The European Court of Justice, on the 4th of October 2024 ruled that FIFA’s transfer rules are incompatible with the guarantee of freedom of movement and EU competition law regarding financial compensation and imposing additional sporting sanctions on both clubs and players in cases of early contract termination without “just cause“.
Before delving deeper into the matter, one must look back at how EU law has impacted sports. A landmark judgement changed sports in Europe as we know it. The case ASBL v Bosman, better known as the Bosman rule, resulted in an overhaul change to the way players transfer from team to team. This rule allowed a player to move freely to another club at the end of their contract with their present team or agree a pre-contract agreement with another club for a free transfer if the player’s contract with their present club has six months or less. The ECJ, in 1995 ruled that the rules regulating player transfers before the judgement’s delivery were against one of the EU’s principles of freedom of movement found in article 45 of the TFEU.
Nearly 30 years later, another case was brought forward by Lassana Diarra, a professional football player who played for the likes of Real Madrid, Chelsea FC and a French international. Diarra signed for Lokomotiv Moscow in 2013 and the next year the club had a dispute with the player on his salary. The Russian football club alleged that such a dispute constituted a breach of contract, thus promptly terminated his contract. In addition to the termination of Lassana Diarra’s contract, Lokomotiv Moscow sued Diarra before FIFA’s Dispute Resolution Chamber (DRC). Lassana Diarra was found guilty and ordered to pay compensation of 20 million EUR to Lokomotiv. After a successful appeal lodged by Lassana Diarra the compensation was lowered to 10.5 million EUR.
As Diarra was no longer part of a club, he could move to any club he wants. Royal Charleroi, a club in Belgium, offered Diarra a contract, but on the condition that Royal Charleroi would not have to pay any compensation to Lokomotiv Moscow. To add insult to injury, FIFA’s regulations did not allow this as its regulations make it clear that club and player would be found joint and severally liable, thus the transfer was not completed and subsequently collapsed. Due to these regulations set in place by FIFA, it made it very difficult for Lassana to sign for a club on a free transfer and additionally have the club pay compensation to Lokomotiv Moscow.
Diarra decided to take the matter to the Belgian Commercial Court and sought damages from FIFA and the Belgian Football Association. Diarra claimed that the rules in FIFA’s Regulation on the Status and Transfer of Players were contrary to EU law. The case opened by Diarra soon fell in the laps of the ECJ through a preliminary ruling (article 267 TFEU).
According to the ECJ’s ruling, some of FIFA’s regulations regarding the financial obligations and athletic penalties that follow an early contract termination without “just cause” are incompatible with both EU competition law and the right to freedom of movement under article 45 TFEU.
The European Court of Justice (ECJ) believes that the rules could prevent players from receiving firm and unconditional offers from clubs in other Member States because “the existence of these rules and the combination of them means that these clubs are faced with major legal risks, unpredictable and potentially very high financial risks, as well as major sporting risks, which, taken together, are clearly likely to dissuade them from hiring such players.” The above set of regulations is therefore “likely to disadvantage professional football players who have their residence or place of work in their Member State of origin and who wish to carry out their economic activity on behalf of a new club established in the territory of another Member State by unilaterally terminating…their employment contract with their former club, for a reason which the latter claims or risks claiming, rightly or wrongly, is not just“. In its decision, the Court emphasised the significance of workers’ rights and went on to say that professional athletes had to have the same legal safeguards under EU law as any other worker or employee. The following was noted by the court: “Professional athletes, like other workers, must be able to make autonomous choices about their careers without undue constraints imposed by governing bodies.”
The Court ruled that players’ basic freedom to freely switch clubs could not be superseded by the concept of contractual stability by stating that “While clubs may have interests in retaining players, such interests cannot supersede an individual’s right to seek employment elsewhere.”
The need of proportionality in any limitations placed on workers’ freedom of movement was emphasised by the ECJ. The court found that FIFA’s rules were excessive and could not be justified on the grounds of contractual stability or competitive balance, with the following being reiterated “Any measure that impedes the free movement of workers must be necessary and appropriate to achieve the desired objectives.” The decision focused on FIFA’s inability to prove that its limitations were required to accomplish the goals it asserted, including fostering financial stability and competitive balance among teams.
The ECJ’s ruling clarifies that specific elements of FIFA’s rules on compensation obligations and sporting sanctions tied to early contract termination without “just cause” are incompatible with both the freedom of movement under Article 45 TFEU and EU competition law. While the ECJ recognizes the legitimate aim of safeguarding the regularity of club competitions, which necessitates some stability in team rosters and thus continuity in player contracts. It also finds the current financial liability allocation and the severity of sporting sanctions linked to unilateral contract termination by a player, along with the presumption of inducement by the new club, to be disproportionate and therefore unlawful. It remains uncertain whether revised transfer rules—ones that consider specific case circumstances and use a more objective, domestic-law-based approach to determining due compensation—would satisfy the ECJ’s standards under Articles 45 and 101 TFEU.
Julian Mifsud
Legal Intern
Mifsud & Mifsud Advocates
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