What You Need to Know
- Key takeaway #1Following the Diarra ruling by the Court of Justice of the European Union, FIFA has amended its transfer rules and in particular the compensation and liability rules that imposed disproportionate and unjustified restrictions on player mobility. FIFA has also now arranged for the automatic issuance of international transfer certificates.
- Key takeaway #2Several football players associations consider that FIFA’s revision of the transfer rules does not go far enough. The associations are calling for a comprehensive overhaul of the rules through collective bargaining within a European social dialogue, to ensure that FIFA complies fully with EU law as interpreted by the CJEU in the Diarra case.
- Key takeaway #3The Diarra ruling raises questions about the enforceability of FIFA’s current transfer rules and has created a state of legal uncertainty regarding players’ contracts. However, in the future, the ruling could increase player mobility and reduce transfer fees between football clubs.
On October 4, 2024, the Court of Justice of the EU (CJEU) ruled in the Diarra case that the transfer rules of the Fédération Internationale Football Association (FIFA) regarding the termination of player contracts without just cause were incompatible with EU internal market and competition laws. Following this landmark ruling, FIFA published temporary changes to its transfer rules on December 23, 2024. This judgment could have a significant impact on the economic model for football in Europe, and on the balance of power both between clubs, and between clubs and their players.
A prerequisite for the development of competing football competitions is greater player mobility. In this context, the Diarra case on the validity of the transfer rules could accelerate the growth of alternatives to the current model based on geographical leagues and local club identity.
This alert discusses the potential implications of the Diarra ruling in the evolving context of football competitions and looks at the parallel implications of previous liberalizations of transfer rules, and in particular the Bosman ruling.
Historical context: the Bosman ruling and its legacy
It is not the first time that the CJEU has overturned certain aspects of the economic model for football. Indeed, in the famous Bosman case (decided almost 20 years ago), the CJEU already demonstrated its ability to redefine the rules governing football at the international and European level.
Specifically, the Bosman ruling revolutionized professional football by ending transfer restrictions and nationality quotas within the EU. The case, brought by Belgian player Jean-Marc Bosman, argued that the existing transfer rules violated the free movement of workers enshrined in Article 45 of the Treaty on the Functioning of the European Union. The CJEU ruled that these restrictions were incompatible with EU law, leading to the liberalization of the transfer market in all sports, and football in particular.
As a direct result of the Bosman ruling, it became possible for players to move freely from one club to another within the EU at the end of their contract. This fundamentally changed the landscape of professional sport and player mobility.
The Bosman ruling has since become a cornerstone in the ongoing dialogue between EU law and sports governance, and, since Bosman, the proportion of non-national players in the top five football leagues has more than doubled in 20 years. One side effect of this ruling has been the exodus of the best players from the weakest national competitions and a concentration of talent in the top European leagues.
As part of the Bosman legacy, there has also been a recent increase in challenges to FIFA’s rules and regulations brought on the basis of EU law, with the CJEU as the ultimate referee. This trend is illustrated by the 2023 rulings in the Superleague and the Royal Antwerp Football Club cases. In the latter case, the CJEU held that the home-grown player requirement imposed on national clubs by the Union of European Football Associations (UEFA) may be incompatible with EU internal market and competition rules.
In the Superleague case, the CJEU found that FIFA and UEFA had unduly restricted third parties from organizing international football competitions, thereby paving the way for possible alternative European competitions between the top teams that currently compete in the UEFA’s Champions League, Europa League and Conference League. Following this ruling, the organizers of the Superleague are seeking FIFA’s approval to organize a new league called the Unify League.
In parallel with these legal challenges, new formats of this beautiful game are now being developed to appeal to a new generation of football fans. Former Barcelona player Gerard Piqué’s “King’s League” is a prime example. Inspired by video game competitions, it challenges established models by proposing different rules of the game and the use of live streaming broadcasting platforms.
The Diarra case: facts and judicial findings
The recent Diarra case marks another significant interaction between EU law and the world of professional football. Lassana Diarra, a former French international, was ordered by FIFA to pay FC Lokomotiv Moscow 10 million euros in compensation for breach of contract without just cause after he decided to leave the club before the end of his contract. The Court of Arbitration for Sport upheld the sanction, and Diarra then faced further obstacles in his attempt to join the Belgian club Royal Charleroi SC due to FIFA’s transfer rules.
As a result, Lassana Diarra filed a claim with the Commercial Court of Hainaut in Belgium, seeking an order that FIFA and the Belgian Football Association (URBSFA) pay him compensation of 6 million euros for damage suffered as a result of the misconduct of these two associations.
In a judgement delivered on January 19, 2017, the court declared that it had jurisdiction to hear Lassana Diarra’s claim and that the claim was well-founded in principle. It ordered FIFA and URBSFA jointly and severally to pay a provisional amount to Lassana Diarra, while remitting the remainder of the case to allow the parties to determine the amount of the loss suffered by Lassana Diarra in Belgium as a result of the two associations’ misconduct. FIFA appealed against this ruling to the Court of Appeal of Mons (Belgium).
The Court of Appeal of Mons asked the CJEU to determine whether FIFA’s transfer rules violated the EU free movement and competition rules. In a ruling dated October 4, 2024, the CJEU found that FIFA had a legitimate objective in ensuring the regularity of club competitions, which requires the maintenance of a certain degree of player stability within clubs. However, it found that the rules in question imposed disproportionate and unjustified restrictions on player mobility. In particular, the Court criticized four key aspects of FIFA’s rules on the termination of contracts without just cause:
- Compensation for breach of contract
The method of calculating compensation was found to be vague and arbitrary, often resulting in unpredictable amounts.
- Joint and several liability
It was seen as overly punitive that new clubs, hiring players who had terminated their contracts without just cause, were automatically held jointly and severally liable with the player for compensation (regardless of whether they had induced the players to unlawfully terminate their contract).
- Sporting sanction
The CJEU considered it to be manifestly disproportionate that if a new club signed a player during the protected period of his or her contract with the former club, the new club would be subject to a sporting sanction consisting of a general ban on the registration of new players for two complete and consecutive registration periods.
- International Transfer Certificates (CIT)
The requirement that there be a CIT before a player could be registered with a new club was found to create undue barriers to player mobility.
The Court concluded that these rules effectively amounted to a “no-poaching” agreement between clubs, which artificially restricted competition for players and constituted a “by object” restriction of competition in violation of Article 101 TFEU. In addition, these rules were found to constitute a disproportionate restriction of the free movement of workers in violation of Article 45 TFEU.
FIFA’s response and interim measures
In response to the Diarra ruling, FIFA has implemented temporary changes to its transfer rules. These temporary adjustments include the automatic issuance of CITs and revisions to the compensation and liability rules. However, despite these changes, various stakeholders, including the players’ unions FIFPro Europe and UNFP, argue that FIFA’s rules remain non-compliant with EU law.
The UNFP, for example, has criticized FIFA’s interim measures for failing to address the core issues raised by the CJEU. They argue that the current transfer system continues to violate fundamental EU principles and they are calling for a comprehensive overhaul through collective bargaining within a European social dialogue.
Potential consequences for FIFA and the football industry
The Diarra ruling, much like the Bosman case, may have far-reaching implications for the future of professional football. The decision highlights the tension between sports governing bodies and EU law, particularly in the areas of competition and labor rights.
Conclusion
The Diarra case underscores the need for sports governing bodies to operate within the boundaries of EU law in order to ensure fair and competitive conditions for all parties involved in professional football. In light of this ruling, clubs, players, and other stakeholders should carefully monitor ongoing developments and assess their legal strategies in relation to FIFA’s transfer rules.
In any event, the trend of challenging the rules of professional football on the basis of EU law seems set to continue. Indeed, in the RFC Seraing case, a Belgian football club is currently relying on EU law to challenge FIFA’s ban on third-party ownership of players’ economic rights, as well as its system of dispute resolution before the Court of Arbitration for Sport. Advocate General Ćapeta delivered her opinion on January 16, 2025, and the CJEU’s judgment in this case is expected later this year.
For further information, please contact:
Karel Bourgeois, Partner, Crowell & Moring
kbourgeois@crowell.com
