On 4 October 2024, the Court of Justice handed down a ruling concerning FIFA rules on the unilateral termination of player contracts in football. The impact of this ruling is currently difficult to predict. Indeed, reactions very divided. Some experts speak of an impact on the foundations of the transfer system that will change the future of transfers, while others prefer to wait and see and do not expect any major changes. We set out below exactly what the ruling is about.
Regulations in question
The specific rules relate to the FIFA Regulations on the Status and Transfer of Players, which state that contracts between a player and his football club can only be terminated by mutual agreement or at the end of the agreed term. If this contract were to be unilaterally terminated by the player without a so-called "just cause", the player, as well as any new football club that wishes to recruit the player, would face severe sanctions. More specifically, these concern the following sanctions:
- * Compensation calculated according to the law of the country concerned, the specificity of the sport and any other objective criteria;
- * The player and the football club wishing to take on the player will be jointly and severally liable for the compensation;
- * The new club is presumed, until established to the contrary, to have induced the player to terminate their contract. If this club cannot rebut this presumption, they may be banned from registering players;
- * The new club may be refused to be granted an International Transfer Certificate by the player's old football federation.
Facts
Specifically, the case involved a football player, employed by Lokomotiv Moscow, where he saw his contract terminated. Indeed, the football club claimed that he refused to play football and had therefore unilaterally terminated his contract itself. Lokomotiv Moscow subsequently filed a case with the DRC (the Dispute Resolution Chamber within FIFA) for EUR 20 million. This body ordered the player to pay EUR 10.5 million, which was confirmed by the CAS (the Court of Arbitration for Sport). Meanwhile, the player had received an offer from Belgian football club Sporting Charleroi, but only on the condition that Sporting Charleroi would not be held liable to pay the compensation. However, this turned out not to be the case, meaning the offer fell through.
Following this, the player therefore started legal proceedings before a Belgian court against FIFA and the URBSFA to obtain damages for the damage he suffered as a result of the aforementioned rules. In first instance, he was awarded provisional damages, whereupon FIFA decided to appeal the ruling to the Mons Court of Appeal. Before this Court, the player's counsel cited that the regulations in question would be contrary to the free movement of persons (Art. 45 TFEU) and that they restrict competition (Art. 101 TFEU). The Mons Court of Appeal took the same view, after which it referred the question to the Court of Justice and asked several preliminary questions on whether the rules imposed by FIFA as a private organisation were indeed contrary to the free movement of persons and whether they indeed restricted competition.
Court of Justice assessment
The Court of Justice divided its assessment into two parts, first the free movement assessment and then the restriction on competition assessment.
Free movement of persons (Art. 45 TFEU)
The Court starts by explaining that Art 45 TFEU precludes a situation where certain rules prevent EU nationals from carrying out an economic activity in a Member State other than their Member State of origin or that put them at a disadvantage in comparison to nationals of that Member State.
The Court is quick to conclude that the combination of the various sanctions - as mentioned above - does have the effect of discouraging professional footballers from playing for another football club in another Member State. More specifically, according to the Court, this is the case because the combination of those rules has the effect of depriving them of the possibility of receiving an unconditional offer when they still have a current contract. Indeed, in such a case, the "new" football clubs always incur major sporting, legal and financial risks.
Therefore, the court decides that the free movement of persons is indeed negatively affected.
There is, of course, a possibility of justification for the violation of freedom of movement if FIFA can prove that there are legitimate objectives in the public interest insofar as those are proportionate. In this sense, FIFA raises three possible legitimate objectives in the public interest:
- Contractual stability and the stability of the professional football clubs;
- The regularity and proper functioning of the various football leagues; and
- * Protecting professional footballers as employees.
As for the latter, the Court is very quick to dismiss, as it does not follow from its statutes. The Court does however accept ensuring the regularity of football competitions as a legitimate objective in the public interest. Indeed, such a legitimate objective in the public interest entails the need to impose rules to ensure a balance and equality of opportunity between the various football clubs.
However, the aforementioned rules, according to the Court, go beyond what is necessary, as they are not or cannot be discretionarily defined by FIFA or the national football associations. In particular, the "just cause" requirement concerns a difficult issue to this end. Also, the presumption resting on the football club wishing to contract the player in question following his unilateral termination of his contract entails an unjustifiably high burden of proof. On top of that, it also leads to disproportionately high compensation.
The Court therefore considers that the requirement of proportionality has not been met. However, it leaves an opening for the Mons Court of Appeal, as the referring court, to conduct a further investigation in this regard.
Competition assessment (Art. 101 TFEU)
Besides the question whether the above rules could affect the free movement of persons, the Court also examined whether competition could be restricted by the rules in question.
After going over the various general notions, the Court then turns to the question of whether the rules in question have the aim of restricting competition by object or produce such a restriction as an effect. The Court begins by emphasising that the recruitment of talented players who have already been formed at certain football clubs concerns an essential parameter of competition within the football sector.
In that sense, the Court states that since the aforementioned rules can be interpreted in a very unclear, discretionary and disproportionate way by FIFA and the various national football associations, the effect is to seriously affect the ability of the football clubs in question to recruit other players. In such a case, the consequences are to be considered in such a drastic way that football clubs are discouraged from contracting players when those players still have a current contract with a football club. In such a case, the aforementioned essential competitive parameter of football, and thus competition, is compromised. According to the Court, rules putting a restriction on such competition are similar to so-called "no-poach" agreements.
The Court does also elaborate on the specific nature of football and FIFA's place as the umbrella regulatory organisation for the various football competitions, in order to try to preserve the stability of those competitions, including through the prevention of unilateral terminations of contracts during the current football season. However, the Court considers that the normal legal mechanisms of contract law are sufficient for that purpose. The rules introduced by FIFA are therefore, according to the Court, neither necessary nor essential to safeguard competition.
Conclusion and implications
It is clear from the ruling that the Court here goes against FIFA's rules that were applicable until now, stating that they go too far in several aspects. Consequently, the Court seems to be increasingly siding with players and clubs. However, it should be stressed that the precise consequences for practice are difficult to foresee, as it, as always refers to the Mons Court of Appeal as the referring court. The actual ruling in the case in practice will therefore rest with the Mons Court of Appeal.
What seems clear, at least, is that FIFA's rules are once again under pressure and a change in the system seems necessary. FIFA itself, meanwhile, has already indicated that it is looking into the ruling and shall analyse it further. It remains to be seen exactly what the concrete changes will be in practice.
Do you have further questions on this ruling or any implications about it? If so, be sure to contact one of our sports law experts:
Julie Wouters and
Pierre De Strycker.
