Recent developments in the Diarra v FIFA case[1] have sparked discussions about its potential to significantly affect the football transfer market. This ruling could bring notable changes, and here's why.
Background
The case revolves around French footballer Lassana Diarra, who once played for clubs such as Chelsea FC and Arsenal FC.
In 2013, Diarra signed a contract with Lokomotiv Moscow, set to last until 2017. However, in 2017, the contract was unilaterally terminated by Lokomotiv following a dispute over Diarra’s salary, which Lokomotiv claimed constituted a breach of contract.
Lokomotiv then took the matter to FIFA’s Dispute Resolution Chamber (DRC), seeking compensation for the contract breach. Diarra challenged the claim and lodged a counterclaim, but the DRC ruled in Lokomotiv’s favour and fined Diarra €10.5 million.
Following this, Diarra sought to sign a new contract with Belgian club Charleroi. However, due to FIFA regulations, the process was far from simple. Since Diarra had "broken" his contract with Lokomotiv, any club signing him would risk being liable for the compensation owed to his former club. Charleroi, understandably concerned, sought confirmation from FIFA that signing Diarra would not expose them to this financial liability. Under FIFA's rules, any new club would be held responsible for the outstanding debt, making Charleroi potentially liable for the €10.5 million owed to Lokomotiv.
FIFA was unable to provide Charleroi with the assurance they requested and confirmed that an international transfer certificate (ITC) had to be issued by the player's former league for the transfer to proceed. With Lokomotiv withholding the certificate, Charleroi deemed the deal too risky and withdrew, leaving Diarra unable to join a new club.
Diarra's Legal Action
In 2015, Diarra filed a complaint against FIFA with the European Commission, arguing that FIFA's transfer regulations violated EU competition law and infringed upon the free movement of workers.
The Commission initially declined to pursue the complaint, prompting Diarra to challenge the decision in the General Court of the EU. When the General Court dismissed his challenge, Diarra appealed to the Court of Justice of the European Union (CJEU).
The CJEU addressed several key issues:
Whether the European Commission's decision not to pursue Diarra's complaint was lawful under EU law.
The extent to which FIFA’s regulations are necessary for the legitimate aims of maintaining contractual stability and ensuring the integrity of sporting competitions.
Central to the case was whether withholding an international transfer certificate, as stipulated by FIFA’s regulations, interfered with Diarra’s right to free movement, and whether the rules imposed on Charleroi restricted their ability to compete in the market.
CJEU Decision
The CJEU overturned the General Court’s ruling and annulled the European Commission’s decision not to investigate Diarra’s complaint.
The CJEU found that FIFA’s transfer regulations, particularly those relating to contractual stability, constituted a restriction on competition under Article 101(1) TFEU and on the free movement of workers under Article 45 TFEU. The court ruled that these regulations went beyond what was necessary to achieve FIFA’s sporting objectives. Specifically, the requirement for buying clubs to cover compensation for players who breach contracts without just cause was deemed anti-competitive. The court, therefore, ruled in Diarra’s favour.
The case has now been referred back to the European Commission for a further investigation into Diarra's complaint, which could lead to more scrutiny of FIFA's transfer system.
Future of Transfers
This ruling marks a positive development in the protection of players' rights under EU law. Without such safeguards, players could be vulnerable to restrictive rules imposed by sporting bodies, leaving them with little recourse. The decision reinforces the view that football players should be considered "workers" under EU law and entitled to the same protections as any other worker in a different industry.
Maheta Molango, Chief Executive of the Professional Footballers’ Association, highlighted the importance of this decision by stating, “Football cannot behave as if it is exempt from the same employment laws that apply to other industries.” He emphasised that football authorities must reassess their rules to ensure they are compliant with employment laws and should engage in meaningful collaboration with players and their unions.
As the CJEU has now determined that FIFA’s current regulations restrict the free movement of players, there will be pressure on FIFA to reform its transfer system in line with EU law.
Implications
While this change strengthens players' rights, it is also likely to disrupt the football transfer market. Players will now have more freedom to exit contracts early without the same financial consequences, which is likely to result in and increase in breaches of contracts.
In addition, this shift could create new imbalances between clubs. Clubs with greater financial resources may have the upper hand in luring players away from smaller clubs, offering more lucrative contracts without the fear of paying compensation for breached agreements.
In summary, while this decision strengthens players' rights, it introduces significant challenges for clubs and could lead to further imbalances in the football ecosystem. The long-term effects of these changes on the competitive landscape remain to be seen, but it is clear that FIFA will need to adapt its regulations to comply with EU law.
References
[1] Court of Justice of the European Union (Grand Chamber), Case C-650/22 FIFA v. BZ, ECLI:EU:C:2024:105, 20 February 2024.
[2] Consolidated Version of the Treaty on the Functioning of the European Union.” Legislation.gov.uk, 2020, www.legislation.gov.uk/eut/teec/article/101.
[3] Consolidated Version of the Treaty on the Functioning of the European Union.” Legislation.gov.uk, 2020, www.legislation.gov.uk/eut/teec/article/45.
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