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

Sport and EU Competition Law: uncharted territories - (II) Mandatory player release systems with no compensation for clubs. By Ben Van Rompuy

The European Commission’s competition decisions in the area of sport, which set out broad principles regarding the interface between sports-related activities and EU competition law, are widely publicized. As a result of the decentralization of EU competition law enforcement, however, enforcement activity has largely shifted to the national level. Since 2004, national competition authorities (NCAs) and national courts are empowered to fully apply the EU competition rules on anti-competitive agreements (Article 101 TFEU) and abuse of a dominant position (Article 102 TFEU).

Even though NCAs and national courts have addressed a series of interesting competition cases (notably dealing with the regulatory aspects of sport) during the last ten years, the academic literature has largely overlooked these developments. This is unfortunate since all stakeholders (sports organisations, clubs, practitioners, etc.) increasingly need to learn from pressing issues arising in national cases and enforcement decisions. In a series of blog posts we will explore these unknown territories of the application of EU competition law to sport.

In this second installment of this blog series, we discuss a recent judgment of the regional court (Landgericht) of Dortmund finding that the International Handball Federation (IHF)’s mandatory release system of players for matches of national teams without compensation infringes EU and German competition law.[1] 


Background

In 2009, the Spanish Handball League (ASOBAL) and Group Club Handball (the predecessor of the Forum Club Handball (FCH); an association representing the interest of the top European handball clubs) launched a complaint with the European Commission alleging that the rules of the IHF and EHF on the mandatory release of players were in breach of Articles 101 and 102 TFEU.[2] The Commission opened a preliminary investigation. This prompted the EHF to seek an amicable solution with the complainants.

In May 2010, the EHF signed a Memorandum of Understanding with FCH, covering issues such as the terms of compensation for the release of players and the representation of clubs and other stakeholders in the bodies of the EHF:

  • The EHF agreed to pay compensation to the clubs for the release of their players to the national team. Starting from the 2010 European Championship, the EHF paid a fee of 270 EUR per player per match via the national federations to the clubs (amounting to a total compensation of 400.000 EUR, i.e. 10 percent of the profits of the 2010 European Championship).[3]

  • The EHF agreed on the principle that “each day a player spends with the national team/selection his salary should be insured by the National Federation, EHF or IHF in case of injury in favour of the clubs”.[4]

    The EHF took an important step towards more inclusive governance by creating the Professional Handball Board, a strategic platform for various stakeholders (leagues, clubs, national federations, and players). It plays an advisory role through the submission of reports and analyses to the EHF Executive Committee and contributes to the decision-making process through its chairperson (who is a full member of the Executive Committee).

Since many of the complainants’ demands were met, ASBOL and FCH withdrew their competition law complaint. Subsequently, the European Commission closed its preliminary investigation in June 2010.

The EU handball “case” is a good illustration of the remedial potential of EU competition law to strengthen good governance in sport. The mere threat of a formal investigation by the European Commission proved sufficient for the EHF to change its rules for the release of players and to establish a channel for clubs and other stakeholders to participate in its decision-making process.

In 2014, the EHF and FCH renewed the 2010 Memorandum of Understanding (MoU) until June 2018. The modified MoU, which has been the subject of negotiations for more than one year, foresees increased fees for the release of players to the European Championships.

Strengthened by the satisfactory outcome reached with the EHF in 2010, the FCH made attempts to come to a similar arrangement with the IHF. Following negotiations during the course of 2010 and 2011, the IHF for the first time in history paid compensation for the release of players to the World Championship and signed insurance for player salaries for injured players. The IHF Council also proposed to integrate the clubs as stakeholders in its bylaws. The clubs, however, did not accept with the terms and conditions of the proposal and no agreement was reached. The clubs were also dissatisfied with the amount of the compensation paid by the IHF: qualification matches were not compensated and the fee only amounted in average to 10-20 percent of the monthly salary paid by the European top clubs. The prospects of reaching an agreement between the IHF and the CFH dimmed. In March 2012, the IHF made clear that it was no longer prepared to discuss a MoU with the FCH. This prompted 30 German clubs to sue the IHF and the German Handball Federation (DHB) before the regional court of Dortmund in April 2013. 


The 2014 Dortmund judgment

The IHF Player Eligibility Code provides that a club having a foreign player under contract is obliged to “release such player to his National Federation if he is called up to take part in activities of that federation's national team” (Article 7.1.2). The activities include the Olympic Games, World Championships, and continental championships as well as the qualification matches and tournaments for these events. According to Article 7.2 of the Code, a club releasing a national player “shall not have any claim to compensation”. Furthermore, the club must take out insurance coverage for the player in the event of personal injury and resulting consequences for the period for which the player has been called to his federation’s activities (Article 7.3.2). A club failing to release a player that is able to play will be penalized in accordance with the IHF Regulations Concerning Penalties and Fines and the disciplinary regulations of the Continental Confederation concerned (Article 7.4.4).

The German handball clubs, supported by the FCH, argued that the rules concerning the mandatory release of players to the national team and their application by the IHF and DHB constitute an abuse of a dominant position prohibited by Article 102 TFEU and the equivalent German competition law provision (§ 19 Gesetz gegen Wettbewerbsbeschränkungen, GWB).

The regional court of Dortmund first addressed a number of procedural issues. Considering that the DHB is bound by the rules of the IHF, the court decided to join the proceedings against the IHF and DHB. Moreover, the court did not defer to the jurisdictional exclusivity claimed by the defendants. It stressed that the internal disciplinary bodies or even the Court of Arbitration could not be considered independent and impartial for the purpose of reviewing the compatibility of the mandatory player release system with competition law.[5] According to the court, neither the IHF nor the DHB regulations could prevent the clubs from seeking direct recourse to an ordinary civil court. Lastly, the court found German law to be applicable. Even though Article 7 of the IHF Player Eligibility Code affects handball clubs worldwide, its obligations also substantially affect the German market in which the claimants operate.[6] The intimate connection between the claims against the IHF and the DHB further supported the conclusion that the regional court of Dortmund was the appropriate legal venue for hearing the case.

On substance, the court found that the IHF is a monopolist on the market for the organisation of international handball events, including the World Championships and the Olympic Games (i.e. events in which national teams compete), and on a number of other separate, but closely related, commercial markets (e.g. sponsorship). Also on the markets for the organisation of European and national handball competitions, the IHF holds a dominant position (solely and together with the EHF and the national federations).[7]

Turning to the contested rule of the IHF Player Eligibility Code (Article 7), the court stressed that the obligation for clubs to release players for matches of national teams without compensation is incompatible with the civil code rule of good faith in contractual performance.[8] In any normal business, it would be unthinkable that an undertaking would provide for free a resource, its employees, to a competitor seeking to make profits from that resource.[9] At the same time, the court found that this obligation constitutes an exploitative abuse of a dominant position prohibited by § 19 GWB and Article 102 TFEU. When recruiting top foreign-raised players, clubs must take into account the costs of paying their players while they are absent and, what is more, the costs incurred if those players would get injured during an international match. As such, uncompensated player release restricts the clubs’ contractual freedom and distorts competition between the clubs.

Although Article 102 TFEU does not contain an exemption clause similar to Article 101(3) TFEU, an undertaking may escape an abuse finding by demonstrating an objective justification or efficiency defense for its conduct. The court, however, brushed aside the arguments put forward by the IHF and DHB to this end. 

First, the defendants contended that without the player release system, clubs would not be willing to release their players to national teams. The release rules would also prevent clubs from trying to weaken foreign national teams in favor of their own national team.[10] The court stressed, however, that the mandatory release of players for national teams in itself is not being contested. It also pointed to the fact that the IHF, notwithstanding Article 7.2 of the Player Eligibility Code, decided to pay compensation for the release of players to the 2011 and 2013 World Championships. This indicates that in principle a compensation would not adversely affect the sporting or other interests of the IHF. In addition, the court made numerous references to the MoU reached between the EHF and the FCH as well as to the MoU between FIFA and the European Club Association (ECA) (i.e. the deal as a result of which the Oulmers litigation was terminated, see below). These examples indeed exemplify that an uncompensated player release system cannot be considered indispensable.

Second, the defendants argued that participation in international handball events increases the exposure and thus the value of the players, which indirectly benefits the clubs.[11] Also this argument failed to convince the court. If the IHF and DHB would be able to quantify this advantage, this could be taken into consideration when determining the compensation. Yet it could not objectively justify the denial of compensation for the release of players or for their potential injuries.

In light of these observations, the court declared the conditions for the release of players to foreign national teams, embedded in Article 7.2 and 7.3.2 of the IHF Player Eligibility Code, null and void. Interestingly, the court also suggested that the IHF would introduce a cap on the number of days an association would be entitled to call up players for the national team. 


A landmark judgment in the making?

Unsurprisingly, the IHF and the DHB lodged an appeal against the judgment before the higher regional court (Oberlandesgericht) of Düsseldorf. It is not unthinkable that eventually the case will trigger a preliminary reference to the Court of Justice and emerge as the successor of the abandoned Oulmers litigation against the FIFA player release system.

The regional court of Dortmund did not expressly rely on the Wouters proportionality test, transposed in Meca-Medina, to assess whether the IHF’s player release system constituted an abuse of a dominant position. The court’s analysis is, however, largely consistent with the analysis that the Court of Justice would follow. After having established that the contested rules emanate from an undertaking that has a dominant position, the court verified whether there are less restrictive means to achieve the objectives pursued by the IHF’s mandatory player release system. It did not call into question the necessity of a mandatory player release system for the organisation of international handball competitions, but the court did conclude that the current system – which leaves clubs uncompensated – could not be objectively justified.

For at least two reasons the Dortmund judgment, while not final yet, has potential to become an important precedent for many other sports.

First and foremost, it offers the first substantive assessment of the compatibility of player release rules with EU (and national) competition law. Particularly in the event of a preliminary reference to the Court of Justice, the case could serve as a much-needed wake up call to all international sports federations that currently operate a similar system. Arguably, federations could assert that the compensation should not cover all the costs incurred by the clubs. Indirect benefits to the clubs could be discounted. Yet it appears undeniable that the imposition of the burden on clubs to supply players without allowing them a fair share of the resulting benefits constitutes an abuse prohibited by Article 102 TFEU.

Second, even though sports federations usually have practical monopolies in a given sport, the remedial potential of Article 102 TFEU to tackle abusive conduct remains underexplored. This case, and even the earlier competition law complaint lodged against the EHF, reveals that it offers a powerful instrument to steer sports federations into the direction of better governance. Eventually the IHF will have to follow the path that others (e.g. EHF, FIFA) have traveled. After all, the determination of a fair compensation for player release necessitates a consensual strategy that balances the needs of stakeholders, in this case the clubs, with the needs of the federation.


We continue to follow this case closely, so stay tuned.



[1] Landgericht Dortmund, Urteil vom 14.05.2014, 8 O 46/13.

[2] Cases COMP/39659 ASOBAL v handball federations and COMP/39669 Group Club Handball v handball federations.

[3] Forum Club Handball, EHF pays compensation to the clubs, 28 February 2010.

[4] Forum Club Handball, Insurance of player salaries in case of injury, 15 June 2010.

[5] Landgericht Dortmund, Urteil vom 14.05.2014, 8 O 46/13, paras. 104-114.

[6] Idem, para. 118.

[7] Idem, paras. 121-122.

[8] German Civil Code, Section 242 (An obligor has a duty to perform according to the requirements of good faith, taking customary practice into consideration”).

[9] Landgericht Dortmund, Urteil vom 14.05.2014, 8 O 46/13, para. 129.

[10] Idem, para. 130.

[11] Idem, para. 132.

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Asser International Sports Law Blog | The Rules of the Electoral Game for the FIFA 2015 Presidential Elections

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 Rules of the Electoral Game for the FIFA 2015 Presidential Elections

After the success of this year’s World Cup in Brazil, FIFA President Sepp Blatter can start concentrating on his Presidential campaign for next June’s FIFA elections. Even though the 78-year old Swiss is not officially a candidate yet, he is still very popular in large parts of the world, and therefore the favourite to win the race. Nonetheless, even for the highly experienced Mr. Blatter these elections will be different. All candidates will have to respect the newly introduced Electoral Regulations for the FIFA Presidency

The Electoral Regulations are the latest addition to the reform process FIFA initiated more than two years ago following the controversial awarding of the 2018 and 2022 World Cups to Russia and Qatar. The stated aim of the Regulation is to make the elections more transparent, democratic and to prevent possible corruption accusations.[1] Its legal basis is found in Article 24(4) of the 2013 FIFA Statutes and reads as follows:

“The conditions to be observed during a candidature for the office of President are stipulated in the Electoral Regulations for the FIFA Presidency. These regulations shall be issued by the Executive Committee.”

Earlier editions of the FIFA Statutes did not include a reference to electoral regulations. In comparing the 2013 Statutes with the 2010 Statutes used for the previous elections one can witness the extent of this dramatic change. Pursuant to Article 24 of the 2010 edition, “only the Members[2] may propose candidatures for the office of FIFA President. Members shall notify the FIFA general secretariat in writing in the name of a candidate for the FIFA presidency at least two months before the date of the Congress.” Furthermore, “the general secretariat shall notify the Members of the names of proposed candidates at least one month before the date of the Congress.” Other criteria regarding the eligibility of candidates were not included.

The first fundamental change to take place at the 2015 election will be the setting up of an Ad-hoc electoral Committee pursuant to Article 7(1) Electoral Regulations. The Ad-hoc Electoral Committee shall be composed of the chairman of the FIFA Disciplinary Committee, the chairman of the FIFA Appeal Committee and the chairman of the FIFA Audit and Compliance Committee[3] and shall assess whether a candidate meets the profile specifications provided for by the eligibility criteria stipulated in Article 13 of the Electoral Regulations and Article 24 of the FIFA Statutes.[4]

The second fundamental change is that, in accordance with article 13(1), Candidates for the office of President must meet the following requirements:

  1. The candidate shall have played an active role in association football (as a board member, committee member, referee and assistant referee, coach, trainer and any other person responsible for technical, medical or administrative matters in FIFA, a Confederation, Association, League or Club or as a player) for two of the last five years before being proposed as a candidate (cf. art. 24 par. 1 of the FIFA Statutes).

  2. The candidate shall have been proposed by a member association in accordance with art. 24 par. 1 of the FIFA Statutes.

  3.  The candidate shall present declarations of support from at least five member associations (cf. art. 24 par. 1 of the FIFA Statutes). Being proposed as a candidate by a member association shall be understood as a declaration of support. Each member may only present a declaration of support for one person. If a member association presents declarations of support for more than one person, all its declarations shall become invalid.

The flowchart below summarises the key procedural steps set out in the Electoral Regulations:


Has the Presidential campaign already begun?

The Presidential campaign has already started due to the fact that one person has declared himself a candidate. This person is neither Mr. Blatter nor “Europe’s favourite” Michel Platini, but former FIFA official Jérôme Champagne. Mr. Champagne, who is personally funding his own campaign, has stated that he has received the support of at least five Member Associations and that the FIFA general secretariat has been notified of his candidature. Details on which Member Associations support the Frenchman remain undisclosed.

During the last FIFA Congress that took place in Sao Paulo in June this year, the Ad-Hoc Electoral Committee was also set up consisting of Mr. Domenico Scala (ltaly), chairman of the FIFA Audit and Compliance Committee, Mr. Claudio Sulser (Switzerland), chairman of the FIFA Disciplinary Committee, and Mr. Larry Mussenden (Bermuda), chairman of the FIFA Appeal Committee. The next step would be for the Ad-hoc Electoral Committee to forward the proposed candidature of Jérôme Champagne to the Ethics Committee pursuant Article 15(10) of the Electoral Regulations.

As stated above, Sepp Blatter is not yet a candidate, but it is expected that he will run for a fifth consecutive term in office. Interestingly enough, in accordance with Article 2(2) of the Electoral Regulations, “if a person engages in campaign or similar activities that give the appearance that he is a candidate, the Ad-hoc Electoral Committee or, if the Ad-hoc Electoral Committee has not yet been constituted, the FIFA Secretary general, shall give him a deadline of ten days to formally state his intention of becoming a candidate. This shall also apply for the incumbent FIFA President. Blatter hinted several times this year that he is thinking about running for President again. Nonetheless, it appears that the rule stipulated in Article 2(2) has not been applied to him (yet). With regard to the possible third candidate, Michel Platini has said that he is considering becoming a candidate and promised to make a decision by the draw for the Champions League on 28 August. 


Could the new Election Regulations jeopardise Mr. Blatter’s possible re-election ambitions?

Given that Blatter still enjoys widespread support in the “football family”, he should have no problem securing the declarations of support from five different Members. As regards the integrity check, it is worth noting that Sepp Blatter has never been personally accused of corruption. True, there has been a lot of controversies at FIFA under his watch (Qatar2022 is the latest and most acute one) and questions can be raised whether an 80-year old is the ideal candidate to run one of the world’s most important Sporting Governing Bodies for the next four years.  


Conclusion

Whether the new Election Regulations will make next year’s election more transparent and democratic will mostly depend on how they will be applied during the unfolding campaign and elections. Will Blatter’s double game as a candidate and FIFA President be closely scrutinized? On what basis and to which extent will the Ethics Committee review the candidatures? Even if the electoral regulations appear to have some teeth in practice, further reforms will still be necessary to improve FIFA’s legitimacy. One can, and Jérôme Champagne has in fact suggested it, imagine public debates between the candidates to be broadcasted worldwide. Furthermore, one should envisage that the vote must be held publically and that the number of terms as FIFA president must be restricted. There is a lot to do before FIFA could be considered, as far as it is even possible, a “democratic” organisation, but the sheer fact of having electoral regulations is already a step in the right direction.


P.S. At the beginning of July Jérôme Champagne visited the Asser institute and presented his program for the upcoming FIFA Presidential elections 2015. The video is available at:


[1] http://www.insideworldfootball.com/fifa/15040-fifa-lays-out-rules-of-engagement-in-the-battle-for-the-presidency.

[2] Member: an Association which is responsible for organising and supervising football in all of its forms in its Country that has been admitted into membership of FIFA by the Congress.

[3] Electoral Regulations for the FIFA Presidency, Article 7(2)

[4] Electoral Regulations for the FIFA Presidency, Article 8(1)d)

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