This is part two of the blog on the Willem II and MVV State Aid decisions. Where part one served as an introduction on the two cases, part two will analyze the compatibility assessment made by the Commission in two decisions.

The compatibility of the aid to MVV and Willem II (re-)assessed

Even though it was the Netherlands’ task to invoke possible grounds of compatibility and to demonstrate that the conditions for such compatibility were met, the aid granted to both Willem II and MVV was never notified. The Netherland’s failure to fulfill its notification obligation, therefore, appears to be at odds with the Commission’s final decision to declare the aid compatible with EU law. Yet, a closer look at the Commission’s decision of 6 March 2013 to launch the formal investigation shows that the Commission was giving the Netherlands a ‘second chance’ to invoke grounds that would lead to a justification of the measures. In paragraph 74, the Commission itself reached the conclusions that the clubs in question faced financial difficulties, consequently indicating that the Rescue and Restructuring Guidelines might apply. In fact, the Commission even suggested possible compensatory measures, which are very much related to “the peculiar nature of professional football”[1]. These suggested compensatory measures included:

- limiting the club’s number of registered players for a season or several seasons;

- accepting a cap on the relation between salaries and turnover;

- banning the payment of transfer fees for a certain period;

- offering additional expenditure on “pro bono” activities to the benefit of the community and training of amateurs.[2]

Furthermore, it invited the Dutch authorities “to provide all useful information allowing the Commission to decide whether the aid measures can be considered compatible with the Guidelines”.[3]

The observations and information submitted by the Netherlands between March 2013 and July 2016 proved more than sufficient for the Commission to carry out its compatibility assessment. As was insinuated in the decision to launch a formal investigation, the Rescue and Restructuring Guidelines proved fundamental to this assessment.  

Willem II and MVV as firms in financial difficulties

This first condition of the Guidelines was easily complied with. As regards Willem II, in the accounting year 2008/2009, it made a loss of €3.9 million on a turnover of €11.4 million. Meanwhile, its own equity decreased from €4.1 million to €200.000. The losses increased to €4.4 million on a turnover of €9.9 million for the 2009/2010 season, while its own equity decreased further from €200.000 to minus €2.1 million.[4]

MVV clearly was financially not doing much better. As the Commission itself summarizes in the MVV decision, “in 2008/2009, MVV made a loss of €1.1 million and its own equity was minus €3.8 million. By March 2010 additional losses amounting to €1.3 million had occurred and the own equity had dropped to minus €5.17 million. In April 2010, MVV was no longer able to pay salaries and other current expenditure and was on the brink of bankruptcy.”[5]

Another consequence of being in financial difficulties relates to the licensing system put in place by the Dutch football federation KNVB. As is explained in paragraph 11 of the decision to open a formal investigation, one of the obligations for clubs under the current system is submitting three financial reports a year to the KNVB. On the basis of these reports clubs are scaled in three categories (I: insufficient, II: sufficient, III: good). Clubs in category I may be obliged to present a plan for improvement in order to reach categories II or III. If the club fails to comply with the plan, sanctions may be imposed by the KNVB, including an official warning, a reduction of competition points and – as ultimate sanction – withdrawal of the licence.[6] At the time the State aid was granted, both Willem II and MVV were scaled in the insufficient category I.  

Willem II and MVV as small enterprises or medium-sized enterprises

This particular assessment is important for the two conditions below, i.e. the introduction of restructuring plans and compensatory measures. Depending on the size of the firm (or enterprise), different conditions apply. Willem II employed 53 people in 2012 and had an annual turnover of €11.4 million in 2008/2009.[7] Pursuant to the Annex of the Commission Recommendation concerning the definition of micro, small and medium-sized enterprises, Willem II just managed to be considered a medium-sized enterprise.[8]

MVV, on the other hand, is considered a small enterprise. In the season 2009/2010 it had 38 employees and in the season 2010/2011 it had 35 employees. Its turnover and balance sheet total remained well below €10 million in both years.[9] 

Restructuring plans

Though not initially communicated to the Commission, both rescue measures were subject to certain restructuring conditions. In principle, these consisted of reducing personnel costs, by introducing new managements, selling players, and signing players free of transfer payments. In the case of Willem II, in the two years following the rescue measure personnel costs were reduced by 30%.[10] The effects of MVV’s restructuring plan were even better, since it managed to book profits for the three seasons following the aid and was scaled in the highest category (III) by the KNVB in the beginning of the season 2011/2012.[11] 

Compensatory measures

For the compensatory measures it is important to take into account point 41 of the Rescue and Restructuring Guidelines. Under this provision, small enterprises, such as MVV, are not required to take compensatory measures. However, this exception did not apply to Willem II. The Commission noted more expenditure of Willem II for public benefit by the training of amateurs and a reduction of the number of registered players from 31 to 27. Similarly, no transfer payments were made during the restructuring period.[12] Potentially as a result of this, Willem II was relegated to the second league in 2011 and again in 2013. In the end, the Commission concluded that “the compensatory measures required by the Guidelines were taken, which had the effect of weakening Willem II's competitive position in professional football”.[13] 

Aid limited to a minimum

Since the aid measures rescued both football clubs from bankruptcy without creating equity surplus, the Commission believed the amount of aid granted limited to what was necessary. Furthermore, the Commission highlighted that the restructuring plans were to a large extent financed by external contributors just as the Rescue and Restructuring Guidelines requested. Private entities had agreed to lend €2.25 million to Willem II for the restructuring, which is well over the 40% of €2.4 million (the total amount of State aid granted) required for medium-sized enterprises under the Guidelines.[14] In the case of MVV, several private creditors decided to waive (part of) their debt, which amounted to €2.25 million. This amount is more than 25% of the €5.8 million granted by the Netherlands, the minimum requirement for a small enterprise like MVV.[15] 

One time, last time

The Commission believes this condition to be fulfilled, as the Netherlands specified that Willem II and MVV did not receive rescue or restructuring aid in the ten years before the aid measures, nor will it award any new rescue or restructuring aid to the clubs during a period of ten years.[16] 

Conclusion

At the time of writing, the non-confidential versions of the positive decisions regarding State aid granted in favour of the Dutch professional football clubs FC Den Bosch and NEC Nijmegen are not published. Nonetheless, this does not prevent us from drawing the following lessons from the Willem II and MVV decisions.

First of all, these decisions show that there is no need to draft sector specific guidelines for State aid to professional football clubs in difficulty. The Rescue and Restructuring Guidelines are all the Commission needs in order to carry out the compatibility assessment. This approach is radically different when compared to the Commission’s decisional practice for the State aid to sport infrastructure cases between 2011 and 2013.[17] Only after the Commission dealt with ten different cases, was its approach (to a large extent) codified in Article 55 of the 2014 General Block Exemption Regulation.[18]

In this regard it is important to highlight that the Commission seems to take into account “the peculiar nature of professional football”[19] when assessing the compatibility of State aid measures under the Rescue and Restructuring Guidelines. For example, it showed demonstrated its awareness of the UEFA Club Licensing and Financial Fair Play Regulations[20] as well as national (KNVB) licensing rules when assessing the compensatory measures taken by Willem II. Moreover, it clearly endorsed the decision taken by the club not to make transfer payments during the restructuring period, since this prevents the club from spending money it might not have, while simultaneously limiting the club’s competitiveness on the field.

A further lesson that can be drawn from these decisions is that, in my opinion, the threshold to ‘pass the compatibility test’ under the Rescue and Restructuring Guidelines is quite low. With regard to the condition that the club needs to be in financial difficulties in order to get the State aid, it is clear that granting State aid to professional football clubs in financial difficulties is one of the most (if not the most) common form of State aid in the sector. This was the case for the five Dutch clubs scrutinized by the Commission, as well as the three clubs from Valencia of which the non-confidential version of the decision still needs to be published. Other clubs like FC Twente and Sporting de Gijón have also received State aid over financial difficulties, even though the Commission did not investigate these measures (yet).[21] In other words, a majority of the cases are assessable under these Guidelines.

The condition that the beneficiary football club needs to stick to a restructuring plan in order to receive the State aid is key. As is elucidated in the two decisions, the restructuring plans consisted of selling players, reducing the costs of wages and not paying transfer fees for new players for a period of three years. In my view, these conditions are rather proportionate when considering that the clubs in question were on the verge of bankruptcy prior to the State aid measures. In fact, one could argue that FIFA’s transfer ban imposed on FC Barcelona for international transfers of minors, or excluding FC Dynamo from the next UEFA club competition for which the club would otherwise qualify in four seasons (i.e. the 2015/16, 2016/17, 2017/18 and 2018/19 seasons) for breaching UEFA’s FFP Regulations,[22] are harsher than the restructuring conditions accepted by the Commission.

The same can be said about the need to take compensatory measures. The measures taken by Willem II (reducing the number of employees and players, and reducing the cost of wages to 48% of the turnover) could be considered a direct consequence of the abovementioned restructuring plans. The only additional compensatory measure taken by Willem II was increasing expenditure of the club for the training of amateurs, though the decision does not specify what this implied in practice.

Perhaps the only condition that could be problematic for some football clubs is the “one time, last time” criterion. Under this condition, the public authorities cannot rescue Willem II and MVV again until at least 2020. Although Willem II and MVV are currently in category III and II on the KNVB’s scale respectively, falling back to category I before 2020 could have dramatic consequences.

Be that as it may, now that the Commission’s approach for the assessment of State aid to professional football clubs in financial difficulties is out in the open, public authorities and football clubs alike should use this knowledge to their own advantage. They should remember that the Commission is willing to accept rescue aid and that the restructuring conditions are far from impossible to match. One can even wonder whether a club like FC Twente would have turned to Doyen when it was facing financial difficulties, if it had been aware of the conditions imposed by the European Commission for receiving compatible State aid under the Rescue and Restructuring Guidelines.

[1] Commission Decision on State Aid SA.40168 of 4 July 2016 implemented by the Netherlands in favour of the professional football club Willem II in Tilburg, para. 50.

[2] Commission Decision SA.33584 of 6 March 2013 – The Netherlands Alleged municipal aid to the Professional Dutch football clubs Vitesse, NEC, Willem II, MVV, PSV and FC Den Bosch in 2008-2011, para. 80.

[3] Ibid, para. 77.

[4] SA.40168, para. 45.

[5] Commission Decision on State Aid SA.41612 of 4 July 2016 implemented by the Netherlands in favour of the professional football club MVV in Maastricht, para. 13.

[6] SA.33584, para. 11.

[7] SA.40168, para. 9.

[8] A firm is not considered a small enterprise i fit has more than 50 employees and an annual turnover of more than €10 million. See footnote 27.

[9] SA.41612, para. 9.

[10] SA.40168, para. 48.

[11] SA.41612, para. 52.

[12] SA.40168, para. 51. Indeed, according to www.transfermarkt.de, Willem II only paid a mere €20.000 for the signing of Kevin Brands in July 2012.

[13] Ibid.

[14] SA.40168, para. 52.

[15] SA.41612, para. 54.

[16] SA.40168, para. 55 and SA.41612, para. 61.

[17] Commission Decision of 9 November 2011, SA.31722 – Hungary - Supporting the Hungarian sport sector via tax benefit scheme; Commission Decision of 2 May 2013, SA.33618 Uppsala arena; Commission Decision of 15 May 2013, SA.33728 Multiarena in Copenhagen; Commission Decision of 20 March 2013, SA.35135 Multifunktionsarena der Stadt Erfurt; Commission Decision of 20 March 2013, SA.35440 Multifunktionsarena der Stadt Jena; Commission Decision of 18 December 2013, SA.35501 Financement de la construction et de la renovation des stades pour l’EURO 2016; Commission Decision of 2 October 2013, SA.36105 Fuβballstadion Chemnitz; Commission Decision of 20 November 2013, SA.37109 Football stadiums in Flanders; Commission Decision of 9 April 2014, SA.37342 Regional Stadia Development in Northern Ireland; and Commission Decision of 13 December 2013, SA.37373 Contribution to the renovation of ice arena Thialf in Heerenveen.

[18] For a deeper analysis of whether sport-specific guidelines are necessary, see Oskar van Maren, “EU State Aid Law and Professional Football: A threat or a Blessing?”, European State Aid Law Quarterly, Volume 15 1/2016, pages 31-46. To find out how sector-specific rules for State aid are usually articulated, see Ben Van Rompuy and Oskar van Maren, “EU Control of State Aid to Professional Sport: Why Now?” In: “The Legacy of Bosman. Revisiting the relationship between EU law and sport”, T.M.C. Asser Press, 2016.

[19] SA.40168, para. 50.

[20] In paragraph 51 of SA.40168, the Commission referred to a UEFA rule, which holds that the cost of salaries should not exceed 70%.

[21] For more information of the precarious financial situation of these two clubs, see our previous blogs: “Unpacking Doyen’s TPO Deals: FC Twente's Game of Maltese Roulette”, and “TPO and Spanish football, friends with(out) benefits?”.

[22] For more information on the FC Dynamo case, see our blog “UEFA’s FFP out in the open: The Dynamo Moscow Case”.

Graph 1: Number of Cases submitted to CAS (CAS Satistics)

The Court of Arbitration for Sport (CAS) is a fairly recent construct. It was created in 1984 under the patronage of IOC’s former president Juan Antonio Samarranch. However, as is evident from Graph 1, it gained prominence only at the turn of the century and reached the symbolic 100 cases/year bar only in 2003. This recent boom of the CAS docket is mainly due to the adoption of the WADA code and the introduction thereafter of binding arbitration clauses in the statutes and regulations of Sports Governing Bodies. Nowadays, CAS is dealing with a caseload of more than 350 cases/year, which is still growing constantly. From 2008 onwards CAS started even to experience pending cases, as it was not able anymore to process all the cases submitted in one calendar year (Graph 2). The steep fall of “other decisions” (Graph 3), a proxy for decisions (mostly on procedural matters) not involving an award, might indicate that the litigants and their lawyers have become more proficient in CAS procedure. Finally, the number of cases withdrawn (Graph 4) has been varying a lot, without it being possible to pin down any definitive cause explaining those variations. It is, however, notable that more than 2/3 of the cases give way to an award.

Graph 2: Percentage of the cases resulting in an Award/Opinion vs. Percentage of pending cases (Data CAS Statistics)

Graph 3: Percentage of Procedures terminated by a CAS decision other than an award (Data CAS statistics)

Graph 4: Percentage of Cases withdrawn before a decision by the CAS (Data CAS statistics)

The breakdown of the way cases were submitted to CAS (Graph 5) highlights very well the paramount role played by the 1994 reform process triggered by the Gundel ruling of the Swiss Federal Tribunal in 1993. Indeed, it is this reform process which enabled the final recognition of CAS as an independent tribunal by the Swiss Federal Tribunal, a move necessary to ensure the legitimacy of its awards. But, it is also the process through which the appeal procedure of CAS got solidified and became highly valuable in the eyes of Sports Governing Bodies. In light of the Bosman case and the perceived need for a global anti-doping Court, CAS became both a recourse to protect the sporting autonomy and a mean to ensure a harmonized anti-doping playing field. Thus it is not surprising that with the entry into force of the first World Anti-Doping Code in 2004 a huge jump in the number of CAS cases under the appeal procedure can be observed (Graph 5), passing from 46 in 2003 to 252 in 2004 and growing to 301 in 2012. In the meantime, the ordinary procedure cases have been stable with 61 cases in 2003 and 62 in 2012. CAS’s success is largely the success of the appeal procedure, but this appeal procedure seems potentially threatened after the recent Pechstein decision of the Landesgericht München. Furthermore, since 1996 ad hoc CAS proceedings have been introduced. At first only for Olympic games (every two-year) and more recently for other international competitions. However, the caseload of the ad-hoc tribunals remains modest, the peak was reached at the Sydney Olympic in 2000 with 15 cases, since then Ad-hoc tribunals have been in the shadow of the prominent place taken by the Appeal Procedure.

Graph 5: Types of procedure (Ordinary Procedure, Appeal Procedure, Consultation Procedure and Ad-Hoc Procedure) under which cases were submitted to CAS since 1995. (Data CAS statistics)

Finally, our last Graph 6 shows that the boom of the number of CAS awards has quite logically triggered a steep rise in the number of appeals against those awards submitted to the Swiss Federal Tribunal. Indeed, starting from one or two decisions per year in the early 2000s, the Swiss Federal Tribunal is now adopting more than 15 rulings per year on appeal of CAS awards. However, very few of these decisions have overruled CAS awards, moreover once an award is overruled it is usually sent back to CAS to decide de novo on the case, thus giving it the opportunity to correct any procedural mistake leading to the annulment of the first award. This appeal procedure is therefore rather a mock procedure; an appellant has very little chances to succeed. In fact, it is only recently that in a case concerning a CAS award (the Matuzalem case), the Swiss Federal Tribunal considered, for the first time, an arbitral award as contradicting Swiss material public policy. The route to the Swiss Federal Tribunal might be the most obvious to any athlete wishing to contest a CAS award, but it is definitely a very difficult (and costly) one, leaving very few reasons to hope for a final twist.

Graph 6: Number of Decisions of the Swiss Federal Court in Appeal against CAS awards. (Data ASSER)

This report on the Court of Arbitration for Sport was aimed at fleshing out the intuition of sports lawyers on the importance taken by CAS in contemporary sports law practice with some “hard” data illustrating both the temporal and quantitative shifts of the CAS relevance. The rise of the CAS needed to be statistically deconstructed and analysed in order to fully grasp the role it plays in the governance of sports. Furthermore, its interaction with state courts, and in particular with the Swiss Federal Tribunal, deserves close scrutiny. In many instances the Swiss Federal Tribunal is the sole forum of review for CAS awards. This is particularly true for athletes, which have usually been forced, in one way or another, to submit to arbitration. Thus, the debates around the legitimacy and role of CAS in sports governance can only gain from an enhanced knowledge of the empirical reality underlying the Court of Arbitration for sport.

Indicative Bibliography on CAS:

A. Rigozzi, Arbitrage International en matière de sport

A. Rigozzi, Challenging Awards of the Court of Arbitration for Sport

G. Kaufmann-Kohler Arbitration at the Olympics – Issues of Fast-Track Dispute Resolution and Sports Law

M. Maisonneuve, Arbitrage des litiges sportifs

I.S. Blackshaw, J. Soek, R. Siekmann  (Eds.), The Court of Arbitration for Sport 1984–2004

R. H. McLaren, Twenty-Five Years of the Court of Arbitration for Sport: A Look in the Rear-View Mirror

D. Yi, Turning Medals into Metal: Evaluating the Court of Arbitration for Sport as an International Tribunal

The CAS Database of awards

The CAS Bulletin

The Swiss Federal tribunal database (French and German)

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.
For that purpose, the author will depart from the restrictive interpretation of article 6(3) adopted by the FIFA Dispute Resolution Chamber (DRC) and continue with a substantive assessment of the rule, firstly by looking at its purposive aim and secondly, by evidencing the potential negative impact on players’ mobility and its inherent anticompetitive effects. 

A. Article 6(3) Annexe IV of the FIFA-RSTP (Ed. 2016)

Article 6(3) of the FIFA-RSTP reads as follows: “3. If the former club does not offer the player a contract, no training compensation is payable unless the former club can justify that it is entitled to such compensation. The former club must offer the player a contract in writing via registered post at least 60 days before the expiry of his current contract. Such an offer shall furthermore be at least of an equivalent value to the current contract. This provision is without prejudice to the right to training compensation of the player’s previous club(s).”[4]
In summary, as a general rule, the former club of the player loses its right to claim training compensation if it fails to offer the player a contract in the terms described by the article, or cannot demonstrate a legitimate interest.
So far, the DRC has been consistent in interpreting that the obligation to offer the player a contract lies exclusively with the former club of the player as opposed to the previous clubs. In other words, the previous club is entitled to ask for training compensation when the player signs the first professional contract[5] no matter whether they offered the player a contract or showed bona fide interest in retaining him.
At first glance, this rigid interpretation might appear controversial in light of the more pragmatic approach towards the formal requirements of article 6(3) adopted in the CAS award 2009/A/1757 between MTK Budapest v. FC Internazionale Milano SpA[6]. In this case, in order to conclude that MTK Budapest was still entitled to request training compensation despite not having offered the player a contract in the terms indicated in the regulation, the adjudicating Panel emphasized that “[the] aims of sporting justice shall not be defeated by an overly formalistic interpretation of the FIFA Regulations which would deviate from their original intended purpose”.[7]
The DRC has thus systematically admitted claims of previous clubs against clubs that have registered professional players for the first time (e.g. DRC decision of 17 May 2016[8]) without delving into whether such clubs are indeed entitled to training compensation or not.
In an attempt to defy such dogmatic approach to the issue, I question whether the different references made in Annexe IV of the FIFA RSTP to the “former club”[9] could and should instead be interpreted more extensively, so as to include all former clubs (thus including previous clubs) where a player has been registered. Firstly, by having a look at the systematic context of the rule and its purposive interpretation[10], and secondly, by taking into consideration the potential competitive disadvantages between European clubs resulting from the regulation.
As to the rationale of the rule, the FIFA DRC jurisprudence (vid. e.g. DRC Decision of 27 April 2006 ref. no. 461185[11]) indicates that “the spirit of and purpose of article 6 para 3 of Annexe 4 of the RSTP, 2016 edition, is to penalise clubs which are obviously not interested in the players’ services as a professional, no matter if the club would have to offer the player an employment contract for the first time or a renewal due to the expiry of an already existing contract.”[12]
It appears therefore, contrary to the spirit of the rule that a club that has shown no interest in keeping the player as a professional, a roster or for its academy, can at a later stage request to be rewarded for the training of that player, irrespective of whether it was the former club, strictly speaking, or the former former club, so to speak (i.e. the previous club in the RSTP exact wording).
One could easily argue at this point, and I would subscribe to it, that at very young ages it is either legally prohibited for training clubs to offer a contract, or unreasonable to require clubs to offer contracts to all its players in order to safeguard their potential right to training compensation.  This was highlighted by the CAS Panel in the CAS award 2006/A/1152 ADO Den Haag v. Newcastle United FC[13] which was the appeal against the above cited DRC Decision of 27 April 2006.
However, nothing prevents training clubs to at least show a genuine interest in retaining the player as an amateur by formally offering him to continue training with them or even through a simple positive evaluation of the player. In order to alleviate the unreasonable burden that such obligation would suppose on training clubs, a solution could be to require the genuine interest at least, for players as from the season of their 16^th birthday. This would coincide with the age when in most EU countries players are legally allowed to sign employment contracts, and form a strict sportive perspective, the age from when training compensation is calculated in full according to article 5(3) of Annexe IV.
The final reference in article 6(3) (i.e. “This provision is without prejudice to the right to training compensation of the players’ previous club(s)”) helps to ground this interpretation. It is difficult to justify from a legal standpoint, why previous clubs should be exempted (as they, in fact, are) from observing the same rules and obligations as the former clubs, especially considering the principle of free movement of workers in the EU. The right to claim training compensation is, being redundant, “without prejudice to the right (…) of the players’ previous club(s)”. Previous clubs should therefore, demonstrate as well their entitlement to training compensation by evidencing a genuine interest in the player, such as former clubs do. 
To illustrate the situation, consider the case were an EU football club omits to offer one of its players (e.g. 18 years old) a professional contract in the terms of article 6(3) of Annexe IV, and that player further registers as an amateur with another EU club for one season. That second club also fails to offer the player (now 19 years old) a professional contract. After two seasons as an amateur, the player, finally signs a professional contract with a third EU club at the age of 20 years. The current interpretation of the exception leads to conclude that the first club, which failed to offer the player a professional contract, perhaps because he was simply not sufficiently interesting to retain, would now be reinstated in the right to claim training compensation, while the former club, under identical circumstances and reasons would be deprived from it.
Within those parameters, de lege ferenda the exception of article 6(3) could reasonably be extended to those previous clubs that failed to show the so-called bona fide interest. This way, by failing to show real interest in keeping a player, the previous clubs would be also prevented from asking training compensation upon the first registration of the player as a professional, to the same extend as the former club when it fails to offer the player a contract, in the terms indicated by the exception.
Turning now the attention, to EU law, the conclusions on why article 6(3) Annexe 4 current interpretation seems unfair and should be reformulated, point towards the same direction. 
 

B. Article 6(3) Annexe IV of the FIFA RSTP and EU competition law

The Bosman ruling and its most recent successor, the Bernard ruling, stand out as constant reminders that EU Law applies to the realm of European club football insofar as it constitutes an economic activity in the sense of Article 2 of the Treaty.[14] It is nowadays unarguable that football is a real economic activity and that the regulations adopted by its governing bodies must respect EU Law as long as they apply in the territory of the EU, or in case the player concerned has a European passport and is transferring to an EU Member State. Only rules which are “inherent to sport” such as the rules of the game, and other “practices likely to be exempted” meaning, those activities not necessarily linked to sport but which are worth of protection, could potentially fall outside the remit of EU competition law (the sporting exception) as pointed out by the “Helsinki Report on Sport” in 1999. However, the decision in the Meca-Medina case went even further, overcoming the traditional distinction between rules of purely sporting nature from others, to determine that rules cannot be of purely sporting nature when they have economic repercussions, and consequently, making it possible to explore new legal avenues to test regulations that in principle may seem outside the scope of EU competition law (such as the doping regulations in Meca-Medina).
According to Bosman[15] and Bernard, training compensation is a practice worth of protection, but it is undeniable that its rules have strong economic implications, for they are expressly meant to financially reward[16] football clubs involved in the training and education of players when these move to other clubs. For that reason, they fall under the remit of EU Law.
The legitimate aim of the training compensation system is also embraced by legal scholars. For example, while delving into the aftermath of the Bosman case and the agreement reached between FIFA and the EU Commission in 2001, S. Weatherill remarked that “(…). Sport has special features that deserve respect. In accordance with Bosman, it should be regarded as legally permissible for football to devise an internal taxation system to transfer money into the hands of nursery clubs, as part of a scheme for sustaining a larger number of clubs than would survive in ‘pure’ market conditions and to diminish gaps in economic strength between clubs.”[17]
However, it is my firm belief that Annexe IV of the FIFA RSTP has in many ways gone beyond the indications in Bosman, the Helsinki Report[18] and later in Bernard. In this last case, the Court referred to a system meant to compensate[19] and not reward training; and it is precisely that difference regarding the foundations of the system implemented by FIFA that leads to disproportionate results when the amounts to pay as training compensation are superior to the real costs incurred by the training clubs.[20]
All these issues jeopardize free mobility within the EU[21], for they restrict the chances of clubs to recruit players, and have an impact on the commercial relations between clubs and players in the sense of Article 101. By way of example, a Romanian football club registering a 21-year old player trained in Romania as a professional for the first time, would end up paying the training club a significantly lower amount of training compensation than a Hungarian club of the same category, wishing to sign that same player. The reason for that is that whilst in the first scenario the Romanian club would be subject to the internal training compensation mechanism; in the second scenario, the Hungarian club would be subject to the FIFA regulations that impose higher training compensations.
With these premises in mind, the testing of article 6(3) Annexe IV of the FIFA RSTP under EU competition law seems appropriate, although the application of EU competition law in this type of cases will probably remain an exception.[22]
In short, Article 101 TFEU[23] prohibits agreements, decisions of associations and concerted practices which may affect trade between Member States and have as their object or effect the prevention, restriction or distortion within the internal market.[24] Saskia King, explaining the so-called “objective criterion”[25], has highlighted that “when determining whether an agreement restricts competition under Article 101(1) TFEU, ‘object’ expresses a true alternative to ‘effect’ and as such requires separate consideration”. Therefore, if the object of the agreement is anticompetitive, there is no need to look behind the effects.
A primary aspect of competition law is the identification of the relevant market where a possible anticompetitive practice takes place. In the present context, the relevant market is the transfer market of football players, that is, the market on which the offer and supply of players meets and clubs compete against each other to recruit the best players.[26] Geographically speaking, the market is limited to the territory of the Member States of the EU.
Assuming also, that the FIFA RSTP (ed. 2016) qualifies as a “decision by an association of undertakings”[27] and that the rules of training compensation have an appreciable affect in trade between Member States[28] since any change of clubs for players under the age of 23 requires the payment of a training compensation[29]; the questions left to answer are therefore, whether or not article 6(3) of Annexe IV of the FIFA-RSTP (Ed. 2016), in its current formulation is (1) likely to prevent, restrict or distort competition in the EU transfer market of football players under Article 101(1) TFEU and more importantly, (2) whether the restrictive effects are proportionate and “[reasonably] necessary for the organization and proper conduct of sport?”[30]
As to the first question, it is my view that both the object and the effects produced by, article 6(3) restrict and distort competition between clubs, for they discriminate former clubs vis-à-vis previous clubs with regard to their right to claim training compensation. Additionally, the compensation limits the ability of clubs to take on players acting as free agent.
As to the second question, the Meca-Medina case –though in a different context[31]- offered valuable guidance to test the compatibility of rules of sports associations with EU competition law: “42. Not every agreement between undertakings or every decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 81(1) EC. For the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects and, more specifically, of its objectives. It has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives (Wouters and Others, paragraph 97) and are proportionate to them.”
Following the Meca-Medina reasoning, and focusing on the rationale behind article 6(3) Annexe IV, in the CAS award 2006/A/1152 ADO Den Haag v. Newcastle United FC, the CAS Panel corrected the view of the original DRC decision of 27 April 2006. Specifically, it remarked that the aim of the rule is “to ensure that no player, whether amateur or professional, in whom the training club has no interest, is impeded to accept the offer of another club because he carries some sort of ‘compensation price tag”[32] rather than to penalize clubs failing to offer a contract to their amateur players. The unquestionably legitimate goal of “the exception to the exception” - as the Panel calls article 6(3) - is thus to limit the obstacles to the free mobility of players aforementioned.
However, as to “whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives and are proportionate to them” there cannot be a positive answer. To me it is doubtful whether the anticompetitive effects produced by establishing different conditions between former clubs and previous clubs are inherent or a necessary consequence to ensure the objective of rule (i.e. contributing to free mobility). I believe the contrary to be true. (i.e. uently,conditions ctive of the rule, tt of EU Law. by scholars.r compensation. in the application of such principle. nsatI bI be The effects generated by the current interpretation of article 6(3) collide with the aim of the rule (i.e. protecting free mobility), for reinstating previous clubs in their rights to claim training compensation irrespective of their behaviour vis-à-vis the player, compromises free movement within the EU and creates unfair competitive advantages for previous clubs.
In conclusion, my suggestion is to rethink, the current formulation of article 6(3) (if not the entire training compensation system) and correct its detrimental effects by preventing all previous clubs that fail to offer players a professional contract or to show bona fide interest as from the season in which a player turns 16 years old from requesting training compensation. It is certainly not the role of the CAS to do so, but the responsibility of the EU Commission to take an active lead to ensure full compliance of football regulations with EU law. 

[1] See FIFA Executive Committee, “Commentary on the Regulations for the Status and Transfer of Players”, Annex 4 (29 June 2005) at page 124.

[2] European Commission Press Release of 5 March 2001, “Outcome of discussions between the Commission and FIFA/UEFA on FIFA Regulations on international football transfers”.

[3] A bona fide and genuine interest in keeping the player must be demonstrated before the DRC cf. Arbitration CAS award 2009/A/1757 MTK Budapest v. FC Internazionale Milano S.p.A., award of 30 July 2009.

[4] FIFA Regulations on the Status and Transfer of Players, article 6(3) Annexe IV.

[5] In cases of subsequent transfer, the club entitled to claim training compensation will always be the “former club”.

[6]“17. As noted earlier, it is the 2005 Regulations which apply in the present case. At the same time, however, FIFA itself has clarified that the aim of the revisions introduced in 2005 was simply to “facilitate the evidence of a contract offer being made”. In its Decision, the DRC stated that “...when revising the Regulations it was decided to integrate in the 2005 edition of the Regulations some formal preconditions in order to facilitate the evidence that a contract offer was effectively made...This is the actual aim of the relevant formalities”. Consequently, the Panel does not interpret the 2005 revisions to the Regulations as constituting a substantive or material alteration to the 2001 regulatory regime because, as FIFA has said, the changes introduced related only to matters of form, and not of substance.”

[7] See para. 31 of the award. Although, the transfer structure used in this case could qualify as a bridge transfer used for the purpose of circumventing the FIFA regulations on transfer compensation.

[8] Decision of the Single Judge of the Sub-committee of the DRC case Budapest Honved FC (Hungary) v. AFC ASA 2013 Targu Mures (Romania) ref. TMS 243. Unpublished.

[9] See also FIFA RSTP, article 2 para. 2 of Annex IV.

[10] See the CAS award 2007/A/1363 TTF Liebherr Ochsenhausen v/ETTU, award of 5 October 2007 para 12 page 8: “10. By interpreting rules and regulations of associations, the starting point and the predominant element of construction is the wording (literal interpretation). Other elements such as the systematic context, the purpose and the history of the rule may contribute to the correct understanding of the meaning of the rule. This principle is accepted in both civil and common law and it has been constantly applied by CAS panels. It is also embedded in the law of Luxembourg (see, e.g., Art. 1156 of the Code Civil of Luxembourg) and the parties have not argued otherwise.” Emphasis added.

[11] Decision not published.

[12] De Weger, The Jurisprudence of the FIFA Dispute Resolution Chamber, Asser Press, 2^nd Edition, 2016. Page 401.

[13] See para. 22 of the CAS award 2006/A/1152 ADO Den Haag v. Newcastle United FC, award of 7 February 2007.

[14] See also Case 36/74, Walrave and Koch v UCI, ECLI:EU:C:1974:140.

[15] Case C-415/93, Union Royale Belge des Sociétés de Football Association and Others v Bosman and Others, ECLI:EU:C:1995:463, paras. 106-110.

[16] See FIFA Executive Committee, “Commentary on the Regulations for the Status and Transfer of Players”, article 1(2) and Annex 4 para. 1 (Objectives), page 112.

[17] S. Weatherill, European Sports Law Collected Papers, Asser Press, 2^nd Edition (2014), pages 218 and 219.

[18] See Report from the Commission to the European Council of 10 December 1999 with a view to safeguarding current sports structures and maintaining the social function of sport within the Community framework – The Helsinki Report on Sport - para. 4.2.1.3: The Report refers to a system of objectively calculated payments that are related to the costs of training.

[19] Case C-325/08, Olympique Lyonnais SASP v Olivier Bernard and Newcastle UFC, ECLI:EU:C:2010:143, paras. 44 and 45.

[20] As an example of this disproportionality, a simple comparison between the training costs established for Cat. III UEFA clubs (30.000 Euro per) with the training costs established for internal transfers by the Romanian Football Football Federation (5.000 RON per year equivalent to 1.107 Euro).

[21] Training compensation rules were recently tested against EU law, and in particular with regard to the freedom of movement of workers, by TAS-CAS in the Riverola case (CAS award 2014/A/Bologna FC 1909 SpA v. FC Barcelona). The award is not public, but a full comment and legal analysis is published in: Luca Smacchia, “The Riverola case: how the enforcement of FIFA rules may restrict the freedom of movement for workers within the EU”, Football Legal, #5 (June 2016), pages 20-24.

[22] See e.g. Ben Van Rompuy, “Sport and EU Competition Law: New developments and unfinished business”, Asser International Sports Law Blog (22 May 2015).

[23] Article 101 TFEU: “The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (…) (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;”

[24] “The distinction between "restrictions by object" and "restrictions by effect" arises from the fact that certain forms of collusion between undertakings can be regarded, by their very nature, as being injurious to the proper functioning of normal competition.” - Commission Staff Working Document of 25 June 2014, Guidance on restrictions of competition “by object” for the purpose of defining which agreements may benefit from the De Minimis Notice, page 3.

[25] Saskia King, “Agreements that restrict competition by object under Article 101 (1) TFEU: Past, present and future”, PhD Thesis – The London School of Economics and Political Science (2015), Page 28.

[26] “The combined investment of summer and winter transfer windows in the top five European leagues was almost €3.4 billion. That was up by 29 per cent versus last season and again a record high ever.” - Soccerex Transfer Review Winter Edition 2016, Prime Time Sport, page 4.

[27] See, for example, Case T-193/02, Piau v. Commission, ECLI:EU:T:2005:22, para. 69: “As regards, first, the concept of an association of undertakings, and without it being necessary to rule on the admissibility of the arguments put forward by an intervener which go against the claims made by the party in support of which it is intervening, it is common ground that FIFA's members are national associations, which are groupings of football clubs for which the practice of football is an economic activity. These football clubs are therefore undertakings within the meaning of Article 81 EC and the national associations grouping them together are associations of undertakings within the meaning of that provision.”

[28] For an in-depth economic data analysis see, e.g., FIFA T.M.S., Global Transfer Market 2012 Highlights, pages 14 and 15 – Overall Market Activity - and pages 23 and 24 - Player Age.

[29] David Nilsson, “The Revised FIFA Regulations for the Status and Transfers of Players’ Compatibility with EU competition law – the Transfer System revised”. Master Thesis. Faculty of Law - University of Lund, (September 2006).

[30] Supra, 30.

[31] Doping rules under EU competition law.

[32] See para. 20 page 7 of the award: “The Panel does not share the DRC’s view that the purpose of the first sentence of Article 6 para. 3 is to penalise clubs which do not offer professional terms to their amateur players. Rather, in the Panel’s opinion, the purpose of the above provision is to ensure that no player, whether amateur or professional, in whom the training club has no interest is impeded to accept the offer of another club because he carries some sort of “compensation price tag”.