Asser International Sports Law Blog

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

The entitlement to Training Compensation of “previous” clubs under EU Competition Law. By Josep F. Vandellos Alamilla

Editor’s note: Josep F. Vandellos is an international sports lawyer associated to RH&C (Spain). He is also a member of the Editorial Board of the publication Football Legal and a guest lecturer in the ISDE-FC Barcelona Masters’ Degree in Sports Management and Legal Skills.


Article 6 of Annexe IV (Training compensation) of the FIFA-RSTP (Ed. 2016) contains the so-called “Special Provisions for the EU/EEA” applicable to players moving from one association to another inside the territory of the European Union (EU) or the European Economic Area (EEA).
The provisions regarding training compensation result from the understanding reached between FIFA and UEFA with the European Union in March 2001[1], and subsequent modifications introduced in the FIFA-RSTP revised version of 2005 to ensure the compatibility of the transfer system with EU law.[2]
This blog will focus on the exception contained in article 6(3) Annexe IV of the FIFA-RSTP. According to this article, when “the former club” fails to offer a contract to the player, it loses its right to claim training compensation from the players’ new club, unless it can justify that it is entitled to such compensation. Instead, the right of “previous clubs” to training compensation is fully preserved irrespective of their behaviour with the player.[3] From a legal standpoint, such discrimination between the “former club” and the “previous clubs” raises some questions that I will try to address in this paper. More...



The EU State aid and sport saga: The Real Madrid Decision (part 2)

This is the second and final part of the ‘Real Madrid Saga’. Where the first part outlined the background of the case and the role played by the Spanish national courts, the second part focuses on the EU Commission’s recovery decision of 4 July 2016 and dissects the arguments advanced by the Commission to reach it. As will be shown, the most important question the Commission had to answer was whether the settlement agreement of 29 July 2011 between the Council of Madrid and Real Madrid constituted a selective economic advantage for Real Madrid in the sense of Article 107(1) TFEU.[1] Before delving into that analysis, the blog will commence with the other pending question, namely whether the Commission also scrutinized the legality of the operation Bernabeú-Opañel under EU State aid law. By way of reminder, this operation consisted of Real Madrid receiving from the municipality the land adjacent to the Bernabéu stadium, while transferring in return €6.6 million, as well as plots of land in other areas of the city. More...

Resolution of Disputes Arising From Football Contracts in Turkey. By N. Emre Bilginoglu

Editor’s note: N. Emre Bilginoglu[1] is a lawyer based in Istanbul. His book entitled “Arbitration on Football Contracts” was published in 2015.


Introduction

With a total market value of approximately 911 million EUR, the Turkish Super League ranks as one of the prominent football leagues in Europe. Five of the eighteen teams that make up half of the total market value are based in Istanbul, a busy megalopolis that hosts a population of fifteen million inhabitants.[2] As might be expected, the elevated market value brings forth a myriad of disputes, mainly between the clubs and the players. However, other crucial actors such as coaches and agents are also involved in some of the disputes. These actors of the football industry are of all countries, coming from various countries with different legal systems.

One corollary of rapid globalisation is the development of transnational law, which is quite visible in the lex sportiva.[3] Like foreign investors, foreign actors of the sports industry look for some legal security before signing a contract. FIFA does protect these foreign actors in some way, providing players and coaches legal remedies for employment-related disputes of an international dimension. But what if the legal system of the FIFA member association does not provide a reasonable legal remedy for its national actors?[4] More...


The World Anti-Doping System at a Crossroads

“One day Alice came to a fork in the road and saw a Cheshire cat in a tree. ‘Which road do I take?’ she asked. ‘Where do you want to go?’ was his response. ‘I don’t know,’ Alice answered. ‘Then,’ said the cat, ‘it doesn’t matter.”

Tomorrow the Foundation Board of the World Anti-Doping Agency (WADA) will gather in Glasgow for its most important meeting since the creation of the Agency. Since the broadcasting of a documentary alleging systematic doping in Russian athletics by the German public broadcaster in December 2014, the anti-doping world has been in disarray. The various independent investigations (the Pound Report and the McLaren Report) ordered by WADA into doping allegations against Russian athletes have confirmed the findings of the documentary and the truth of the accusations brought forward by Russian whistle-blowers. Undeniably, there is something very rotten in the world anti-doping system. The current system failed to register a widespread, and apparently relatively open, state-sponsored scheme aimed at manipulating any doping test conducted in Russian territory. Moreover, it was not WADA that uncovered it, but an independent journalist supported by courageous whistle-blowers. More...


The EU State aid and sport saga: The Real Madrid Decision (part 1)

Out of all the State aid investigations of recent years involving professional football clubs, the outcome of the Real Madrid case was probably the most eagerly awaited. Few football clubs have such a global impact as this Spanish giant, and any news item involving the club, whether positive or negative, is bound to make the headlines everywhere around the globe. But for many Spaniards, this case involves more than a simple measure by a public authority scrutinized by the European Commission. For them, it exemplifies the questionable relationship between the private and the public sector in a country sick of never-ending corruption scandals.[1] Moreover, Spain is only starting to recover from its worst financial crisis in decades, a crisis founded on real estate speculation, but whose effects were mostly felt by ordinary citizens.[2] Given that the Real Madrid case involves fluctuating values of land that are transferred from the municipality to the club, and vice versa, it represents a type of operation that used to be very common in the Spanish professional football sector, but has come under critical scrutiny in recent years.[3] More...

International and European Sports Law – Monthly Report – October 2016. By Kester Mekenkamp.

Editor’s note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.  


The Headlines
We are looking for an International Sports Law Intern (with a particular interest in the CAS)! More information can be found here.


The (terrible) State of the World Anti-Doping System

The fight against doping is still on top of the agenda after the Russian doping scandal. The national anti-doping organizations (NADOs) have reiterated their call for an in depth reform of the World Anti-Doping Agency at a special summit in Bonn, Germany. These reforms are deemed urgent and necessary to “restore confidence of clean athletes and those who value the integrity of sport” and secure “the public’s desire for a fair and level playing field”. The NADOs propose, amongst others things, to separate the investigatory, testing and results management functions from sports organizations, and to remove sports administrators from crucial anti-doping executive functions. More...




Taking the Blue Pill or the Red Pill: Should Athletes Really Check their Medications against the Prohibited List Personally? - A Comment by Marjolaine Viret (University of Neuchâtel )

Editor's Note:  Marjolaine is an attorney admitted to the Geneva bar (Switzerland) who specialises in sports and life sciences.   She currently participates as a scientific collaborator at the University of Neuchâtel on a research project to produce the first article-by-article legal commentary of the 2015 World Anti-Doping Code. Her latest book Evidence in Anti-Doping at the Intersection of Science & Law was published in 2016 in the International Sports Law Book Series of T.M.C. ASSER Press.


INTRODUCTION

On 30 September 2016, a panel of the Court of Arbitration for Sport (“CAS”) rendered its award in the matter opposing high-profile tennis player Maria Sharapova to the International Tennis Federation (“ITF”). Maria Sharapova was appealing the two-year ban imposed on her by the ITF Tribunal in June 2016 for her use of Meldonium, a substance newly added to the WADA Prohibited List 2016[1]. Since neither the ITF nor WADA had chosen to challenge the Tribunal’s decision, the stakes of the case were rather simple: would the player convince the CAS panel that she should benefit from a finding of “No Significant Fault or Negligence”[2], thereby allowing for a reduction of the sanction down to a minimum of one year, or should the decision of the Tribunal be upheld? In its award, the CAS panel decided to grant such finding and reduced the sanction to 15 months.

This blog does not purport to be a ‘comment’ on the CAS award. Rather, it seeks to place the Sharapova matter into a broader context with respect to a specific issue: the expectations on Athletes when it comes to their awareness of the prohibited character of a substance, specifically when taking a medication[3]. In July 2016, I presented at the T.M.C Asser Institute in The Hague various current challenges of anti-doping that the Meldonium cases exposed (see the video here). One of these challenges concerned the modalities for including new substances onto the Prohibited List. This blog represents a follow-up on my presentation, in the light of the findings contained in the CAS award. More...



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...



International and European Sports Law – Monthly Report – September 2016. By Kester Mekenkamp

Editor’s note: This report compiles all relevant news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. You are invited to complete this survey via the comments section below, feel free to add links to important cases, documents and articles we might have overlooked.


The Headlines

September hosted the very last bit of the sport summer 2016, most notably in the form of the Rio Paralympic Games. Next to the spectacular achievements displayed during these games, in the realm of sports law similar thrilling developments hit town. The first very much expected #Sportslaw highlight was the decision by the German Bundesgerichtshof in the case concerning SV Wilhelmshaven. The second major (less expected) story was the Statement of Objections issued by the European Commission against the International Skating Union.More...


De- or Re-regulating the middlemen? The DFB’s regulation of intermediaries under EU law scrutiny at the OLG Frankfurt. By Antoine Duval and Kester Mekenkamp.

Football intermediaries, or agents, are again under attack in the news. For some, corrupt behaviour has become endemic in football’s culture. It is always dangerous to scapegoat a whole profession or a group of people. Many intermediaries are trying their best to lawfully defend the interests of their clients, but some are not. The key focus should be on providing an adequate legal and administrative framework to limit the opportunities for corrupt behaviour in the profession. This is easier said than done, however. We are dealing with an intrinsically transnationalized business, often conducted by intermediaries who are not subjected to the disciplinary power of federations. Sports governing bodies are lacking the police power and human resources necessary to force the intermediaries to abide by their private standards. In this context, this blog aims to review a recent case in front of the regional court of Frankfurt in Germany, which highlights the legal challenges facing (and leeway available to) national federations when regulating the profession. More...

Asser International Sports Law Blog | League of Legends European Championships - Challenging the Boundaries of Sport in EU Law - By Thomas Terraz

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

League of Legends European Championships - Challenging the Boundaries of Sport in EU Law - By Thomas Terraz

Editor’s note: Thomas Terraz is a third year LL.B. candidate at the International and European Law programme at The Hague University of Applied Sciences with a specialisation in European Law. Currently he is pursuing an internship at the T.M.C. Asser Institute with a focus on International and European Sports Law.


1.     Introduction

The surge of e-sports has stimulated a lively discussion on the essential characteristics of sport and whether e-sports, in general, can be considered a sport. However, one should not overlook the fact that e-sports encompass a broad range of video games that fundamentally differ from one another. Thus, as one commentator recently underlined, “the position of video games and the e-sport competitions based on them should be analysed on a case-by-case basis.”[1] In this spirit, this blog aims to provide a concise analysis of one of these e-sports, League of Legends (LoL), and one of its main competitions, the League of Legends European Championship (LEC), to assess whether it could be considered a sport in the sense of EU law. The LEC offers a fascinating opportunity to examine this issue especially since the previous European League of Legends Championship Series (EU LCS) was rebranded and restructured this year into the LEC.

 

2.     What is League of Legends and the LEC?

At the time of writing, LoL released nearly a decade ago by Riot Games (a game developer based in the USA) and rapidly became one of the most played video games in the world due in part to its free to play business model. This means that anyone can download and play LoL on their computer without ever having to pay anything. In-game microtransactions exist but do not provide any competitive advantage. The game itself involves two teams of five players who each control a ‘champion’, which are characters in the game that each possess unique abilities. A team only wins when it has destroyed the enemy base (‘nexus’). The game is not only a popular video game, but it is a popular e-sport. The most recent world championships finals attracted 99.6 million unique viewers. While these numbers are greatly due to its popularity in China and South Korea, there is also a sizeable European viewership of LoL. For example, the LEC regular season matches have reached a record-breaking 355,000 concurrent viewers in its 2019 spring competition.

The LEC is LoL’s highest level of European competition and is owned and organised by Riot Games who establishes and enforces the rules which apply to the teams participating in the LEC. Consequently, Riot Games is truly at the apex of professional LoL in Europe by setting both the in-game parameters (the rules of the game) and the regulations that govern its competitive play. As explained earlier, Riot Games restructured and rebranded its previous European competition, EU LCS, into the LEC. While previously the EU LCS was characterised by a pyramid structure with a promotion and relegation system familiar to the European sports world, the LEC introduced a franchise model to follow its sibling competition in North America, the League Championship Series (LCS). The LEC itself is a limited liability company registered in the Republic of Ireland as League of Legends European Championship Limited.[2] The LEC buy-in fee for teams already in the EU LCS was reportedly set at 8 million euros and 10.5 million euros for those outside the EU LCS. Additionally, big brands such as KIA, Shell, Foot Locker and Red Bull sponsor the LEC and are featured during the broadcast. Besides being produced and diffused weekly by the official Riot Games English broadcast team in a professional studio in Berlin on Twitch (an online video game livestreaming service) and YouTube, the LEC partners with other official broadcasters who provide coverage of the matches in other languages (French, Spanish, Polish, German, Italian). Nevertheless, before examining the LEC’s position under EU law, a review of the broader arguments on the fundamental traits of sport will contextualise the Court of Justice of the European Union’s (CJEU) interpretation of the concept of sport.

 

3.     Is LoL played in the LEC a sport competition?

The academic discourse on the definition of sport has provided a plethora of elements and conditions for an aspiring sport to meet in order to be considered a ‘real’ sport. Needless to say, this blog will not be able to address all of them. However, the characteristics identified by Suits and elaborated by Jenny et al. and Abanazir are a good starting point for this brief review.[3] Suits explains that sports are in essence games that require skill, where the skill requires physicality, that the game have a wide following, and that this following have a certain level of stability. Abanazir delved into the concept of stability in the e-sports context by explaining institutionalisation’s central role in achieving permanence.

On the first requirement, there is very little room to argue that professional LoL does not require a great amount of skill. Suits explains that games of skill provide ‘unnecessary obstacles’ (in relation to daily life) “to realize capacities not otherwise realizable” that do not rely on pure chance.[4] Playing LoL is not in any way a necessary part of human life, yet many players practicing LoL play to refine and improve their mechanical skill (the physical element of the game, e.g. muscle memory and reflexes). Chance sometimes plays a role in LoL, but it is rarely a decisive factor in determining the outcome of a competitive match. Generally, Riot Games has taken steps over the years to limit the elements of pure luck in its game.

The role of physical motor skills in e-sports has been explained in detail by van Hilvoorde and Pot, and this blog will not dive into the arguments on whether actions taken in a video game can be considered taking place in the ‘real’ world.[5] Assuming that it does, the skill required in LoL is intrinsically connected to its physicality. LoL is played on a computer with a mouse and a keyboard. High level play requires precise movement of the arm, wrist and/or hand to most effectively control one’s character with the mouse. Additionally, the clicks and inputs registered by one’s fingers on the mouse and keyboard must be timed precisely and with enough practice these movements become muscle memory. The classic example of a game that does not require this sort of physicality is chess because the manner in which one moves a chess piece from a to b does not affect the result of the game. On the other hand, LoL demands precise and timed movements of the player’s arms, wrists, and/or fingers to be played optimally. One can be a LoL strategic genius but without a sufficient level of mechanical skill, it is impossible to become a professional LoL player.

Next, a large following is probably the easiest criteria for LoL and the LEC to fulfil. Between the large viewership that watch the LoL events online and the thousands of spectators that come to watch the championships live, there is very little doubt that LoL and the LEC have a wide following at the moment. However, this point leads into the next element which arguably may be the hardest criteria for it to satisfy in the long term: stability.

Video games and consequently, e-sports, generally reach a point where they have achieved their max popularity and eventually begin to lose players and viewers. Often times, this is the result of newly released video games pushing older and ‘outdated’ games out of the spotlight. LoL has remained at the forefront of e-sports for nearly a decade and there is little suggestion that this will change in the near future. Part of this is Riot Games’ continued support of LoL by regularly updating the game. Updates are released nearly every other week and can range from graphical improvements, balancing the game to ensure the viability of new strategies, the introduction of new champions (currently 143 champions) and tweaks that improve the way the game runs on the computer. Abanazir describes that changes such as these “present a double-edged sword” because while they keep the game fresh for players, they can result in drastic changes to the best strategies (meta) to win the game.[6] Thus, professional teams and players must continually adapt their play to conform to the meta. Nevertheless, updates have never fundamentally changed the goal and overall ‘rules’ of the game. Professional LoL is always two teams of five players, each controlling one champion, aiming to destroy the enemy nexus.

From an outsider’s point of view, it may seem that the constant flux of the meta would truly damage any of LoL’s claim to stability. However, in this context, it is imperative to highlight the institutionalisation of the LEC. Institutionalisation describes the appearance of “standardisation of rules, the formalisation of learning of the games, the development of expertise and finally the emergence of coaches, trainers, officials and governing bodies.”[7] The very fact that the meta often changes have pushed professional teams to hire analysts that review the team’s play and are constantly searching for new and creative ways to play LoL. Additionally, all professional teams have at least one coach who not only define the team’s strategy before each game, but also ensure that players observe strict practice schedules. During LEC matches, referees (Riot Games employees) are always present in order to ensure that the LEC rules are observed, which greatly lends to the idea of a ‘standardisation’ of the rules.[8] In fact, Riot Games directly state that the creation of the LEC Rulebook is to help “unify and standardize the rules used in competitive play.”[9] From this outline, there are many indications that the LEC and LoL have many of the characteristics of a sport and currently have achieved a certain amount of stability and institutionalisation. The true test will be whether these structures continue to last as they have been developed and implemented over the past eight years.

 

4.     A Sport under EU Law?

Recently, the Court of Justice of the European Union (CJEU) ruled on whether the English Bridge Union could benefit from a sports exemption under the VAT Directive and in doing so examined the concept of sport under that Directive.[10] Furthermore, in this case, Advocate General (AG) Szpunar provided an enlightening opinion to the Court examining the concept of sport in the context of the VAT exemption.[11] Both provide a good opportunity to infer how the Court would perhaps go about determining whether the LEC is a sport competition under EU law. This being said, the sport exception in the current VAT Directive would not apply to the LEC since Article 132 (1) (m) applies only to services provided by non-profit organisations. Nonetheless, should League of Legends European Championship Limited eventually restructure into a non-profit, it would not be far-fetched to imagine a situation in which it would seek to have VAT reimbursed from authorities under a sports exception in the future. After all, Riot Games has repeatedly stated that it does not make a profit on its e-sport activities.[12]

The AG’s opinion began by explaining that the concept of sport in the exemption should be “interpreted in a narrow manner, while bearing in mind the purpose and objective of the exemption.”[13] From this it is clear that the analysis of the concept of sport differs depending on the applicable provision, which could mean that the LEC could be considered a sport competition under one provision and a purely economic activity in another context. The AG goes on to identifying elements which preclude an activity from being considered a sport and states that “where a physical element is not necessary, sport is defined by competition and the fact that equipment is provided by not just one supplier -  which excludes activities without a broad basis in civil society, such as commercial products in the market place, designed by firms for pure consumption (for instance video games).”[14] If this interpretation of the concept of sport had been endorsed by the CJEU, it would have constituted a tremendous obstacle for the LEC. Indeed, if the ‘equipment’ also encompasses the game itself, it is impossible to argue that Riot Games does not hold a monopoly over the supply of LoL. Moreover, Riot Games has made and continues to support LoL in order to make money. In analysing this opinion, Abanazir explains the core issue well: “e-sport competitions based on video games created for purely consumption purposes and organised by persons aimed to profit from these activities may find themselves out of the scope as they are perceived to be devoid of social function.”[15] Indeed, it can seem difficult for the LEC and LoL to argue that it has a deeper ‘social function’ but perhaps this requirement might not be completely insurmountable. An argument could be made that the e-sports aspect of LoL is not only a commercial product made for pure consumption especially because LoL is a free to play game, and Riot Games does not seem to be making any profit in its e-sport related activities. Riot Games and the LEC have also taken steps to enhance the social function of LoL by investing in regional leagues to develop local talent.

In its ruling on the Bridge case, the CJEU sidelined the AG’s approach and decided to focus on a physicality requirement. The Court, in examining the specific VAT provision, found that sport must be “characterised by a not negligible physical element,” and the fact that an activity has elements of competition, professionality and organisation were not deemed sufficient to argue that the activity is a sport for the VAT exemption.[16] Physicality was the central criteria in the CJEU’s interpretation of the concept of sport, but in doing so, it did not give any further clarity as to the threshold of physicality required for an activity to benefit from the VAT sport exemption. It has already been contended above that LoL does have a clear physical element which is intrinsically connected to the game’s skill, yet the question remains whether the physicality would be considered more than negligible by the CJEU.

In summary, if LoL and the LEC were to be examined under the VAT Directive sport exemption, it would be confronted with several challenges. The approach endorsed in the AG’s opinion would have been the most problematic since LoL is mainly a commercial product designed to attract consumers and ultimately profit a private company. However, the CJEU chose to focus its interpretation of the concept of sport on a physicality criterion. This decision may give the LEC a wide enough window to argue that the fine motor skills involved in LoL are enough to fulfil this condition.


5.     Conclusion

In its current form, the LEC would not be able to benefit from the sport exemption in the VAT Directive, but this is just one provision of EU law, and there could be other opportunities where it could attempt to claim to be a sport. In the meantime, this gives an opportunity to Riot Games to continue to develop and emphasise the social function of its e-sports competitions, which might entail building a not-for-profit entity to run the competition and to strengthen the redistribution of economic gains to the grassroots. In any case, LoL and the LEC share many characteristics with established sports, but it remains to be seen if this will be enough to boost its recognition as a ‘real’ sport in law and society.


[1] Cem Abanazir, ‘E-sport and the EU: the view from the English Bridge Union’ (2019) International Sports Law Journal 102.

[2]LEC Rules’ (LoLEsports).

[3] William Morgan, Ethics in Sport (3rd edn, Human Kinetics 2018) ch 1: Elements of Sport by Bernard Suits; Seth Jenny et al., ‘Virtual(ly) Athletes: Where eSports fit within the definition of “Sport”’(2016) Quest 1; Cem Abanazir, ‘Institutionalisation in E-Sports’ (2019) Sport, Ethics and Philosophy 117.

[4] Morgan (n 3) ch 1.

[5] Ivo van Hilvoorde and Niek Pot, ‘Embodiment and fundamental motor skills in eSports’ (2016) Sports, Ethics and Philosophy 14.

[6] Abanazir (n 3).

[7] Jenny et al. (n 3); Abanazir (n 3).

[8] See LEC Rulebook Art. 8.15.

[9] LEC Rules (n 2).

[10] Case C-90/16 The English Bridge Union Limited v Commissioners for Her Majesty’s Revenue & Customs ECLI:EU:C:2017:814.

[11] Case C-90/16 The English Bridge Union Limited v Commissioners for Her Majesty’s Revenue & Customs ECLI:EU:C:2017:814, Opinion of AG Szpunar.

[12] Steven Asarch, ‘“League of Legends” cuts esports budget, can Riot Games bounce back?’ (Newsweek, 28 August 2018); Derrick Asiedu head of Global Events at Riot Games confirmed this in a Reddit post: “We’re a long way from breaking even (revenue minus cost equalling 0)”.

[13] English Bridge Union Opinion (n 11) para 21.

[14] English Bridge Union Opinion (n 11) para 38.

[15] Abanazir (n 1).

[16] English Bridge Union (n 10) para 19, 25.

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