The Facts of the case
The 2024 judgement of Lassana Diarra and FIFPRO v FIFA and URBSFA (Case C-650/22) had shocked the footballing world. The case concerns Lassana Diarra, an ex-French national footballer stint at Russian Football Club Lokomotiv Moscow (2013-2017). After one year, Lokomotiv Moscow terminated the contract due to alleged contractual breaches. Upon termination, Diarra sought to enter a new contract with other football clubs, but FIFA regulations effectively hamstrung him from joining a new club under the concept of ‘contractual stability’.
Diarra then decided to take the matter to court initially before the FIFA’s Dispute Resolution Chamber (‘DRC’) where Diarra was found to be liable to pay a compensation amounting to €10.5m. Diarra subsequently launched legal action against FIFA and the Belgian FA before the local commercial court, seeking €6m in compensation for the loss incurred due to the two associations’ decisions. The local court ruled in favour of Diarra and directed FIFA and the Belgian FA to compensate him.
The judgment was appealed to the Court of Appeal of Mons, which referred the case to the Court of Justice of the European Union (‘CJEU’) seeking clarity on whether the Contested FIFA Regulations infringe:
(i) the EU cartel prohibition, i.e. the prohibition of agreements, decisions by associations of undertakings and practices which have as their object or effect the restriction of competition within the EU; and/or
(ii) the EU right to freedom of movement for workers within the EU. Throughout the trial, the courts had highlighted two main issues.
Issues
- The extent to which FIFA’s regulations might be considered necessary for the legitimate objectives of maintaining contractual stability and the integrity of sporting competitions.
- Whether FIFA’s transfer regulations, particularly those relating to contractual stability, are compatible with EU competition law (art 101 TFEU) and the free movement of workers (art 45 TFEU).
The Judgement
With regard to the first issue, the CJEU considered the rules stipulated under FIFA’s Regulation on the Status and Transfers of Players (‘RSTP’) and criticised the relevant rules on compensation for breach of contract and the conditions governing the granting of International Transfer Certificate (‘ITC’) as unjustifiable and disproportionate.
For context, CJEU specified that FIFA’s rules may be justifiable on basis that:
- the rules concerning legitimate objective in the public interest complies with the TFEU and not purely of an economic nature; and
- the rules have taken into account the principle of proportionality in terms of ensuring the achievement of legitimate objective and that the application of such rules do not go beyond what is necessary to achieve that objective.
In line with this, CJEU held that when taken as a whole, the specific rules on compensation payments and ITC have violated the principle of proportionality. When applying the rules, the specific circumstances of each case ie the facts circumventing the breach, the actions of the player, the former club and the new club should be considered.
Although FIFA asserted that the RSTP rules protect professional footballers, the adoption of such rules did not contribute to the protection of the professional footballers. In light of the legitimate objective in the public interest, the sanctions imposed in the event of a breach can only be accepted within a well-defined framework that are ‘transparent, objective, non-discriminatory and proportionate’. By imposing such stringent sanctions on Diarra, the adoption of such rules went far beyond necessary to ban the Diarra from competing for a period which put an athlete’s relatively short sporting career into jeopardy.
CJEU had found the criteria to calculate the compensation to be vague, it also found that art 17(4) of the RSTP had imposed an ‘unreasonable and disproportionate’ presumption being imposed on clubs signing players who are ‘signing a professional who has terminated his contract without just cause has induced that professional to commit a breach’. This presumption is not justifiable as it places the new club in a negative light without giving it any opportunity to supplement evidence in proving the contrary.
This indicates that when it comes to achieving legitimate objectives, the FIFA regulations have gone beyond necessary in its attempt to maintain stability to ensure regularity in interclub competitions, resulting in stringent measures. This reasoning indicates that FIFA’s objectives could be met through less restrictive measures, suggesting that the transfer system may need restructuring to better align with EU legal standards.
Moving on to the second matter, the CJEU held that the rules adopted by sports federations falls under the purview of EU law except where these rules have been adopted exclusively for non-economic reasons and for the matters of interest only for sports as such. According to CJEU, in other instances sports-related specificities can be considered in the interpretation of the relevant EU law provisions.
The CJEU also confirmed that the relevant RSTP rules fall under the scope of application of arts 45 and 101 TFEU. A point in which FIFA have acknowledged when they released a statement shortly after the verdict was released that it is satisfied that the legality of key principles of the transfer system was re-confirmed in the ruling and that only two paragraphs of two articles of the regulations on the status and transfer of players were questioned, which the national court is now invited to consider. This effectively implies that FIFA accepts the verdict and that necessary amendments to its regulations governing the transfer market will be amended in due course to make it compatible with EU regulations and directives.
The rationale of the verdict from the CJEU was that the present transfer and registration rules which directly impact the work of football players and their right to choose where and who to work for, a fundamental right which is guaranteed under art 45 (Freedom of Movement). Furthermore, the presumption clause under art 17(4) was held ‘unreasonable and disproportionate’ which essentially goes against the fundamental principle of freedom to contract in EU Private Law.
While the intention of drafting such a clause was not without its merits, which is essentially to provide contractual stability and preserving the integrity of competitions for football clubs operating in the transfer market. However, as member states of the European Union are obliged to adopt the principle of EU supremacy which means that EU law will reign supreme over all other forms of laws. Thus, once a judgment is made in the CJEU there is realistically, and practically very little FIFA can do besides adhering to the judgment.
Review of the case
The judgement of Lassana Diarra will undoubtedly have a profound impact on football. For one, it formally establishes that EU would remain supreme whenever there exist a convergence of law. The CJEU’s reasoning suggests that while sporting organisations like FIFA may pursue legitimate objectives, their regulations must still comply with EU competition law principles. This reinforces the notion that sport’s governing bodies do not enjoy blanket immunity from EU law scrutiny.
The Diarra case carries substantial implications for sports governance, especially within football. It calls into question FIFA’s ability to impose transfer regulations independently, without adequate regard for EU law. This development could foster a more inclusive rule-making process, incorporating feedback from various stakeholders such as players’ unions and national authorities. Furthermore, the ruling may empower individual athletes to contest regulations they view as unjust or overly restrictive. This could alter the power dynamic between players and governing bodies, possibly paving the way for more player-centric regulations in the future.
This however may raise questions for football administrative and regulatory bodies outside Europe who may be now indirectly bound by EU laws when it comes to regulating football clubs and footballers. This may raise the potential issue of conflict of laws or conflict of jurisdiction.
On the sporting front, the verdict in Diarra will have major repercussion on future transfer fees and contractual deal as it now tilts the negotiating power firmly in favour of the player. The judgement has essentially enabled players a legal route to break their contracts with clubs and go on and sign for new clubs without the present club being able to hold them on to their existing contractual obligations. This will hurt football finances for smaller clubs particularly, as they do not have the same commercial appeal and revenue stream to compete with bigger clubs financially when it comes to player remuneration packages.
The European Club Association (‘ECA’)’s statement summaries the long-term financial impact it will have on football clubs. The statement states:
The football transfer system is designed to establish a balance between the rights of players to free movement and stability of contracts, together with the legitimate objectives of the integrity and stability of squads and competitions. ECA believes that this system functions well, on the whole, and succeeds in finding this necessary balance.
What can be understood and inferred from this statement is that the present transfer regulations and system was developed and set up in such a way that it helps, and aid medium and smaller clubs compete at higher levels, especially those that develop talent. The system as a whole, are an effective and efficient means of equitable distribution of wealth not just amongst bigger clubs to smaller clubs domestically, but also internationally. The example of this is that of the Brazilian Serie A, which have over the last 20 years benefitted from the sale of football talents to their wealthier European counterparts. The accumulated profits obtained have enabled clubs in invest in football infrastructure and support staff which have now made Serie A teams more financially sustainable.
In conclusion, the Lassana Diarra judgment represents a significant shift in the landscape of football governance, reasserting the supremacy of EU law over regulations set by international sporting organisations. By mandating that FIFA’s rules align with EU competition principles, the ruling opens the door for a more player-focused approach to contracts and transfer regulations.
However, as the ripple effects reach outside Europe, it’s likely that regulatory bodies worldwide will have to navigate complex legal landscapes. As football continues to evolve under these legal shifts, finding a harmonious balance that supports all levels of the sport — from grassroots to elite clubs — will be critical to sustaining football’s global integrity and appeal.
For further information, please contact:
Wong Zi Ying, Richard Wee
ziying@richardweechambers.com
