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

Balancing Athletes’ Interests and The Olympic Partner Programme: the Bundeskartellamt’s Rule 40 Decision - By Thomas Terraz

Editor’s note: Thomas Terraz is a fourth 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 International Olympic Committee (IOC), after many years of ineffective pushback (see here, here and here) over bye law 3 of rule 40[1] of the Olympic Charter (OC), which restricts the ability of athletes and their entourage to advertise themselves during the ‘blackout’ period’[2] (also known as the ‘frozen period’) of the Olympic Games, may have been gifted a silver bullet to address a major criticism of its rules. This (potentially) magic formula was handed down in a relatively recent decision of the Bundeskartellamt, the German competition law authority, which elucidated how restrictions to athletes’ advertisements during the frozen period may be scrutinized under EU competition law. The following blog begins by explaining the historical and economic context of rule 40 followed by the facts that led to the decision of the Bundeskartellamt. With this background, the decision of the Bundeskartellamt is analyzed to show to what extent it may serve as a model for EU competition law authorities. More...

Is UCI the new ISU? Analysing Velon’s Competition Law Complaint to the European Commission - By Thomas Terraz

Editor’s note: Thomas Terraz is a fourth 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 UCI may soon have to navigate treacherous legal waters after being the subject of two competition law based complaints (see here and here) to the European Commission in less than a month over rule changes and decisions made over the past year. One of these complaints stems from Velon, a private limited company owned by 11 out of the 18 World Tour Teams,[1] and the other comes from the Lega del Ciclismo Professionistico, an entity based in Italy representing an amalgamation of stakeholders in Italian professional cycling. While each of the complaints differ on the actual substance, the essence is the same: both are challenging the way the UCI exercises its regulatory power over cycling because of a growing sense that the UCI is impeding the development of cycling as a sport. Albeit in different ways: Velon sees the UCI infringing on its ability to introduce new race structures and technologies; the Lega del Ciclismo Professionistico believes the UCI is cutting opportunities for semi-professional cycling teams, the middle ground between the World Tour Teams and the amateur teams.

While some of the details remain vague, this blog will aim to unpack part of the claims made by Velon in light of previous case law from both the European Commission and the Court of Justice of the European Union (CJEU) to give a preliminary overview of the main legal issues at stake and some of the potential outcomes of the complaint. First, it will be crucial to understand just who/what Velon is before analyzing the substance of Velon’s complaint. More...

International and European Sports Law – Monthly Report – October 2019 by Thomas Terraz

Editor's note: This report compiles the most relevant legal news, events and materials on International and European Sports Law based on the daily coverage provided on our twitter feed @Sportslaw_asser. 


The Headlines

International Sports Law Journal (ISLJ) Conference 2019

The T.M.C. Asser Institute and the Asser International Sports Law Centre held the third International Sports Law Journal (ISLJ) Conference on October 24-25. The Conference created a forum for academics and practitioners to discuss, debate and share knowledge on the latest developments of sports law. It featured six uniquely themed panels, which included topics such as ‘Transfer systems in international sports’ and ‘Revisiting the (in)dependence and transparency of the CAS’ to ‘The future of sports: sports law of the future’. The ISLJ Conference was also honored to have two exceptional keynote speakers: Moya Dodd and Ulrich Haas. To kick off the conference, Moya Dodd shared her experiences from an athlete’s perspective in the various boardrooms of FIFA. The second day was then launched by Ulrich Haas, who gave an incredibly thorough and insightful lecture on the importance, function and legal basis of association tribunals in international sport. For a detailed overview of this year’s ISLJ Conference, click here for the official conference report.

The Asser International Sports Law Centre was delighted to have been able to host another great edition of the ISLJ Conference and is thankful to all the participants and speakers who made this edition such a success.

Moving towards greater transparency: Launch of FIFA’s Legal Portal

On October 31, FIFA announced that it was introducing a new legal portal on its website that will give greater access to numerous documents that previously were kept private. FIFA explains that this is in order to help increase its transparency, which was one of the key ‘Guiding Principles’ highlighted in FIFA 2.0: The Vision for the Future released in 2016. This development comes as many sport governing bodies face increasing criticism for the opacity of its judicial bodies’ decisions, which can have tremendous economic and societal impacts. The newly available documents will include: ‘decisions rendered on the merits by the FIFA Disciplinary Committee and the FIFA Appeal Committee (notified as of 1 January 2019); decisions rendered on the merits by the FIFA Ethics Committee (notified since 1 January 2019); decisions rendered on the merits by the FIFA Players’ Status Committee and the FIFA Dispute Resolution Chamber; non-confidential CAS awards in proceedings to which FIFA is a party (notified since 1 January 2019); list of CAS arbitrators proposed by FIFA for appointment by ICAS, and the number of times they have been nominated in CAS proceedings’. The list of decisions from all the aforementioned bodies are updated every four months, according to their respective webpages. However, time will ultimately tell how consistently decisions are published. Nevertheless, this move is a major milestone in FIFA’s journey towards increasing its transparency.

Hong Kong Protests, Human Rights and (e)Sports Law: The Blizzard and NBA controversies

Both Blizzard, a major video game developer, and the NBA received a flurry of criticism for their responses to persons expressing support for the Hong Kong protests over the past month. On October 8, Blizzard sanctioned Blitzchung, a professional Hearthstone player who expressed support of the Hong Kong protest during a post-match interview, by eliminating the prize money he had won and suspending him for one year from any Hearthstone tournament. Additionally, Blizzard will cease to work with the casters who conducted the interview. With mounting disapproval over the sanctions,  J. Allen Brack, the president of Blizzard, restored the prize money and reduced the period of ineligibility to 6 months.

The NBA controversy started when Daryl Morey, the general manager of the Houston Rockets, tweeted his support for the protests in Hong Kong. The tweet garnered much attention, especially in China where it received a lot of backlash, including an announcement from CCTV, the official state broadcaster in China, that it was suspending all broadcasts of the NBA preseason games. In attempts to appease its Chinese audience, which is a highly profitable market for the NBA, Morey deleted the tweet and posted an apology, and the NBA responded by saying that the initial tweet was ‘regrettable’. Many scolded these actions and accused the NBA of censorship to which the NBA Commissioner, Adam Silver, responded that the NBA remains committed to freedom of expression.

Both cases highlighted how (e)sport organizations may be faced with competing interests to either guarantee greater protection of human rights or to pursue interests that perhaps have certain financial motivations. More...


ISLJ International Sports Law Conference 2019 - Conference Report - By Thomas Terraz

On October 24th and 25th 2019, the T.M.C. Asser Institute and the International Sports Law Centre hosted the International Sports Law Journal (ISLJ) Conference for a third year in a row, bringing together a group of academics and practitioners from around the world. This year’s conference celebrated the 20th year of the International Sports Law Journal, which was originally started by Robert Siekmann. Over the past 20 years, the ISLJ has aimed to be a truly international journal that addresses global topics in sports law while keeping the highest academic standards.

With this background, the conference facilitated discussions and exchanges over six differently themed panels on international sports law’s most pertinent issues and gave participants wide opportunities to engage with one another. Additionally, this year’s edition also had the great honor of hosting two distinguished keynote speakers, Moya Dodd and Ulrich Haas, who were able to share their wealth of experience and knowledge with the conference participants.

The following report aims to give an overview of the ISLJ Conference 2019 to extract and underline the fundamental ideas raised by the different speakers.More...

International and European Sports Law – Monthly Report – August and September 2019 - By Thomas Terraz

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

Another Russian Doping Crisis? Inconsistencies Uncovered in the Data from the Moscow Lab

Storm clouds are brewing once more in the Russian Doping Saga, after several inconsistencies were uncovered by WADA from data retrieved from the Moscow Laboratory. More specifically, a certain number of positive tests had been removed from the data WADA retrieved from the Moscow Laboratory compared to the one received from the original whistleblower. WADA launched a formal compliance procedure on 23 September, giving three weeks for Russian authorities to respond and provide their explanations. WADA’s Compliance Review Committee is set to meet on 23 October in order to determine whether to recommend declaring Russia non-compliant.

Russian authorities are not the only ones now facing questions in light of these new revelations. Criticism of WADA’s decision to declare Russia compliant back in September 2018 have been reignited by stakeholders. That original decision had been vehemently criticized (see also Edwin Moses’ response), particularly by athlete representative groups.

The fallout of these data discrepancies may be far reaching if Russian authorities are unable to provide a satisfying response. There are already whispers of another impending Olympic Games ban and the possibility of a ban extending to other sports signed to the WADA Code. In the meantime, the IAAF has already confirmed that the Russian Athletes would compete as ‘authorised neutral athletes’ at the World Athletics Championship in Doha, Qatar.

Legal Challenges Ahead to Changes to the FIFA Football Transfer Market

FIFA is set to make amendments to its player transfer market that take aim at setting new boundaries for football agents. These changes will prohibit individuals from representing both the buying and selling club in the same transaction and set new limits on agent commissions (3 percent for the buying club and player representative and 10 percent for the selling team). FIFA is already in the process of creating a central clearinghouse through which all transfer payments would have to pass through, including agent commissions. FIFA will be making a final decision on these proposed changes at the FIFA Council meeting on 24 October.

If these proposed changes are confirmed, they will almost certainly be challenged in court. The British trade organization representing football agents, Association of Football Agents, has already begun its preparations for a costly legal battle by sending a plea to its members for donations. It claims that it had not been properly consulted by FIFA before this decision had been made. On the other hand, FIFA claims that ‘there has been a consultation process with a representative group of agents’ and that FIFA kept ‘an open dialogue with agents’. Regardless, if these proposed changes go through, FIFA will be on course to a looming legal showdown.

CAS Public Hearing in the Sun Yang Case: One Step Forward for Transparency?

On 20 August, 2019, the Court of Arbitration for Sport (CAS) announced that the hearing in the appeal procedure of the Sun Yang case will be held publicly. It will be only the second time in its history that a public hearing has been held (the last one being in 1999, Michelle Smith De Bruin v. FINA). WADA has appealed the original decision of the FINA Doping Panel which had cleared Sun Yang from an alleged anti-doping rule violation. The decision to make the hearing public was at the request of both parties. The hearing is set to take place November 15th and is likely to be an important milestone in improving the CAS’ transparency.

Sun Yang, who has already served a doping ban for a previous violation in 2014, has also been at the center of another controversy, where Mack Horton, an Australian swimmer, refused to shake hands and stand on the podium with Sun Yang at the world championships in Gwangju. More...

Caster Semenya’s Legal Battle Against Gender Stereotypes: On Nature, Law and Identity - By Sofia Balzaretti (University of Fribourg)

Editor's note: Sofia Balzaretti is a Graduate research assistant and a PhD candidate at the University of Fribourg (Switzerland) where she is writing a thesis on the Protection against Gender Stereotypes in International Law. In addition to research in human rights and feminist legal theory, she has also carried out some research in legal philosophy and on the relationship between gender and the law.

 

The International Association of Athletics Federations (IAAF), the monitoring body of track and field athletics, regularly submitted South African middle distance runner and Olympic gold medalist Mokgadi Caster Semenya to sex verification tests when it began questioning her sexual characteristics and speculating whether her body belonged on the Disorder of Sex Development (DSD) spectrum. DSD Syndrome is often defined as an “intersex condition” which affects the clear development of either/or genitalia, gonads and chromosomes into one distinctive sex or another. The spectrum of the intersex condition is particularly wide, and the disorder can sometimes be minimal - some cases of female infertility can actually be explained by an intersex condition.

The IAAF deemed the controversial sex verification tests necessary on the grounds that it was required to prove Semenya did not have a “medical condition” which could give her an “unfair advantage”. It was eventually found that, because of an intersex trait, Semenya did have abnormally high levels of testosterone for a woman, which, in the IAAF’s opinion, justified a need for regulatory hormonal adjustments in order for her to keep competing in the women’s category. The IAAF also funded research to determine how ‘hyperandrogenism’ affects athletic performance. In 2018, it issued Eligibility Regulations on Female Classification (“Athlete with Differences of Sexual Development”) for events from 400m to the mile, including 400m, hurdles races, 800m and 1’500m. The IAAF rules indicated that in case of an existing high level of testosterone, suppression or regulation by chemotherapy, hormonal castration, and/or iatrogenic irradiation was mandatory in order to take part in these events.

Semenya and her lawyers challenged the IAAF Regulations in front of the CAS, who, in a very controversial decision, deemed the Regulations a necessary, reasonable and proportionate mean “of achieving the aim of what is described as the integrity of female athletics and for the upholding of the ‘protected class’ of female athletes in certain events” (§626). More...

International and European Sports Law – Monthly Report – June and July 2019 - By Tomáš Grell

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

The European Court of Justice finds that rule of a sports association excluding nationals of other Member States from domestic amateur athletics championships may be contrary to EU law

On 13 June 2019, the European Court of Justice (ECJ) delivered a preliminary ruling at the request of the Amtsgericht Darmstadt (Local Court Darmstadt, Germany) filed in the course of the proceedings involving Mr Daniele Biffi, an Italian amateur athlete residing in Germany, and his athletics club TopFit based in Berlin, on the one hand, and the German athletics association Deutscher Leichtathletikverband, on the other. The case concerned a rule adopted by the German athletics association under which nationals of other Member States are not allowed to be awarded the title of national champion in senior amateur athletics events as they may only participate in such events outside/without classification. The ECJ’s task was to decide whether or not the rule in question adheres to EU law.

The ECJ took the view that the two justifications for the rule in question put forward by the German athletics association did not appear to be founded on objective considerations and called upon the Amtsgericht Darmstadt to look for other considerations that would pursue a legitimate objective. In its judgment, the ECJ analysed several important legal questions, including amongst others the applicability of EU law to amateur sport or the horizontal applicability of European citizenship rights (for detailed analysis of the judgment, please see our blog written by Thomas Terraz).

Milan not featuring in this season’s edition of Europa League following a settlement with UEFA

On 28 June 2019, the Court of Arbitration for Sport (CAS) rendered a consent award giving effect to a settlement agreement between UEFA and the Milan Football Club, under which the Italian club agreed to serve a one-year ban from participation in UEFA club competitions as a result of its breaches of UEFA’s financial fair play regulations over the 2015/2016/2017 and the 2016/2017/2018 monitoring periods, while the European football’s governing body agreed to set aside previous decisions of the Investigatory and Adjudicatory Chamber of its Club Financial Control Body which had found Milan guilty of the respective breaches.   

This was not the first intervention of the CAS related to Milan’s (non-)compliance with UEFA’s financial fair play regulations. In July 2018, the CAS annulled the decision of the Adjudicatory Chamber of the UEFA Club Financial Control Body of 19 June 2018 which was supposed to lead to the exclusion of the Italian club from UEFA club competitions for which it would otherwise qualify in the next two seasons (i.e. 2018/2019 and 2019/2020 seasons). Following such intervention of the CAS – which concerned the 2015/2016/2017 monitoring period – it may have appeared that Milan would eventually manage to escape a ban from participation in UEFA club competitions for breaches of UEFA’s financial fair play regulations. However, Milan’s case was again referred to the Adjudicatory Chamber of the UEFA Club Financial Control Body in April 2019 – this time its alleged breaches of UEFA’s financial fair play regulations concerned the 2016/2017/2018 monitoring period – and such referral apparently forced Milan into negotiations with UEFA which led to the settlement agreement ratified by the CAS.      

Swiss Federal Tribunal gives Caster Semenya a glimmer of hope at first but then stops her from running at the IAAF World Championships in Doha

Caster Semenya’s legal team brought an appeal to the Swiss Federal Tribunal in late May against the landmark ruling of the CAS which gave the IAAF the green light to apply its highly contentious Eligibility Regulations for Female Classification (Athlete with Difference of Sexual Development) preventing female athletes with naturally elevated levels of testosterone from participating in certain athletic events unless they take medication to supress such levels of testosterone below the threshold of five nmol/L for a continuous period of at least six months. The appeal yielded some positive partial results for Caster Semenya early on as the Swiss Federal Tribunal ordered the IAAF on 3 June 2019 to suspend the implementation of the contested regulations. However, the Swiss Federal Tribunal overturned its decision at the end of July which means that Caster Semenya is no longer able to run medication-free and this will most likely be the case also when the 2019 IAAF World Athletics Championships kick off in Doha in less than one month’s time. The procedural decisions adopted by the Swiss Federal Tribunal thus far have no impact on the merits of Caster Semenya’s appeal.More...

Book Review - Football and the Law, Edited by Nick De Marco - By Despina Mavromati (SportLegis/University of Lausanne)

 Editor's Note: Dr. Despina Mavromati, LL.M., M.B.A., FCIArb is an Attorney-at-law specialized in international sports law and arbitration (SportLegis) and a Member of the UEFA Appeals Body. She teaches sports arbitration and sports contracts at the University of Lausanne (Switzerland) and is a former Managing Counsel at the Court of Arbitration for Sport.


This comprehensive book of more than 500 pages with contributions by 53 authors and edited by Nick De Marco QC “aims to embody the main legal principles and procedures that arise in football law”. It is comprised of 29 chapters and includes an index, a table of football regulations and a helpful table of cases including CAS awards, UEFA & FIFA Disciplinary Committee decisions and Football Association, Premier League and Football League decisions. 

The 29 chapters cover a wide range of regulatory and legal issues in football, predominantly from the angle of English law. This is logical since both the editor and the vast majority of contributing authors are practitioners from England.

Apart from being of evident use to anyone involved in English football, the book offers additional basic principles that are likely to be of use also to those involved in football worldwide, including several chapters entirely dedicated to the European and International regulatory framework on football: chapter 3 (on International Federations) gives an overview of the pyramidal structure of football internationally and delineates the scope of jurisdiction among FIFA and the confederations; chapter 4 explains European law and its application on football deals mostly with competition issues and the free movement of workers; and chapter 29 deals with international football-related disputes and the Court of Arbitration for Sport (CAS).

In addition to the chapters exclusively dealing with international football matters, international perspectives and the international regulatory landscape is systematically discussed – in more or less depth, as the need might be – in several other chapters of the book, including: chapter 2 on the “Institutions” (from governing bodies to stakeholders groups in football); chapter 6 on the FIFA Regulations on the Status and Transfer of Players (RSTP); chapter 8 dealing with (national and international) player transfers; chapter 11 (on Third Party Investment) and chapter 16 on Financial Fair Play (mostly discussing the UEFA FFP Regulations); chapter 23  on disciplinary matters (very briefly discussing the disciplinary procedures under FIFA and UEFA Disciplinary rules); chapter 24 on domestic and international doping-related cases in football, with an overview of the CAS jurisprudence in this respect; and finally chapter 23 on corruption and match-fixing (with a very short description of the FIFA and UEFA regulations).

Furthermore, the book offers extensive chapters in less discussed – yet of high importance – football topics, including: chapter 13 on image rights and key clauses in image rights agreements; chapter 14 on taxation (referring also to taxation issues in image rights and intermediary fees); chapter 15 on sponsoring and commercial rights, with a guide on the principal provisions in a football sponsoring contract and various types of disputes arising out of sponsorship rights; chapter 17 on personal injury, discussing the duty of care in football cases (from the U.K.); and chapter 18 on copyright law and broadcasting (with short references to the European law and the freedom to supply football broadcasting services).

Some chapters seem to have a more general approach to the subject matter at issue without necessarily focusing on football. These include chapters 27 (on mediation) and 22 (on privacy and defamation), and even though they were drafted by reputable experts in their fields, I would still like to see chapter 27 discuss in more detail the specific aspects, constraints and potential of mediation in football-related disputes as opposed to a general overview of mediation as a dispute-resolution mechanism. The same goes for chapter 22, but this could be explained by the fact that there are not necessarily numerous football-specific cases that are publicly available. 

As is internationally known, “football law” is male-dominated. This is also demonstrated in the fact that of the 53 contributing authors, all of them good colleagues and most of them renowned in their field, only eight are female (15%). Their opinions, however, are of great importance to the book due to the subject matter on which these women have contributed, such as player contracts (Jane Mulcahy QC), player transfers (Liz Coley), immigration issues in football (Emma Mason), broadcasting (Anita Davies) or disciplinary issues (Alice Bricogne).

The book is a success not only due to the great good work done by its editor, Nick De Marco QC but first and foremost due to its content, masterfully prepared by all 53 authors. On the one hand, the editor carefully delimited and structured the scope of each topic in a logical order and in order to avoid overlaps (a daunting task in case of edited volumes with numerous contributors like this one!), while on the other hand, all 53 authors followed a logical and consistent structure in their chapters and ensured an expert analysis that would have not been possible had this book been authored by one single person.  

Overall, I found this book to be a great initiative and a very useful and comprehensive guide written by some of the most reputable experts. The chapters are drafted in a clear and understandable way and the editor did a great job putting together some of the most relevant and topical legal and regulatory issues from the football field, thus filling a much-needed gap in the “football law” literature.

Can a closed league in e-Sports survive EU competition law scrutiny? The case of LEC - 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 organizational structure of sports in Europe is distinguished by its pyramid structure which is marked by an open promotion and relegation system. A truly closed system, without promotion and relegation, is unknown to Europe, while it is the main structure found in North American professional sports leagues such as the NFL, NBA and the NHL. Recently, top European football clubs along with certain members of UEFA have been debating different possibilities of introducing a more closed league system to European football. Some football clubs have even wielded the threat of forming an elite closed breakaway league. Piercing through these intimidations and rumors, the question of whether a closed league system could even survive the scrutiny of EU competition law remains. It could be argued that an agreement between clubs to create a completely closed league stifles competition and would most likely trigger the application of Article 101 and 102 TFEU.[1] Interestingly, a completely closed league franchise system has already permeated the European continent. As outlined in my previous blog, the League of Legends European Championship (LEC) is a European e-sports competition that has recently rebranded and restructured this year from an open promotion and relegation system to a completely closed franchise league to model its sister competition from North America, the League Championship Series. This case is an enticing opportunity to test how EU competition law could apply to such a competition structure.

As a preliminary note, this blog does not aim to argue whether the LEC is a ‘real’ sport competition and makes the assumption that the LEC could be considered as a sports competition.[2]

More...



I’m A Loser Baby, So Let’s Kill Transparency – Recent Changes to the Olympic Games Host City Selection Process - By Ryan Gauthier (Thompson Rivers University)

Editor's Note: Ryan Gauthier is Assistant Professor at Thompson Rivers University in Canada. Ryan’s research addresses the governance of sports organisations, with a particular focus on international sports organisations. His PhD research examined the accountability of the International Olympic Committee for human rights violations caused by the organisation of the Olympic Games.


Big June 2019 for Olympic Hosting

On June 24, 2019, the International Olympic Committee (IOC) selected Milano-Cortina to host the 2026 Winter Olympic Games. Milano-Cortina’s victory came despite a declaration that the bid was “dead” just months prior when the Italian government refused to support the bid. Things looked even more dire for the Italians when 2006 Winter Games host Turin balked at a three-city host proposal. But, when the bid was presented to the members of the IOC Session, it was selected over Stockholm-Åre by 47 votes to 34. 

Just two days later, the IOC killed the host selection process as we know it. The IOC did this by amending two sections of the Olympic Charter in two key ways. First, the IOC amended Rule 33.2, eliminating the requirement that the Games be selected by an election seven years prior to the Games. While an election by the IOC Session is still required, the seven-years-out requirement is gone.

Second, the IOC amended Rule 32.2 to allow for a broader scope of hosts to be selected for the Olympic Games. Prior to the amendment, only cities could host the Games, with the odd event being held in another location. Now, while cities are the hosts “in principle”, the IOC had made it so: “where deemed appropriate, the IOC may elect several cities, or other entities, such as regions, states or countries, as host of the Olympic Games.”

The change to rule 33.2 risks undoing the public host selection process. The prior process included bids (generally publicly available), evaluation committee reports, and other mechanisms to make the bidding process transparent. Now, it is entirely possible that the IOC may pre-select a host, and present just that host to the IOC for an up-or-down vote. This vote may be seven years out from the Games, ten years out, or two years out. More...


Asser International Sports Law Blog | The proportionality test under Art. 101 (1) TFEU and the legitimacy of UEFA Financial fair-play regulations: From the Meca Medina and Majcen ruling of the European Court of Justice to the Galatasaray and AC Milan awards of the Court of Arbitration for Sport – By Stefano Bastianon

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 proportionality test under Art. 101 (1) TFEU and the legitimacy of UEFA Financial fair-play regulations: From the Meca Medina and Majcen ruling of the European Court of Justice to the Galatasaray and AC Milan awards of the Court of Arbitration for Sport – By Stefano Bastianon

Editor’s note: Stefano Bastianon is Associate Professor in EU Law and EU sports law at the University of Bergamo and lawyer admitted to the Busto Arsizio bar. He is also member of the IVth Division of the High Court of Sport Justice (Collegio di Garanzia dello sport) at the National Olympic Committee.

 

1. On the 20th July 2018, the Court of Arbitration for Sport (hereinafter referred to as “CAS���) issued its decision in the arbitration procedure between AC Milan and UEFA. The subject matter of this arbitration procedure was the appeal filed by AC Milan against the decision of the Adjudicatory Chamber of the UEFA Financial Control Body dated 19th June 2018 (hereinafter referred to as “the contested decision”). As many likely know, the CAS has acknowledged that, although AC Milan was in breach of the break-even requirement, the related exclusion of the club from the UEFA Europe League was not proportionate. To date, it is the first time the CAS clearly ruled that the sanction of exclusion from UEFA club competitions for a breach of the break-even requirement was not proportionate. For this reason the CAS award represents a good opportunity to reflect on the proportionality test under Art. 101 TFEU and the relationship between the landmark ruling of the European Court of Justice (hereinafter referred to as “ECJ”) in the Meca Medina and Majcen affair and the very recent case-law of the CAS.

2. According to the contested decision, AC Milan was guilty for failing to comply with Articles 58 to 63 of the UEFA Financial fair-play regulations on the break-even requirement. As a consequence the Adjudicatory Chamber has excluded AC Milan from participating in the next UEFA Europe League for which AC Milan has already qualified (2018-2019) at the end of the 2017-2018 Italian football championship. The appeal filed at the CAS by AC Milan was mainly aimed at seeking the annulment of the contested decision and ordering UEFA to enter into a settlement agreement.

3. The theory of proportionality test under Art. 101(1) TFEU in sports matters goes back to the ECJ’s ruling in the 2006 Meca Medina and Majcen case, while, in general terms, this theory was enunciated by the ECJ for the first time in the 1994 DLG case and then repeated in the 2002 Wouters and Others case although in a slightly different way.

In the DLG case the ECJ has ruled that:

«in order to escape the prohibition laid down in Article 85(1) of the Treaty, the restrictions imposed on members by the statutes of cooperative purchasing associations must be limited to what is necessary to ensure that the cooperative functions properly and maintains its contractual power in relation to producers (…). In addition, it is necessary to establish whether the penalties for non-compliance with the statutes are disproportionate to the objective they pursue and whether the minimum period of membership is unreasonable». 

Eight years later, in the Wouters and Others case the ECJ established the following principles:

(i) 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 Art. 101(1) of the Treaty;

(ii) 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

(iii) it has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives.

Unlike the DLG case, in the Wouters and Others ruling the ECJ did not expressly refer to the concept of proportionality, but preferred to recall the concept of inherent restrictions. However, from the overall wording of the ECJ, it is clear that in both cases it tried to apply in the antitrust sector the same theory of mandatory requirements developed in relation to the internal market.

4. On the contrary, in the Meca Medina and Majcen case, the ECJ expressly referred to the concept of proportionality. In particular, the ECJ has literally quoted the passage of the Wouters and Others ruling where it is stated that:

«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, par. 97)». 

However, unlike the Wouters and Others case, the ECJ has added that the effects restrictive of competition must also be proportionate to the objectives pursued.

More specifically, in anti-doping issues the test of proportionality is a means to avoid the risk that a given rule (and the sanctions imposed in case of a breach of it) may prove excessive by virtue of:

(i) firstly, the conditions laid down for establishing the dividing line between circumstances which amount to doping in respect of which penalties may be imposed and those which do not, and

(ii) secondly, the severity of those penalties (in the case at issue the penalty was a two year suspension).

Regarding the first point, the ECJ has underlined that the dividing line was determined by the threshold of 2 ng/ml of urine above which the presence of Nandrolone in an athlete's body constitutes doping. Based on documents before the Court, the ECJ could conclude that the average endogenous production observed in all studies then published was 20 times lower than 2ng/ml of urine and that the maximum endogenous production value observed was nearly a third lower. As a consequence, the ECJ rejected the argument according to which the threshold was set at such a low level that it should have been regarded as not taking sufficient account of the phenomenon of the endogenous production of Nandrolone.

Regarding the second point, instead, the ECJ simply observed that: 

«since the appellants have, moreover, not pleaded that the penalties which were applicable and were imposed in the present case are excessive, it has not been established that the anti-doping rules at issue are disproportionate».

This is the most critical passage of the ruling as one could wonder what would happen if the plaintiffs had contested the proportionality of the penalties. In such a case the ECJ should have examined the substance of the plea and stated whether the two year suspension was proportionate or not. However, in the event that the ECJ had come to the conclusion that the penalty was not proportionate, the anti-doping rules at issue should have been declared null and void unless it was possible to prove that the conditions of Art. 101 (3) TFEU were fulfilled.

The same reasoning was applied by the EU Commission in the ISU decision concerning the Eligibility rules enacted by the International Skating Union. In its decision, the Commission clearly underlined that:

«even if the Eligibility rules and their consequential effects restrictive of competition were inherent in the pursuit of any legitimate objective, the sanctions imposed on athletes in case of breach of the Eligibility rules are manifestly disproportionate» (par. 260).[1]

Thus, in sports matters there seem to be no doubt that the proportionality test must involve also the sanctions imposed on athletes. As already said, in the ISU decision, the Commission has clearly underlined that the Eligibility rules were not proportionate to achieve legitimate objectives in particular in view of the disproportionate nature of the ISU’s ineligibility sanctions. More specifically the Commission has pointed out that:

«the 2014 Eligibility rules provided for the heaviest sanction of a lifetime ban, even for the first infringement of the Eligibility rules, without taking into consideration the circumstances of the case (…). For the purposes of the assessment of the proportionality of the Eligibility rules it is however not relevant how many times the ISU has actually imposed sanctions. The fact that a lifetime ban was imposed only once on an athlete may even underline the strong deterrent effect of the sanctions. Although the sanctions system has been modified in the General Regulations 2016, the sanctions remain disproportionately punitive, as they provide for periods of ineligibility that go up to five years for negligent participation in unauthorized events, up to 10 years for athletes that knowingly participate in unauthorised events and a lifetime ban for athletes participating in unauthorised events endangering, inter alia, the ‘ISU jurisdiction’. These are disproportionately heavy sanctions in particular in view of the fact that on average a professional athlete's entire career is around eight years long. Also the imposition of a five-year ban is therefore likely to impact very heavily on an athlete's career who, after years of training and sacrifices, loses the possibility to gain income through the participation in the ISU's international events». 

This reasoning clearly shows that the Commission has considered the sanctions imposed to be disproportionate, not simply the rule forbidding participation in unauthorized events.

5. To date, neither the EU Commission nor the ECJ has had the opportunity to comment on the compatibility of the UEFA Financial Fair-play rules with EU Competition law. Indeed, regarding the Striani affair, the Commission has dismissed the complaint on procedural grounds only (the lack of Community interest), while the ECJ has declared a reference for preliminary ruling send by a Belgian court manifestly inadmissible and therefore did not rule on the substance of the case. As a consequence, to date there is no European formal decision that has assessed the compatibility of UEFA Financial Fair-play rules with EU law.

This opportunity, however, was offered to the CAS in the context of the Galatasaray/UEFA award (2016/A/4492). To fully understand the case one must go back to the 2nd March 2016 when the Adjudicatory Chamber of the UEFA Financial Control Body issued a decision in which it decided that Galatasaray has failed to comply with the terms of the Settlement Agreement and imposed on Galatasaray an exclusion from participating in the next UEFA Club competition for which it would otherwise qualify in the next two seasons.

On the 11th March 2016, Galatasaray filed an appeal with the CAS to challenge the decision of the Adjudicatory Chamber of the UEFA Financial Control Body. Basically, the arguments put forward by Galatasaray were based:

(i) on the alleged incompatibility of the break-even rule with EU law (namely, Art. 101 TFEU on cartels, Art. 102 TFEU on abuse of dominant position, Art. 63 TFEU on free movement of capital, Art. 56 TFEU on free movement of services and Art. 45 TFEU on free movement of workers); and, in the event the first argument is rejected,

(ii) on the alleged disproportionate nature of the sanctions imposed by UEFA.

It is very interesting to note that from the point of view of Galatasaray the incompatibility of the break-even rule with EU law is something different and completely divorced from the proportionate character of the sanction. Indeed, the latter argument is invoked only in the event the first argument is rejected. In other words, according to this line of defence, the compatibility of the break-even rule with EU principles must be assessed only on the basis of the alleged restrictive effects on competition and the (alleged legitimate) objectives pursued, without considering the sanctions imposed.

In line with this approach, the CAS examined the two arguments put forward by Galatasaray separately. Regarding the relationship between the break-even rule and EU Competition law, the CAS reasoning can be summarized as follows:

(i) UEFA Financial fair-play regulations have neither the object nor the effect of restricting competition because: (a) UEFA Financial fair-play regulations do not prevent the clubs from competing among themselves on the pitch or in the acquisition of football players; (b) they prevent the distortion of competition by overspending; (c) clubs are free to pay the players as much as the wish provided that salaries are covered by revenues; (d) large dominant clubs have always existed and will always exist and therefore the alleged ossification of the structure market is a nonsense; (d) overspending is not completely prohibited because the break-even rule only applies over rolling periods of three years; and

(ii) in any case, even assuming that the break-even rule has anticompetitive effects, the objectives sought by UEFA Financial fair-play regulations do appear legitimate and their alleged restrictive effects inherent to the achievement of those objective. Put simply: if UEFA intends to control the level of indebtedness of European football clubs, the imposition of limits to spending beyond revenues is a natural element of a financial discipline seeking that objective.

By contrast, regarding the proportionality of the sanction imposed by the UEFA, the reasoning of the CAS is completely based on external factors which allegedly affected the finances of Galatasaray (i.e., the Syrian refugee crisis, the terrorist attacks in Turkey, the Turkish major match-fixing scandal, the exchange rate and rate fluctuations, the national economic downturn in Turkey, the inefficiencies of the market and the management changes). However, according to the CAS, this argument cannot be accepted because the club failed to provide the Panel with the accounting evidence of how and in which proportion each of these factors would have caused the break-even deficit. Moreover, the CAS has underlined that the sanction was not disproportionate because:

(i) it was imposed as a sanction for a second violation (i.e., after the Settlement Agreement which presupposes the previous violation of the rules on financial fair play);

(ii) an exclusion limited in time (one season) from the UEFA competitions is consistent with the principle of equal treatment and fair competition, as it protects the club respecting the UEFA Financial Fair-play regulations and does not prevent future compliance with them.


It follows from the foregoing that, according to the CAS the proportionate character of sanctions listed in the UEFA Financial Fair-play regulations cannot affect the evaluation of the legitimacy of these regulations under Art. 101 TFUE.

6. To some extent the AC Milan/UEFA case is similar to the Galatasaray case. Both clubs have failed to comply with the break-even requirement; both clubs have been sanctioned with the exclusion for one season from the UEFA competitions; both clubs have contested the proportionality of the sanction. Unlike Galatasaray, however, AC Milan was denied the possibility to enter into a Settlement Agreement[2]. On the contrary, it is worthy to note that the CAS has confirmed the decision of the Adjudicatory Chamber of the UEFA CFCB, which was rendered on the 19th June 2018, establishing that AC Milan had failed to fulfil the break-even requirement. However, it has annulled the decision to the extent that it has excluded AC Milan from participating in the next UEFA Club competition for which it would otherwise qualify in the next two seasons (i.e., the 2018-19 and 2019-20 seasons), arguing that the sanction was not proportionate. As a consequence, the CAS has referred back the case to the Adjudicatory Chamber to issue a proportionate disciplinary measure. The press release issued on the 20th July 2018 (the full text of the award is not yet available) indicates that the decision to annul the sanction and refer back the case to the Adjudicatory Chamber is based on the following arguments:

(i) some important elements regarding the financial situation of the Club and the recent change in the Club’s ownership have not been properly assessed by the Adjudicatory Chamber, or could not be properly assessed at the moment when the contested decision was rendered;

(ii) the Adjudicatory Chamber is in a better position than the CAS Panel to issue a new proportionate disciplinary measure on the basis of the current financial situation of the Club.

Despite the differences between the two cases, it is interesting to note that in the Galatasaray case the CAS assessed the sanction imposed by the Adjudicatory Chamber on the merits and found it proportionate. To the contrary, in the AC Milan case the CAS has assessed the sanction on the merits only to state that it was not proportionate, but refrained from saying which other sanction could be considered proportionate, arguing that the Adjudicatory Chamber is in a better position than the CAS to issue a new proportionate disciplinary measure. In other words, the CAS seems to say that it has no problem to assess the proportionality of a given sanction ; however, if it deems that the sanction is not proportionate, it is not for the CAS to replace the penalty imposed with another sanction.

7. Comparing the awards in the Galatasaray and AC Milan cases with the ruling in Meca Medina and Majcen affair some aspects deserve to be underlined. First of all, according to the case-law of the ECJ in sports matters, the evaluation of the restrictive effects of a rule necessarily presupposes the analysis of the proportionate character of the sanction imposed in the event of violation of that rule. On the contrary, according to the case-law of the CAS the analysis of the proportionate character of a sanction necessarily presupposes a positive evaluation of the legitimate character of the objectives pursued by the rule and its inherence to those objectives. In other words, it seems that according to the CAS the disproportionate nature of a sanction is not capable of affecting the legitimacy of the rule whose violation determined that sanction. Although the full text of the award is not yet available from the AC Milan/UEFA case it emerges that the disproportionate nature of the penalty imposed only resulted in the referral of the case to the Adjudicatory Chamber for the imposition of another sanction. Although apparently in line with the Wouters and Others case, this approach is clearly in contrast with the Meca Medina and Majcen case and, more generally, with the whole theory of mandatory requirements in the field of the internal market.

To this regard it is of paramount importance not to underestimate the fundamental difference between rules which are applied a priori and rules that are applied a posteriori. As also recognized by the CAS in the well-known ENIC case:

«rules that are applied a priori tend to prevent undesirable situations which might prove difficult or useless to deal with afterwards, rather than imposing a penalty on someone guilty of something. On the other hand, rules that are applied a posteriori are bound to react to specific behaviours. For example, under EC law and several national laws, rules on mergers are applied a priori, whereas rules on abuses of dominant position are applied a posteriori. Merger operations are checked before they actually take place, and are blocked if the outcome of the merger would be the establishment of a dominant position because of the possible negative consequences on the market and not because the individuals owning or managing the merging undertakings are particularly untrustworthy and the company after the merger is expected to abuse of its dominant position (…). All such a priori rules are applied on a preventive basis, with no appraisal of any specific wrongdoing and no moral judgement on the individuals or companies concerned. On the other hand, rules setting forth obligations and corresponding penalties or sanctions, such as criminal or disciplinary rules, can be applied only after someone has been found guilty of having violated an obligation». 

In this context it is clear that rules applied a posteriori (such as the UEFA Financial Fair-play regulations) consist of both the obligations set forth and the corresponding sanctions. In addition, it is not possible nor correct to arbitrarily separate the obligation from the sanction. Indeed, the fact that in the Meca Medina and Majcen ruling the proportionality test was referred precisely to the restrictive effects and not to the prohibition of doping cannot be ignored. The prohibition of doping as such, without the corresponding sanctions, does not have any restrictive effect on competition.

Secondly, the sanctioning system envisaged by the UEFA does not provide clear and transparent criteria as to how the sanctions are to be applied. There is no scale to measure and define the seriousness of the violation and no provision illustrating the relationship between the violation and the sanction that can be imposed. It is interesting to note that the same reasoning was applied by the EU Commission in the ISU decision. And everyone knows the outcome of this case.

Thirdly, the choice of the CAS to refer back the case to the Adjudicatory Chamber could mean that the AC Milan/UEFA case is not yet closed definitively. According to Art 29 of the Procedural rules governing the UEFA Club Financial Control Body in case of a breach of the UEFA Financial Fair-play regulations the clubs may be sanctioned with the following measures: a) warning, b) reprimand, c) fine, d) deduction of points, e) withholding of revenues from a UEFA competition, f) prohibition on registering new players in UEFA competitions, g) restriction on the number of players that a club may register for participation in UEFA competitions, including a financial limit on the overall aggregate cost of the employee benefits expenses of players registered on the A-list for the purposes of UEFA club competitions, h) disqualification from competitions in progress and/or exclusion from future competitions, i) withdrawal of a title or award. If the exclusion from UEFA competitions is certainly one of the most serious sanctions, there are other particularly serious penalties, such as the prohibition on registering new players in UEFA competitions or the restriction on the number of players that a club may register for participation in UEFA competitions. Consequently, since the seriousness of the ascertained infringement seems to exclude that the Adjudicatory Chamber may decide to apply a very minimal sanction (such as a warning or a reprimand), it cannot be excluded that the new sanction will also be perceived as excessive and therefore disproportionate. And in this case, at least in theory, nothing could prevent AC Milan from appealing to the CAS by challenging again the disproportionate character of the (new) sanction.

8. The Meca Medina and Majcen ruling presents many ambiguities and for this reason is rightly criticized. To say nothing else, it cannot be ignored that the extension of the proportionality test also to the sanctioning system provided for by sports regulations raises at least two fundamental problems: (a) firstly, to establish which criteria are to be used to determine the proportionate character of the sanctions; and (b) secondly, the opportunity to invest judges or arbitrators of such a task. However, the recent case-law of the CAS on the proportionality test of UEFA Financial Fair-play regulations seems to reveal no less serious concerns and perplexities.


[1] For more details, see my blog and Ben Van Rompuy’s blog.

 

[2] As a consequence one could argue that the decision of the panel to find that the sanction is disproportionate is probably connected to the fact that Milan was not offered a settlement.

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