FIFA’s Player Transfer Regulations Found to Violate EU Employment and Competition Laws

Summary

In what is being considered a landmark ruling for professional footballers, the Court of Justice of the European Union (“CJEU”) has ruled that certain provisions within the Fédération internationale de football association’s (“FIFA”) Regulations on the Status and Transfer of Players (“RSTP”) are contrary to European Union (“EU”) law and, specifically, the Treaty on the Functioning of the European Union (“TFEU”).

In its decision, released on October 4, 2024, the CJEU found that certain provisions of the RSTP impede the free movement of players by imposing considerable risks on both the player and club who may wish to employ them. As a result, the CJEU found that these provisions restrict and, in some cases, prevent cross-border competition between EU clubs, contrary to EU employment and competition laws.

Underlying Facts and Litigation

Since the enactment of the RSTP, there have been major impediments to players being able to freely transfer to new clubs if they terminated a previous contract.

Financial Risks

The first hurdle is contained in Article 17.1 and 17.2. Per the RSTP, should a player terminate their contract “without cause,” they would be liable to pay compensation to their former club. This compensation could include a portion of the transfer fee or other expenses incurred by the former club in acquiring the player. If the player signs with a new club, the new club would also be jointly and severally liable for this compensation.

For context, transfer fees have been gradually increasing over time, with the highest transfer fee in history being €222 million, paid by Paris Saint-Germain FC (“PSG”) to FC Barcelona in acquiring Brazilian footballer Neymar Jr. in 2018 – equivalent to more than C$330 million today. It is no surprise that a player, and any potential future club, would be concerned with taking on such a risk. The CJEU found that imposing these considerable financial risks, which are often unforeseeable, were contrary to the EU’s employment laws.

Registration Restrictions

The second hurdle is contained in Article 9.1, and Section 8.2.7 of Annexe 3 of the RSTP, and concerns international transfer certificates (“ITCs”). If a player under contract with a club in a specific national football federation is transferred to another football federation, the initial federation must provide an ITC for the player to register with the new federation.

In the previous example, when Neymar Jr. was transferred from FC Barcelona in Spain to PSG in France, the Royal Spanish Football Federation (“RFEF”) provided the French Football Federation (“FFF”) with an ITC, which allowed Neymar Jr. to register with the FFF, of which PSG is a member.

Now, per the RSTP, if a contractual dispute exists between the player and their initial club, the initial federation cannot provide the ITC. Without the provision of an ITC from one federation to the other, the player cannot complete their move.

The CJEU found that this restriction on transfer disproportionately disadvantages players who are looking to transfer to a team in a different federation.

Lassana Diarra

This case commenced as a result of a dispute between French footballer Lassana Diarra and his former club. Mr. Diarra had entered into a contract with Russian club Lokomotiv Moscow (“Lokomotiv”) in 2013. After the relationship with Lokomotiv soured, Mr. Diarra sought to terminate his contract with the club. Lokomotiv took Mr. Diarra through FIFA’s internal dispute resolution mechanism, which sided with the club and ordered Mr. Diarra to compensate Lokomotiv €20 million. Mr. Diarra appealed to the Court of Arbitration for Sport, which upheld the previous ruling, although lowering the initial compensation awarded to the club to €10.5 million.

Belgian club Royal Charleroi Sporting Club (“Charleroi”) offered the talented midfielder a contract, conditional on guarantees from FIFA and the Royal Belgian Football Association (“RBFA”) that it would not be jointly and severally liable for the €10.5-million order. FIFA and the RBFA would not make this guarantee, and the contract fell through. In addition, FIFA refused to issue an ITC for Mr. Diarra.

As a result, Mr. Diarra commenced a new action against FIFA for effectively preventing him from doing his job, citing both Article 17 and Article 9 of the RSTP. Mr. Diarra’s action made its way to the Court of Appeal, Mons, Belgium, which referred the question of compliance with EU laws to the CJEU.

CJEU’s Decision

In its decision, the CJEU held that “the rules at issue in the main proceeding are such that they hinder the freedom of movement for workers.” [translated from its original French].

As a result, these RSTP articles were found to be in contravention of the TFEU, and specifically Article 45, which guarantees that freedom of movement for workers shall be secured within the EU. In addition, the CJEU found that each national football federation, despite being a member of FIFA, is considered to be its own enterprise and subject to anti-competition laws. The court held that the restrictions, in collectively hindering the ability for players to move freely and collaborating through restrictions on granting ITCs, had breached Article 101 of the TFEU.

What’s Next?

While the ruling is certainly a positive step for Mr. Diarra, the Belgian court will now proceed with the litigation and make judgment, applying the CJEU’s ruling on the issues. The Belgian court’s decision will provide more concrete guidance on how the ruling will practically change the football transfer market and player mobility. As for Mr. Diarra, he continues to seek personal compensation for his damages. In the interim, the midfielder was able to continue his career at Olympique de Marseille, his childhood club, and Paris Saint-Germain, before retiring in 2019.

FIFA itself will now need to amend its policies in order to comply with the ruling and, by extension, EU laws. These amendments, barring a surprising EU carveout within FIFA’s regulations, will likely impact all 211 member footballing associations, including the Canadian Soccer Association and the United States Soccer Federation (“USSF”). While these amendments will not happen overnight, the transfer window for the majority of football federations will open again in January, leaving FIFA time to implement the necessary changes.^[1] However, the ruling will likely give players even more bargaining and negotiating positions, as clubs will risk losing players who are dissatisfied.

FIFPRO, the largest global representative of professional footballers, has already released a statement that it will consider with its members whether to pursue means to seek compensation from FIFA for past player compensation to former clubs, or missed opportunities as a result of ITC issues.

Outside the professional footballing world, this decision could have precedential value across the EU. In essence, the CJEU has ruled that an employee who terminates their own employment contract without cause cannot be restricted from seeking new employment. Canadian readers will certainly be familiar with such restrictions against non-competition in standard employment and labour contexts, which are now being considered in the often-unique world of sport.

The Sports, Media & Entertainment Group and the Labour & Employment Group at Aird & Berlis LLP will continue to monitor Mr. Diarra’s ongoing lawsuit and other developments in this area. For any inquiries, please contact the authors or a member of the Sports, Media and Entertainment Group.