On April 30, 2024, Maciej Szpunar, Advocate General at the Court of Justice of the European Union (CJEU), issued his non-binding opinion on case C-650/22, Lassana Diarra and FIFPRO v. FIFA and URBSFA. The Advocate General considers that some FIFA Regulations on the Status and Transfer of Players (RSTP) about the termination of the contract without cause could be contrary to the European Union (EU) Law.

Full article

The Diarra case

In recent months, a certain unease has been felt in the atmosphere. The sports model of conditional autonomy in the EU is now, more than ever, a subject of debate. The CJEU's rulings on December 21, 2023 [Case C-333/21 European Superleague Company SL v. FIFA, UEFA, Case C-680/21 UL, SA Royal Antwerp Football Club v. URBSFA, UEFA and Case C-124/21 P International Skating Union v. Commission] reflect a shift in the Court’s approach to the application of proportionality review to decisions by powerful sporting bodies.

The December 2023 rulings maintain the model of conditional autonomy in sports, but alter the method of analysis.  Under pre-existing doctrine, undertakings can be challenged under Article 101.1 as “restrictions by object” or “restrictions by effect.”  When a behavior is restrictive by its object, the analysis of necessity and proportionality gives way to the strict application of the more stringent exemption rules provided for in Article 101.3 TFEU. Thus, if the conduct is restricted by its effects, sports organizations have more room to assert their “legitimate objectives.”

These cases led next to the non-binding opinion of Advocate General Maciej Szpunar on April 30, 2024, in case C-650/22, Lassana Diarra and FIFPRO v. FIFA and URBSFA. The case under examination involves FIFA and a retired professional football player, Lassana Diarra. Following the termination without just cause of the contract between the player and a Russian club, the Futbolny Klub Lokomotiv (Lokomotiv), the Advocate General assessed the compatibility of several articles of the Regulations on the Status and Transfer of Players (RSTP) with EU competition law (Article 101 TFEU) and free movement (Article 45 TFEU).

The facts are as follows. In August 2014, Lokomotiv terminated Diarra's contract and, invoking Article 17 RSTP, requested that the Dispute Resolution Chamber (DRC) of FIFA order the player to pay compensation of 20 million euros, claiming that he had breached and terminated his contract 'without just cause.' The player—who had a contract until 2019—filed a countersuit requesting the payment of owed salaries and compensation equivalent to the remuneration he would have received until the end of his contract, and he set out to find a new club.  In February 2015, Sporting du Pays de Charleroi (Charleroi) sent an offer to the player with two suspensive conditions: 1) that he be registered and meet the requirements to be able to play in competitions organized by the Belgian Football Federation (URBSFA), FIFA, and UEFA, before the end of March 2015; and 2) that he certifies in writing and unconditionally that Charleroi could not be considered “jointly liable” for any compensation the player had to pay to Lokomotiv. In March 2015, the URBSFA denied the player's registration due to the absence of the International Transfer Certificate (ITC), a document required to transfer football players between different national associations according to the RSTP. Shortly after, in May, the DRC partially granted Lokomotiv's request, set the compensation the player had to pay at 10.6 million euros, and declared the joint liability referred to in Article 17.2 RETJ inapplicable to future clubs (the Court of Arbitration upheld this decision for Sport in May 2016). Diarra was hired in July 2015 by Olympique de Marseille (France). A few months later, in December 2015, he filed a lawsuit against FIFA and the URBSFA Hainaut Commercial Court (Belgium), claiming 6 million euros for the damages caused to him by the application of a federative regulation which, in his view, is contrary to EU regulations. Considering the lawsuit well-founded at first instance and, upon appeal of the judgment by FIFA and the URBSFA, the Court of Appeal of Mons (Belgium) raised a preliminary question to the CJEU to determine whether Articles 45 and 101 TFEU should be interpreted as precluding: “the principle that the player and the club wishing to employ him [or her] are jointly and severally liable in respect of the compensation due to the club whose contract with the player has been terminated without just cause, as stipulated in Article 17.2 of the RSTP, in conjunction with the sporting sanctions provided for in Article 17.4 of those regulations and the financial sanctions provided for in Article 17.1”; and “ the ability of the association to which the player’s former club belongs not to deliver the [ITC] required if the player is to be employed by a new club, where there is a dispute between that former club and the player (Article 9.1 of the RSTP and Article 8.2.7 of Annexe 3 to the RSTP)?.”

Advocate General Szpunar began his analysis by observing –which is uncontested- that the transfer system limits players' ability to change clubs and, conversely, new clubs' ability to hire players when they terminate their contracts without cause. However, he implicitly acknowledges that this is also true in every legal system where voluntary obligations are enforced: any law that imposes damages on a party for breach of contract limits that parties ability to change its economic behavior in a way inconsistent with that which was promised in the contract.  Rather, in his view, “the consequences of a player terminating a contract without just cause are so draconian that it is highly unlikely that a player will go down this route.”  Thus, “Article 17 of the RSTP provides that, as soon as a player has terminated a contract without just cause, compensation must be paid and severe sporting sanctions kick in”; “Moreover, under Article 8.2 of Annexe 3 to the RSTP, such a player will not receive the ITC enabling a club to field him or her” (paragraph 52).  He observed that the “contested provisions are designed in such a way as to have a deterrent effect and send a chill down each player’s spine;” and “The same applies with respect to clubs potentially interested in luring players into new opportunities while the latter are in a running contract” (paragraph 53).

Perhaps because he sees the impact to be so significant, and the regulations to be so disproportionate as to be ‘draconian,’ he does not see “how this cannot be equated with a restriction of competition by object” (paragraph 56), which would lead to the analysis of the requirements to assess whether an exemption under Article 101.3 TFEU might apply, something he believes does not occur (paragraph 58), without delving into FIFA's possible legitimate objectives (paragraph 59).

The Advocate General noted in his 'Methodological Observations' that the rules of competition law and fundamental freedoms “must be appraised independently on their merits” (paragraph 34). Hence, it is unsurprising that legitimate objectives (contractual stability and training of young players), excluded from the analysis under Article 101 TFEU, are included in the study under Article 45 TFEU. Thus, regarding the compatibility of the said provisions with Article 45 TFEU, Szpunar contended that these EU provisions are inconsistent with the principle of joint liability outlined in Article 17.2 RETJ, unless it can be demonstrated that its application can be avoided within a reasonable timeframe by proving that the new club was not involved in the premature and unjustified termination; and that a federation on which the previous club depends cannot deny the issuance of the ITC for a player to be hired by another club if there is an ongoing dispute with the first unless it can be proven that provisional measures can be adopted when the previous club merely claims that the player has breached the contract and that, therefore, it had to terminate it.

Regarding competition law, the debate transforms the traditional analysis about the restrictive nature of regulations of dominant sports regimes, like the RETJ.  Thus, if the ECJ finds that restrictions included in the RETJ are “restrictive by their object,” it will not be possible to assess legitimate objectives such as contractual stability.  In contrast, as reflected in prior ECJ sports jurisprudence, recognizing the benefits of a flexible analysis of the federation’s legitimate objectives, the Court will consider the extent to which these objectives are actually served by the challenged regulation, and whether there are alternatives to achieve legitimate objectives with less impact on free competition and free movement.