taxation, a very hot topic in today’s State aid landscape. Obviously, this Decision will not have the same impact as other prominent tax decisions, such as the ones concerning Starbucks and Apple

Background

This case dates back to November 2009, when a representative of a number of investors specialised in the purchase of publicly listed shares, and shareholders of a number of European football clubs drew the attention of the Commission to a possible preferential corporate tax treatment of the four mentioned Spanish clubs.[2]More...



Asser International Sports Law Blog | FIFA’s provision on the protection of minors - Part 1: The Early Years. By Kester Mekenkamp.

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

FIFA’s provision on the protection of minors - Part 1: The Early Years. By Kester Mekenkamp.

Editor’s note: Kester Mekenkamp is an LL.M. student in European Law at Leiden University and an intern at the ASSER International Sports Law Centre. This blog is, to a great extent, an excerpt of his forthcoming master thesis. 


On 24 November 2016, a claim was lodged before a Zurich commercial court against FIFA’s transfer regulations by a 17-year-old African football player.[1] The culprit, according to the allegation: The provision on the protection of minors, Article 19 of the Regulations for the Status and Transfer of Players.[2] The claimant and his parents dispute the validity of this measure, based on the view that it discriminates between football players from the European Union and those from third countries. Besides to Swiss cartel law, the claim is substantiated on EU citizenship rights, free movement and competition law. Evidently, it is difficult to assess the claim’s chance of success based on the sparse information provided in the press.[3] Be that as it may, it does provide for an ideal (and unexpected) opportunity to delve into the fascinating subject of my master thesis on FIFA’s regulatory system aimed at enhancing the protection of young football players and its compatibility with EU law. This three-part blog shall therefore try to provide an encompassing overview of the rule’s lifespan since its inception in 2001. This first part will shed its light on the “birth” and “first years” of the provision, thereby illustrating the relevant developments from 2001 till 2009. The heart of this analysis is formed by two decisions of the Court of Arbitration for Sport (“CAS”): The Acuña and FC Midtjylland case. The second part shall subsequently cover the rule’s “adolescent years”, which span from 2009 to the present. Therein, the major changes put forward in the 2009, 2015 and 2016 versions of the RSTP will be addressed, together with the important CAS decisions concerning Article 19. The third, and final, part will constitute a substantive assessment of the provision under EU Internal Market law. 


The first years, from 2001 onwards[4]

The 2001 “Commission-condoned” FIFA transfer rules included for the first time a section dedicated to the enhancement of the protection of minors.[5] An accompanying circular by FIFA stipulated that the new transfer rules imposed strict conditions “in order to provide a stable environment for the training and education of players”.[6] Moreover, stating that abuses frequent in the past had to be tackled, it seemed to inaugurate a new era of safeguarding young footballers.[7] The starting point of the new provision is a general prohibition for players under the age of 18 (“minor”) to transfer internationally.[8] The same principles apply to a so-called “first registration” of a minor who requests to be registered in a country other than that of his nationality.[9] An absolute transfer ban however was apparently deemed too radical.[10] The prohibition was therefore made subject to two exceptions. Firstly, the “parents-rule” allows for minors to transfer internationally when their family moves to a country, in which the new club is located, for “reasons not related to football”.[11] Secondly, within the territory of the EU and EEA, players younger than 18 but above the minimum working age can transfer internationally, given that their sporting and academic education is guaranteed by the new training club.[12] FIFA further stressed its intention to issue, together with UEFA, a code of conduct guiding the national associations regarding these conditional arrangements.[13] However, this self-obligation was removed from the subsequent 2005 edition of the RSTP.[14]

Only a year after the introduction of the new rules, the first adaptations were made in response to concerns raised by national associations.[15] FIFA’s Players Status Committee (“PSC”, FIFA’s competent body adjudicating any disputes on matters related to the protection of minors) decided to add a third exception, which became known as the “50 + 50-rule”.[16] Hereby it aimed at dealing with the case of players living close to national borders where “cross-border traffic is a daily matter”.[17] Those young players living within this 50 km range may attend a club of a neighbouring association if that club is similarly situated within a 50 km distance of the border, provided that these players remain living at home. The two-part FIFA Circular is rather ambiguous in its explanation, stating on the one hand that minors in this situation can solely “train” with the club situated across the border,[18] while on the other hand introducing a full exception to the transfer ban (thereby permitting a “complete” international transfer).[19] This latter view is in accordance with the regulations’ revision that entered into force on 1 July 2005.[20] Next to adding the “50 + 50-rule”, the new article 19 RSTP slightly adjusted and hence further clarified the first two exceptions. A minor can transfer internationally only if his “parents” move to another country for reasons not related to football, restricting the scope of the rule from “family” to “parents”.[21] Moreover, with respect to the “EU and EEA-rule” it set the international standard of 16 as the minimum age and spelled out several additional requirements on the arrangements made by the recruiting club for the academic education of the transferred player.[22] These oblige the club to: “provide the player with an adequate football education and/or training in line with the highest national standards”; “guarantee an academic or vocational education which will allow the player to pursue a career other than football”; “ensure that the player is looked after in the best possible way” by arranging housing with optimal living standards; and “provide its association with proof of compliance”.[23] Importantly, paragraph 4 orders national associations to safeguard compliance by clubs and paragraph 5 installs the PSC as the competent body to adjudicate in this field.[24] Hence, more explicit accountability and control was established concerning the abidance with the rules on the protection of minors.

In early 2007, FIFA issued a commentary on the RSTP in order to further clarify the separate provisions.[25] It stipulated that the international transfer of minors should be subject to stern restrictions in order to provide a stable environment for the player’s training and education.[26] Furthermore, “the term ‘parents’ has to be understood in a strict way”, a minor therefore cannot live with a close relative in the country of the new club. The document acknowledges that the “EU and EEA-rule” was adopted as to not interfere with EU free movement law.[27] National associations are once more reminded that they possess a vital role in ensuring compliance, amongst other by carrying our on-spot investigations regarding the mandatory educational arrangements if need be.[28] 


The Acuña case

These rules have not operated in a vacuum. The real effect of the provisions on the protection of minors has been shaped by the judicial practice of FIFA, through the PSC, and first and foremost the Court of Arbitration for Sport (“CAS”, the competent institution that deals with appeals contra FIFA’s internal decisions).[29]

The first (published) case before the CAS concerning a dispute on the provision’s content was Càdiz C.F. and Carlos Javier Acuña Caballero v. FIFA and Asociación Paraguaya de Fútbol.[30] In January 2005, the 16-year-old Acuña Caballero represented his Paraguayan club Olimpia in an international tournament for players under 20. His successful performance led to foreign interest, and on 14 February 2005 he, together with his family, left Paraguay for Cádiz, Spain.[31] Three days later, Cádiz C.F. (a club meandering through the Spanish second and third league) and the player signed an employment contract, and subsequently Olimpia agreed to the transfer.[32] However the Paraguayan football association refused to issue the compulsory international transfer certificate (“ITC”), referring to Acuña Caballero’s age.[33] The FIFA PSC decided upon the matter on 26 August 2005 by verifying whether the requirements of the “parents-rule” of Article 19(2)(a) RSTP were observed. By highlighting the apparent lack of intention to continue his education besides football, as well as the fact that the mother’s employment contract commenced much later than her son’s, the PSC found the case to be in total contradiction with the letter and spirit of the exemption: “the mother would have followed the player”[34], instead of the other way round. The PSC noted that the protection of minors is one of the fundamental principles of the RSTP, which requires the strict application of Article 19, and consequently refused the request of the Spanish association to register Acuña with Cádiz C.F.[35] Both the club and the player appealed this decision before the CAS, after which the tribunal organized a hearing of all parties concerned and several witnesses in order to grasp the factual context of this international transfer.[36] The CAS Panel swiftly countered the appellants’ views by stating that FIFA’s rules limiting the international transfer of minors do not violate any mandatory principle of public policy under Swiss law or any other national or international law, insofar that “they pursue a legitimate objective, namely the protection of young players from international transfers which could disrupt their lives, particularly if, as often happens the football career eventually fails or, anyways, is not as successful as expected and they are proportionate to the objective sought, as they provide for some reasonable exceptions”.[37] Subsequently it explained that, it had to be determined whether the move of the mother was related to the transfer of her son, and ergo whether the exception of article 19(2)(a) was applicable? The Panel found that “the players’ decision to move to Spain was made first”[38], by emphasizing the inconsistencies in the appellants’ statements, and as a result thereof doubting their truthfulness.[39] Furthermore, the club’s submission stated that “from all the possibilities, the offer made by CÁDIZ C.F. was the most suited to his parents’ wishes”, which lead the Panel to believe that in fact the clubs’ offer for her son made the mother look for a suitable job in Cádiz.[40] As such, the Panel established that the appellants could not benefit from the exception, since it concluded that Acuña’s family moved “for reasons linked to football”.[41]

The Acuña case exhibits a strict application of the rule. This strict application, although being in line with FIFA’s policy, lead to a disadvantageous outcome for the minor in question.[42] As argued by the player, his life in Paraguay meant living alone in a small apartment at his agent’s house and only seeing his mother two or three times a year.[43] The move to Spain allowed him to live with his mother and was therefore positive for both his career and his family. The CAS Panel addressed this matter by stating that “the task of the CAS is not to revise the content of the applicable rules but only to apply them”.[44] Moreover, it stressed that any adverse consequences in relation to the refusal to allow the player to be registered with the club were the result of the appellants own actions. The Panel finally put forward that the player would not have to face the adverse consequence for long as he would turn 18 in a couple of months.[45] 


The FC Midtjylland case

The next confrontation followed suit: the case of FC Midtjylland.[46] The Danish Superligaen club came in FIFA’s crosshairs through a FIFPro complaint concerning the signing of six young Nigerians.[47] These players were registered as amateurs and played for Midtjylland’s youth teams. Additionally, they were granted short-term residence permits as students, excluding the right to work, and enrolled in the Danish educational program.[48] The FIFA PSC emphasized that Article 19 RSTP on the protection of minors, being one of the principles included in the FIFA/UEFA and European Commission agreement and “one of the pillars of the regulations”, is applicable to both amateur and professional players.[49] Thereto, only a strict, consistent and systematically implemented interdiction subject to very limited exceptions could stop the abuse and maltreatment of many young players. The PSC hence warned the Danish Football Association (DBU) and FC Midtjylland, and subsequently refused the registration of the players.[50]

The CAS Panel addressed four main issues in relation to what had been brought to the fore in the parties’ submissions concerning Article 19 RSTP:

1. Is it applicable to both professional and amateur minor players?

2. What are the exceptions and are any of these applicable?

3. Does the application of the provision “contradict any mandatory provision of public policy or any of the provisions of EC Law”? Is there a breach of the non-discrimination principle, following the alleged inconsistent approach of FIFA?[51]

In short, the Panel answered the first question in the affirmative, based on a textual approach together with taking due notice of the intended objective as “to apply Art. 19 of the RSTP restrictively to professional players only could result in obviating protection of young amateur players from the risk of abuse and ill treatment”.[52] As to the second question, it was noted that the codified exceptions provided in Article 19(2) RSTP were not applicable to the case at hand. Nevertheless, the Panel regarded this list not to be exhaustive and allowed for two additional exceptions relating to students: first, “where the players concerned could establish without any doubt that the reason for relocation to another country was related to their studies, and not to their activity as football players”, and second, “where the association of origin and the new club of the players concerned have signed an agreement within the scope of a development program for young players under certain strict conditions (agreement on the academic and/or school education, authorization granted for a limited period of time)”.[53] Yet, neither of these additional exceptions applied here.[54] The third issue was related to appellant’s Cotonou Agreement argument.[55] The Panel agreed that the non-discrimination rights are conferred by article 13(3) of the Cotonou Agreement to “Workers of ACP countries legally employed in its territory”.[56] Nonetheless, the Nigerian players in question are to be considered as “students”, not as “workers” legally employed in Denmark, which means they fall outside the scope of this provision.[57] The Panel moreover dismissed, based on that same reasoning, the appellant’s claim founded on the Simutenkov[58] case in their attempt for the “EU and EEA-rule” of Article 19(2)(b) RSTP to be applicable.[59] The Panel furthermore stressed with regard to this third question that agreements between the EU and third countries that prohibit discrimination in working conditions are clearly limited in scope to foreigners “legally employed in the Member States” and do not concern access to the employment market.[60] It also endorsed the Acuña case in that the FIFA rules limiting the international transfer of minor players “do not violate any mandatory principle of public policy and do not constitute any restriction to the fundamental rights that would have to be considered as not admissible”.[61] Lastly on the fourth issue, in reaction to the appellant’s allegation that FIFA’s approach was inconsistent and favoured bigger clubs (by reference to Bayern München’s registering a minor player from South America), the CAS solely pointed at the general principle “that no one can claim for equal treatment by referring to someone else who has adopted an illegal conduct, without sanction (nemini dolus alienus prodesse debet)”.[62] Concluding, FC Midtjylland was found to have breached Article 19 RSTP as the CAS favoured a strict interpretation, yet simultaneously, it allowed for two additional implicit exceptions for students.

Around this point in time, the European Commission’s attention was also drawn to the protection of minors in sport. In its white paper on sport, it  pointed at “children who are not selected for competitions and abandoned in a foreign country, often falling in this way in an irregular position which fosters their further exploitation”.[63] Even though it makes reference to neither of the two abovementioned cases, this explicit consideration by the Commission, emphasizing the importance of protecting minors, could be seen as an indirect endorsement, prima facie, of the strict interpretation of Article 19 RSTP by CAS.

The next, second, part of this blog series shall aim to cover the rule’s “adolescent years”, which span from 2009 to the present. The major changes put forward in the 2009, 2015 and 2016 versions of the RSTP will be addressed. Furthermore, important CAS decisions concerning Article 19, Muhic, Vada I and II, FC Barcelona, RFEF, and the FIFA decisions relating to Real and Atlético Madrid, will be at the centre of the attention. 




[1] CNN, 24 November 2016, “FIFA: African footballer, 17, takes world governing body to court

[2] Article 19 FIFA RSTP (2016)

[3] Eurosport, 24 November, “FIFA faces lawsuit over rules banning transfer of minors

[4] The text of this blog contribution is part of my forthcoming thesis, which shall be submitted in order to complete my master’s degree in European Law at Leiden University.

[5] Art. 12 FIFA RSTP 2001.

[6] FIFA Circular no. 769, 24 August 2001.

[7] N. St. Cyr Clarke, “The beauty and the beast: Taming the ugly side of the people’s game”, 2011 CJEL, P. 627.

[8] Art. 12(1) FIFA RSTP 2001.

[9] Art. 12(2) FIFA RSTP 2001.

[10] Press release EU Commission, IP/01/29, 14 February 2001.

[11] Art. 12(1)(a) FIFA RSTP 2001.

[12] Art. 12(1)(b) FIFA RSTP 2001.

[13] FIFA Circular no. 769, 24 August 2001.

[14] F. de Weger, “The Jurisprudence of the FIFA Dispute Resolution Chamber”, 2nd edition, Asser Press (2016), p. 14.

[15] FIFA Circular no. 801, 28 March 2002.

[16] Supra at 14, pp. 36-37.

[17] Supra at 15.

[18] Ibid.

[19] New Art. 12(1)(c) FIFA RSTP 2001 in FIFA Circular no. 801, 28 March 2002, “Amendments to the FIFA Regulations for the Status and Transfer of Players”.

[20] Art. 19(2)(c) FIFA RSTP 2005.

[21] Art. 19(2)(a) FIFA RSTP 2005.

[22] Art. 19(2)(b) FIFA RSTP 2005.

[23] C. Lembo, “FIFA Transfer Regulations and UEFA Player Eligibility Rules: Major Changes In European Football And The Negative Effect On Minors”, Emory Int'l L. Rev 2005, p. 557.

[24] Art. 19(4) and 19(5) FIFA RSTP 2005.

[25] FIFA Circular no. 1075, 18 January 2007.

[26] Commentary on the Status and Transfer of Players, p. 58.

[27] Ibid, p. 59.

[28] Ibid, p. 59.

[29] For more information see A. Duval, “The FIFA Regulations on the Status and Transfer of Players: Transnational Law-Making in the Shadow of Bosman” in A. Duval and B. Van Rompuy (Eds.) “The Legacy of Bosman”, Asser Press (2016), pp. 81-116; A. Duval “The Court of Arbitration for Sport and EU Law. Chronicle of an Encounter”, MJ 2015, pp. 224-256.

[30] CAS 2005/A/955 Càdiz C.F., SAD v FIFA and Asociación Paraguaya de Fútbol and CAS 2005/A/956 Carlos Javier Acuña Caballero v/FIFA and Asociación Paraguaya de Fútbol.

[31] Ibid, para. 2.5.

[32] Ibid, paras. 2.6-2.7.

[33] Ibid, para. 2.10.

[34] Ibid, para. 2.16.

[35] Ibid, para. 2.17.

[36] Ibid, paras. 3.6-3.17.

[37] Ibid, para. 7.2.

[38] Ibid, para. 7.3.1.

[39] Ibid, paras. 7.3.2-7.3.5; Especially the circumstances surrounding the mother’s search for a job, the agreement between her and her employer, and the reasons why she decided to take up work in Cádiz while, being a cook, she could have worked anywhere in Spain, did not assist to their case.

[40] Ibid, para. 7.3.6.

[41] Ibid, para. 7.3.8.

[42] FIFA Circular no. 801, 28 March 2002.

[43] Supra at 30, para. 3.3.5 and 3.11.

[44] Ibid, para. 7.3.10.

[45] Ibid, para. 7.3.10.

[46] CAS 2008/A/1485 FC Midtjylland A/S v. Féderation Internationale de Football Association.

[47] A. Wild, “Young Football Players: Protection of Minors” in “CAS and Football: Landmark Cases”, Asser Press (2012), p. 249.

[48] Ibid, p. 250.

[49] Supra at 46, p. 3.

[50] Ibid, p. 4.

[51] Ibid, para. 10.

[52] Ibid, para. 15.

[53] Ibid, paras. 19-21.

[54] Ibid, para. 22.

[55] The Cotonou agreement between the EU and certain African, Caribbean and Pacific States, including Nigeria; Ibid, paras. 30-31.

[56] Supra at 46, para. 35.

[57] Ibid, para. 36.

[58] Case C-265/03 Simutenkov v Ministerio de Educación y Cultura and RFEFl [2005] ECR I-2579, Therein the ECJ ruled that non-EU/EEA sportsmen can challenge nationality clauses if: they are legally employed in a host EU Member State and “can rely upon a directly effective equal treatment provision included in an international agreement establishing a partnership between the EU and their country of origin, regardless of whether accession to the EU is envisaged or not”, see S. Van den Bogaert, “From Bosman to Bernard” in J. Anderson (Ed.), “Leading Cases in Sports Law”, T.M.C. Asser Press (2013), p. 104.

[59] Supra at 46, para. 40.

[60] Ibid, para. 41.

[61] Ibid, para. 45; Supra at 30, para. 7.2.

[62] Supra at 46, paras. 47-49.

[63] The White Paper on Sport (COM 2007) 391 final, point 4.5; European Parliament, Report on the on the future of professional football in Europe (2006/2130(INI)), p. 25.

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Asser International Sports Law Blog | 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

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

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 

The clash between SNB and 2K Games, albeit unprecedented at the European level, should not come as a surprise. The commercialization of athletes’ image rights has become a sine qua non component of sports marketing.[2] The transfer of professional players’ image rights to their clubs or third parties is for some of them more lucrative than their salaries. In the framework of international basketball, this has led to the proliferation of image rights contracts, signed by the players in addition to their employment contracts. While the legal nature of image rights and their unauthorized use by third parties has been recently extensively debated- in the wake of US College Athletes image rights cases before US Courts which will be discussed in the second part of this blog series[3]-, image rights contracts and their enforcement by basketball players before the Basketball Arbitral Tribunal (BAT)[4] are still very much uncharted territories.

This blogpost will look at the basketball players’ image rights contracts in a three-pronged approach. First, we will explain how image rights contracts in international basketball serve as tax loopholes by the clubs, which increasingly force players to sign them (I). Thereafter, based on BAT’s case law, we will attempt to build a legal roadmap with regard to the enforcement of image rights contracts by players. In this light, we will examine the relationship between the main contract and the image rights contract as well as the role of the different dispute settlement clauses included in the different contracts when assessing BAT’s jurisdiction (II). Finally, we will analyse the position of the BAT in enforcing image rights contracts and the significant impact of its awards in the basketball world, taking into account the unique features of basketball arbitration (III). 


I. Image rights contracts in international basketball: Cherchez l’argent!

The use of image rights contracts leads to two possible scenarios. In the first one, which is the most common, a player signs an employment contract with a club indicating the player’s remuneration net of all taxes. This initial contract is usually characterized as the “main agreement”[5] or “master agreement”[6]. Thereafter, the club approaches the player with two additional contracts: the league contract which provides for a remarkably lower monthly salary than the main contract; and an image rights contracts, where the player assigns his rights to a third party, an image rights company. The league contract reporting a much lower wage than the wage actually offered to the player is sent to the league and is used for tax purposes. In parallel, the club signs an image rights contract with the image rights company to which the player has previously assigned his intellectual property rights. According to this contract, the company owns the player’s image rights. This means that the player assigns to the club the use of these rights for commercial and promotional purposes. As a result of this assignment, the club undertakes the obligation to pay a specific amount of money per month to the company. Once the club pays the image rights company, the image rights company transfers this amount to the player.

In order to understand this quite complex scheme, let’s use a concrete example. A player signs with the club a main contract indicating a remuneration of EUR 300.000. Thereafter, the player signs the league contract indicating a remuneration of EUR 30.000 by the club, while the club signs a contract with an image rights company and undertakes to pay a total amount of EUR 270.000. Finally, the player receives the amount of EUR 270.000 by the image rights company. Thus, it is clear that a combination of the league and the image rights contracts amounts to sum foreseen in the main contract (30.000+270.000=300.000). While this fictitious transfer of money through a third party does not seem to have a practical effect on the player’s remuneration, the split of the main contract into two separate agreements helps the club to tailor its tax obligations. In fact, the club would in principle have had to pay taxes on the full amount of EUR 300.000. Nonetheless, by breaking up the payment into different amounts, the club pays taxes and social contributions for the individual income of EUR 30.000 only. True, the club is also obliged to pay the taxes due on the EUR 270.000 transferred to the image rights company. However, taking into account that the tax rate over intellectual property rights is typically much lower than that concerning individual income, the club gains significant tax benefits.[7]

In the second potential scenario, in parallel to the main contract, the player signs a side agreement with the club, which explicitly splits the net compensation into an amount derived from the league contract and an amount derived from the image contract. Subsequently the player enters into an exclusive license agreement with an image rights company to which he assigns the use of his image rights receiving as compensation the amount stipulated in the side agreement. At the same time, the club enters into a sublicense agreement with the image rights company in order to use the player’s image rights, by paying the company the same amount of money that the company then pays to the player under the license agreement.

In short, this scheme is a fiction invented by the clubs in order to get significant tax advantages. While this is done pro forma, without any intent of changing the player’s rights and obligations under the main contract[8], this tax evasion scheme can lead to the club evading also its contractual duties when a club fails to pay the player. In this case, with respect to any outstanding remuneration, can the player enforce the image rights contract against the club in BAT proceedings? 


II. How the BAT establishes its jurisdiction on image rights contracts disputes

An overview of the BAT case law shows that players bring a dispute against their club for outstanding payments on the grounds of a broadly drafted arbitration clause in the main contract, which provides for BAT’s jurisdiction over any dispute arising out of, or in connection with the main contract. However, as is already discussed, a player’s remuneration is often based on a matrix of several contracts – the main contract, the league contract, the image rights contract and/or the license agreement-, which may contain a dispute resolution clause of their own that does not refer to the BAT. Therefore, when a dispute for outstanding payments is brought before the BAT, the arbitrator first has to determine whether the claim made by the player falls within the scope of the BAT arbitration clause included in the main contract. Thus, the arbitrator must consequently determine the relation between the main contract and the other contracts, including the image rights contracts.

The difficulty emerges from the fact that the contracts do not define how they should inter-relate. As a result, the BAT has to interpret the contracts and decide whether the subsequent contracts actually supersede the main contract and the applicable BAT arbitration clause or whether they only supplement the main contract. Namely, the clubs, relying on the fact that the image rights contract is signed after the main contract and referring to the legal principle lex posterior derogate legi priori[9], claim that the dispute settlement provision contained in those contracts override the BAT arbitration clause included in the main contract.[10]

In order to decide on its jurisdiction and the underlying relation between the several contracts, the BAT has consistently used a double test based on the common intention of the parties and the wording of the BAT arbitration clause contained in the main contract. At first, the BAT examines whether the main contract includes all the essential elements with regard to the player’s rights remuneration. Then, it elaborates whether these terms reflect the parties’ common intent under the main agreement to guarantee the payment of the full salary to the player, irrespective of any modalities that would be agreed upon in subsequent contracts as to the mode and schedule of payments.[11] If the main contract is seen as containing the common agreement of the parties on the full amount of remuneration, any further agreement referring to the way this payment is organized has only a supplementary function. The second criterion is based on the interpretation of the BAT arbitration clause. The main contract usually contains a broad BAT arbitration provision that covers any dispute arising from the main contract. Once established that the common intent of the parties is to guarantee the salary stipulated in the main contract, the broad terms of the arbitration clause necessarily encompass any dispute relating to the non- payment of any part of the player’s total salary. Once these criteria are fulfilled, the BAT asserts that the outstanding payments deriving from the image rights contracts fall within the scope of the BAT arbitration clause.

Furthermore, in some cases, the BAT has introduced other criteria, such as the necessity to establish a link between the contracts. In the 0115/10 case, the BAT established a close link between the main contract and the image rights contract, in a way that the image rights contract could not exist but for the original contract.[12] Interestingly enough, this rather broad interpretation has been inspired by the liberal case law of the Swiss Federal Tribunal, which requires that the interconnection between different contracts be taken into account when examining the substantive validity of an arbitration agreement.[13]

It is remarkable that until now, when examining the jurisdictional basis, the BAT has consistently adopted a rather liberal approach by piercing the fictitious veil between the club, the player and the third party when using overlapping contractual constructions. However, on the merits, the BAT’s approach is not totally consistent. 


III. Enforcing image rights contracts: the BAT’s enigmatic approach

In a series of awards, the BAT has found the clubs liable for the breach of the image rights contract and the subsequent outstanding payment of the player.

Applying the legal roadmap established above, the BAT has addressed the supplementary role of the subsequent contracts in organizing the payment schedule of the full remuneration of the player provided in the main contract. Indeed, from a contractual point of view, the terms of the main contract are deemed sufficient to entitle the player to claim the entire amount owed to him on the basis of that contract alone.[14] In this sense, the fact that image rights payments have been made via a third party does not free the club from its duty to guarantee the full remuneration of the player.[15] To reinforce this argument, the BAT has even asserted that the only case in which the club would not be found liable for breach of image rights contract would be the case where the image rights contract explicitly provided a waiver of the player’s claims against the club relating to image rights.[16]

However, this - until recently- consistent approach has been overturned in the latest BAT award concerning the enforcement of image rights contracts.[17] In that case, the image contract was signed between a company to which the claimant assigned the rights to his promotion and a company managing the image and endorsement rights of the club. Although having confirmed the supplementary role of the image rights contract with regard to the employment contract at hand, the arbitrator chose to deviate from the entrenched interpretation in BAT jurisprudence of the intent of the parties. Namely, the arbitrator interpreted the parties’ behaviour as intending to discharge the club of its obligation to guarantee the full amount of the player’s salary under the main contract.

While, in this particular case, the company to which the player assigned his image rights could have been found liable for not transferring the missing amounts to the player, the BAT’s approach is questionable in that it undermined the club’s liability under the main contract. At this point, it should be highlighted that BAT decides all cases ex aequo et bono.[18] In this light, it is the opinion of the author of this blogpost that it would be contrary to general considerations of justice and fairness to consider that the club could take advantage of a tax-optimising structure to no longer guarantee principal amounts contractually due to the player. In other words, it would be unfair to consider that the player has implicitly renounced the guarantees offered to him by the club under the main contract. 


Conclusive Remarks

The system of image rights contracts in international basketball is fragile. Based on the lack of legal certainty in BAT jurisprudence, this blogpost has evidenced the risk that clubs use the BAT to escape their obligations deriving from the image rights contracts. Taking into account that BAT awards are directly enforceable under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, subject only to an appeal on the limited grounds provided in Article 190 Swiss Private International Law Act (PILA)[19], a denial of the BAT to enforce image rights contracts against the clubs leaves the players deprived of any real legal avenue to vindicate their rights. In this sense, a consistent approach of the BAT with regard to the intimate relation existing between the image rights contract and the main employment contract would not only be desirable, but would also be in line with the ex aequo et bono principle.


[1] Johan Passave-Ducteil, the president of SNB remarks in l’Equipe:"Ce n’est pas une histoire d’argent, on défend le droit des joueurs"

[2] D-R Martens, ‘An innovative System for Resolving Disputes in Sport (only in Sport?)’ (2011) 1-2 International Sports Law Journal 54, 60.

[3] Edward O’ Bannon et al v National Collegiate Athletics Association, Electronic Arts Inc and Collegiate Licensing Company ( US District Court, 08.08.2014) and NCAA Student-Athlete Name and Likeness Licensing Litigation, 724 F. 3d 1268 (9th Cir. 2013).

[4] The tribunal was established by FIBA in 2006 under the name “FIBA Arbitral Tribunal (FAT)”. In accordance with the 2010 FIBA General Statutes, the tribunal was renamed into “Basketball Arbitral Tribunal (BAT)”.

[5] Vladimir Golubovic v Basketball Club Union Olimpija Ljubljaba, BAT 0174/11, para 6.

[6] Pawel Kikoeski v KK Union Olimpija Ljubljana, BAT 0155/11, para 23.

[7] In the case where the image rights company is seated in a tax haven state, the tax benefits are almost double for the club.

[8] BAT 0155/11(n 6), para 51.  See also, 0174/11(n 5) para 10: “The Club suggested the image contract because it served tax driven purposes only. That was the only purpose for such a contract, and it was irrelevant for the player, because his remuneration were settled in net amount (tax free)”.

[9] i.e a subsequent law imparts the abolition of a previous one

[10] Richard Hendrix v Club Baloncesto Granada, FAT 0115/10, para 36.

[11] FAT 0115/10(n 10), para 44, Dalibor Bagaric v Fortitudo Pallacanestro SrL FAT 0105/10 para 49, Lazaros Papadopoulos v Fortitudo Palacanestro Societa’ Sportica Dilettantistica a R.L. FAT 0071/09 para 61, Darryl Eugene Strawberry and Bill Duffy International Inc v Fortitudo Palacanestro Societa’ Sportica Dilettantistica a R.L. FAT 0067/09, para 66.

[12] FAT 0115/10 (n 10), para 41.

[13] Ibid, para 43 where the arbitrator makes an extensive reference to Swiss Federal Tribunal case law: Decision of the Swiss Federal Tribunal of 16 October 2003, reported in ATF 129 III 727, 735 using the

word “liberal” with reference to ATF 121 III 38, 45 and the decisions 4P.126/2001 of 18 December 2001

reported in ASA Bulletin 2002, p. 482; 4C.40/2003 of 19 May 2003 at 4, reported in ASA Bulletin 2004, p.

344; see also decision 4P.230/2000 of 7 February 2001 reported in ASA Bulletin 2001, p. 523.

[14] FAT 0067/09 (n 11), para 83.

[15] FAT 0071/09 (n 11), para 76.

[16] FAT 0115/10 (n 10), para 64.

[17] Steven Smith v Virtus Palacanestro Bologna S.p.A, BAT 0413/13

[18] BAT Arbitration Rules, Article 15.1: "Unless the parties have agreed otherwise the Arbitrator shall decide the dispute ex aequo et bono, applying general considerations of justice and fairness without reference to any particular national or international law ".

[19] In fact, according to Article 190 (2) PILA, only serious procedural defects or rulings on substance that are contrary to international public policy may constitute grounds to set aside an award. See A Rigozzi, ‘Challenging Awards of the Court of Arbitration for Sport’ (2010)1 Journal of International Dispute Settlement 217, 217-254.

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