On Tuesday, 30 April 2024, the Advocate General of the CJEU, Maciej Szpunar (hereinafter “the Advocate General”), delivered his Opinion in case C-650/22, known as the “Diarra” case. In his Opinion, the Advocate General challenged the FIFA transfer system by questioning the compatibility of certain provisions of the Regulations on the Status and Transfer of Players (hereinafter “RSTP”), such as Articles 17(2) and 17(4), with EU law, on the grounds that they might contradict the free movement of workers between Member States.
Although these conclusions are not binding for the Court, we will delve into a brief analysis of the key points and the potential implications for the FIFA transfer system.
(i) Introduction:
The Diarra case goes way back, specifically to 2014, when Lokomotiv Moscow (hereinafter “Lokomotiv”) terminated the employment contract with the player Lassana Diarra (hereinafter the “Player”) for alleged contractual breaches. Lokomotiv filed a compensation claim with FIFA, valuing it at EUR 20 million. The Player, considering himself free, started searching for a new club. Belgian club Charleroi showed interest in the Player but, aware of the pending FIFA dispute with Lokomotiv and the risk of being jointly and severally liable for the compensation if the Player was found to have breached the contract, decided not to pursue the transfer.
FIFA ultimately ordered the Player to pay EUR 10.5 million to Lokomotiv, a decision later upheld by CAS in 2016. The Player later continued his career at Olympique de Marseille.
Later, the Player filed a case in the Belgian ordinary courts against FIFA and the Belgian Football Federation, seeking EUR 6 million in damages for lost profits, arguing that they had prevented him from signing with Charleroi. In January 2017, the Belgian court of first instance ruled that FIFA’s application of Article 17.2 of the RSTP was incorrect and violated the principle of freedom of movement of workers, ordering FIFA to pay the Player EUR 60,000 in compensation.
The case would proceed to the second instance in Belgium, with the appellate court deciding to refer a question to the CJEU for a preliminary ruling. The court inquired whether Articles 45 and 101 of the Treaty on the Functioning of the EU (hereinafter “TFEU”) preclude the application of FIFA rules on (i) joint and several liability of the new club for the player’s contractual termination without cause and (ii) whether the federation to which the player's former club belongs has the option not to issue the ITC if there is a dispute between the club and the player.
(ii) Brief summary of the Advocate General’s Opinion:
In his Opinion, the Advocate General starts by stating that the RSTP is clearly restrictive in nature concerning the free movement of persons, as (some of) its provisions might discourage clubs from signing a player due to the financial risk. The Advocate General reasons as follows:
“53. In other words, 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. The contested provisions are designed in such a way as to have a deterrent effect and send a chill down each player’s spine. The same applies with respect to clubs potentially interested in luring players into new opportunities while the latter are in a running contract. The ‘price tag’ for such an operation would be extremely high.” (emphasis added)
Furthermore, the Advocate General considers that the sporting sanctions faced by new clubs contracting the player might effectively prevent a player from pursuing his professional career with a club in another EU Member State.
As for the competition rules, the Advocate General argues that since the RSTP limits the ability of clubs to contract players, the RSTP necessarily affects competition between clubs in the market for player acquisition. Based on the foregoing, the Advocate General concludes that there is a restriction of competition by object:
“56. These elements are strong indications that there is a restriction of competition by object. Obviously, there are other situations in which players can change clubs and be recruited. This, however, does not mean, as the Commission implies in its observations, that there is no restriction of competition by object. In a situation where a contract is terminated without just cause, competition is, under the contested provisions, designed to come to a halt. I do not see how this cannot be equated with a restriction of competition by object.” (emphasis added)
Although the Advocate General deems the RSTP provisions at issue restrictive by object, he nevertheless envisages the possibility that the CJEU may not share his interpretation and may classify them as restrictive by effect.
In that regard, the Advocate General states that it would need to be determined whether the provisions in question are indeed justified by one or more legitimate objectives of general interest, as outlined in the Wouters v Meca Medina case-law. This would require FIFA to prove the proportionality of the contested provisions before the referring national court.
In this context, the Advocate General conducts a thorough analysis of the questions of joint and several liability (Article 17.2 RSTP) and related sporting sanctions (Article 17.4 RSTP). Contrary to FIFA’s long-standing stance, he concludes:
“68. While it may be, from the perspective of FIFA, difficult to discern the reasons that led to the premature termination of the professional player’s contract with his or her former club, when a player is recruited by another club, holding the new club systematically liable appears to me to go beyond what is necessary to pursue the legitimate objective, in a situation in which the new club has played no role in the termination of the contract. The presumption contained in Article 17.4 of the RSTP that the new club has induced the player to commit the breach appears draconian, since I do not see how the new club can prove its ‘innocence’. While one may argue, as do FIFA and the Commission, that it is possible to derogate from the application of Article 17.2 of the RSTP, with the DRC having the power to restrict the application of the principle of joint and several liability, I am of the opinion that affording such discretion to the DRC does not provide the necessary legal certainty for players and clubs, as everything hinges on the viability and expeditiousness of a procedure which appears difficult to ascertain.” (emphasis added)
On the other hand, regarding the provisions allowing for the refusal to issue the ITC based solely on allegations that the player breached the terms of his contract and the club was forced to terminate, the Advocate General, while conceding that the system contains a certain degree of flexibility, nevertheless states that “these elements appear to me to be too tenuous so as to come to the conclusion that they are necessary for the attainment of contractual stability.”
Based on the foregoing, the Advocate General proposes that the CJEU respond to the questions referred for a preliminary ruling as follows:
Article 101 TFEU should be interpreted as precluding FIFA’s rules on joint and several liability of the new club for compensation that the player would be required to pay in the event of a contract breach, provided that it is established that those decisions may affect trade between Member States and/or restrict competition between professional football clubs.
Article 45 TFEU should be interpreted as precluding FIFA’s rules on (i) joint and several liability of the new club and (ii) refusal of the ITC by the federation of the player’s former club if there is a dispute between the former club and the player.
(iii) Conclusion
As can be observed from the above, the analysis of the Advocate General of the CJEU raises questions about the validity of some of the rules in FIFA’s transfer system introduced in 2001, as they may conflict with EU law.
The CJEU is not bound by these conclusions (as recently evidenced with the Superleague judgment), but if the Court accepts the Advocate General's interpretation, the transfer system would be seriously affected. However, we will have to wait for the CJEU’s ruling to assess the potential future implications for FIFA’s transfer regime.