Earlier this month, the European Court of Justice (ECJ) delivered another landmark preliminary ruling that sent shockwaves not just in the football industry but to other sports as well.
The case concerned French international football player Lassana Diarra who at the time that the dispute arose was on the books of Lokomotiv Moscow.
Diarra had a dispute with the Russian club over his salary, with the club interpreting such dispute as amounting to a breach of contract and thus proceeding to terminate the contract without just case.
As a result of the alleged breach of contract, the club was demanding EUR 20 million from Diarra as compensation due in accordance with the FIFA Regulations on the Status and Transfer of Players (RSTP).
The compensation was eventually reduced to €10.5 million following a successful appeal lodged to FIFA’s Dispute Resolution Chamber.
The regulations also stipulated that any club who would sign Diarra would be held liable, jointly and severally, to pay the compensation due to Lokomotiv Moscow, rendering Diarra’s chances of finding new employment almost impossible.
Following the collapse of a deal to potentially sign for Belgian football club Royal Charleroi, Diarra lodged a case against FIFA and the Royal Belgian Football Association (URBSFA) in front of the Commercial Court of Hainaut, Charleroi (Belgium) division in July 2015.
Diarra was seeking damages for loss of earnings (which were calculated at €6 million) that he claimed he suffered as a result of the RSTP provisions.
Furthermore, Diarra claimed that the RSTP are in breach of EU law.
On this latter point, the Belgian Commercial Court made a request for a preliminary ruling to the ECJ to rule on the compatibility or otherwise of the RSTP provisions in accordance with applicable EU law.
Essentially what the ECJ had to consider and determine was whether the applicable RSTP provisions represent a restrictive measure under EU law to the extent that they make it more difficult for the athlete in question to find a new job?
The ECJ once more repeated the already-known position that rules adopted by sports federations generally fall within the scope of EU law, except where these rules have been adopted exclusively for non-economic reasons and for matters of interest only for sport as such.
In the present case, the ECJ confirmed that the relevant RSTP rules do constitute an economic activity and a result fall within the scope of the application of Articles 45 and 101 of the Treaty on the Functioning of the European Union (TFEU).
In the eyes of the ECJ, the transfer and registration rules directly impact both the work of football players as a professional economic activity as well as the club’s composition of teams for competitions, which forms part of their professional activities.
Similar to the Bosman ruling that was delivered by the ECJ in 1995 and which as a result led to a complete overhaul of the RSTP as they are found today, the ECJ ruled that the rules in question are deemed to be contrary to EU law, both with respect to freedom of movement as well as with respect to EU competition law.
With regards to the breach of the freedom of movement, the court ruled that these rules impose considerable legal risks, including unforeseeable and potentially very high financial risks as well as major sporting risks on those players and clubs wishing to employ them which, taken together, are such as to impede international transfers of those players.
Although such restrictions may be justified by overriding reasons in the public interest, the rules in question seem, in a number of respects, to go beyond what is necessary to pursue their objective.
The ECJ went on to rule that the same rules have as their object the restriction, and even prevention, of cross-border competition, which in the opinion of the court do not appear to be indispensable and as a result deemed to be a breach of EU competition law.
One must now wait and see how the Belgian Commercial Court interprets and implements the preliminary ruling in its judgement, meaning that the true legal consequences and practical impact of the decision remain to be seen.
Whatever the final outcome might be, this preliminary ruling is another clear reminder of the primacy of EU law also in the context of rules and regulations that govern sports.
It should also serve as a further wake up call to international sports federations to ensure that their rules and regulations adhere to EU law in order to avoid potentially becoming the next victim themselves.
Dr. Robert Dingli is a sports lawyer and Senior Associate at Dingli & Dingli Law Firm
