The Court of Justice of the European Union (CJEU), the highest court of the EU, has handed down a preliminary ruling in what could be the most significant sporting legal decision since the famous Bosman case of the 1990s.

Lassana Diarra is a now-retired footballer who played for Real Madrid, Paris Saint-Germain, Chelsea, and Arsenal, amongst other teams, and internationally for France. Diarra had sought to challenge the world football governing body FIFA in relation to the ‘Regulation on the Status and Transfer of Players’ (RSTP).

What happened to Lassana Diarra?

Diarra was playing for Lokomotiv Moscow in 2013 and 2014. Following allegations of poor performances by his manager, the club demanded that Diarra accept a salary cut. Diarra declined and Lokomotiv decided that this amounted to a breach of contract by Diarra and terminated his contract before seeking damages from Diarra for his alleged breach.

Initially, the case was heard before FIFA’s dispute resolution chamber where Diarra lost the case resulting in a ban and 20 million Euros compensation awarded to Lokomotiv, as well as a ban from playing for 15 months. Diarra appealed the decision to the highest sporting court, the Court of Arbitration for Sport (CAS), which upheld the ban but reduced the compensation awarded against him to 10.5 million Euros.

This case concerns a subsequent attempted move by Diarra to the Belgian club Royal Charleroi, who offered the player a contract as a free agent. Charleroi sought confirmation from FIFA that they would not be liable for the sums owed to Lokomotiv, who were refusing to issue an international transfer certificate required by FIFA to allow registration of players at their new clubs, but FIFA declined to provide such confirmation and Charleroi withdrew their contract offer. Diarra brought a claim in the Belgian courts seeking 6 Million Euros damages for loss of earnings from FIFA and the national governing body the Royal Belgian Football Association (RBFA) due to what were alleged to be various restrictions imposed on him moving club following his dispute with Lokomotiv.

In this next instalment, and some ten years on from Diarra’s departure from Lokomotiv, the Belgian Court of Appeal asked the CJEU for clarification about whether the FIFA rules were compatible with EU law, specifically in respect of freedom of movement of people and competition law. This was referred to the CJEU under the preliminary ruling power which allows any national court of an EU member state to request that the CJEU rule on the interpretation of EU law.

What is the applicable FIFA regulation?

The RSTP is a set of FIFA regulations which are adopted by national governing bodies. As the proposed transfer involving Diarra was to a Belgian club, the relevant national governing body is the RBFA.

Article 17 of the RSTP applies where a contract is terminated “without just cause” and states that:

• Art 17(1) – the party in breach shall pay compensation;
• Art 17(2) – the player and the club wishing to sign the player are jointly and severally liable to pay compensation to the player’s former club;
• Art 17(3)&(4) – the player and the club may be subject to sporting sanctions, including a ban from playing in the case of a player, or from registering new signings in the case of a club. There is also a presumption that any club signing a player who is found to have terminated his contract without just cause induced that player to commit the breach.

In this instance, Diarra had been held by FIFA’s dispute resolution chamber, as confirmed by CAS, to have terminated his contract with Lokomotiv without just cause. As such, had Charleroi signed him they would have been presumed to have induced him to commit the breach, and both they and Diarra would have been liable for the damages awarded to Lokomotiv as well as potentially being subject to sporting sanctions.

The decision

The CJEU held that “some FIFA rules on international transfers of professional footballers are contrary to EU law.”

In respect of freedom of movement, the court decided that the rules in question impeded the free movement of professional footballers such as Diarra and placed risks both on players and clubs wishing to employ them.

In effect, FIFA’s rules prevented Charleroi from being able to sign Diarra, despite him being a free agent, which meant his freedom of movement was restricted. Although there are exceptions to freedom of movement whereby the rights can be restricted by FIFA in circumstances where there is a legitimate interest on public interest grounds, such as ensuring the regularity of sporting competition and stability of clubs’ squads, the CJEU deemed that FIFA’s rules in their current form go beyond what is necessary to protect such interests.

In respect of competition, the court held that the RSTP was effectively intended to restrict cross-border competition between clubs in the EU, by preventing the unilateral recruitment of players under contract with another club or who are alleged to have terminated their contract without just cause. The court did not believe these rules to be necessary.

What is next?

The case will go back to Belgium’s Court of Appeal for the domestic judges to decide. It is worth noting that the preliminary ruling procedure acts as guidance for the national court about how the CJEU would interpret the law; however, on the basis that the national court had asked the CJEU for clarification it appears unlikely that the CJEU’s preliminary ruling would be departed from.

Diarra’s lawyers, who also acted for Jean-Marc Bosman in his landmark case, hailed the CJEU’s judgment, stating that all professional players impacted by the RSTP since their inception in 2001 could seek compensation for losses suffered.

The players union FIFPRO released a statement supporting the judgment, saying that Article 17 had “discouraged numerous players from terminating their contract unilaterally and pursuing new employment”, and that the present rules don’t protect players rights as workers and cannot be justified. They commended Diarra like Bosman before him.

FIFPRO has expressed a willingness to negotiate with FIFA in order to resolve the issues with the regulations highlighted by the CJEU.

In contrast, FIFA has highlighted the CJEU’s opinion that rules which legitimately restrict freedom of movement are still permitted, claiming that the ruling did not substantively alter the core principles of the international transfer system.

Comment

What is interesting about this case is that a club that holds the registration of a player has always held an advantage in terms of effectively being able to decide where and when a player exits the club, by refusing to release the player until the club received what it considered to be sufficient compensation.

This decision may give players greater opportunity to attempt to leave their current club unilaterally for an international transfer, which would naturally lead to an increase in disputes between clubs and their player assets.

The decision may also force FIFA to change Article 17 and more generally the rules around a player’s ability to leave a club in order to ensure the rules comply with EU law.