The “Diarra case”: the CJEU finds FIFA provisions to violate EU law

The “Diarra case”: the CJEU finds FIFA provisions to violate EU law

On 04.10.2024, The CJEU announced its highly anticipated judgment on the “Diarra case” (C-650/22).

In this landmark ruling, CJEU states that certain regulations of FIFA are in breach of the provisions of the EU regarding the free movement of workers (art. 45 TFEU) and the freedom of competition (art. 101 TFEU). This judgment may prove to be a turning point for the Regulations of FIFA. It may bring significant changes in the current transfer system in football, especially affecting the FIFA provisions about contractual stability in football.

The Facts of the Case

Lassana Diarra, a well-known footballer of French nationality, signed a 4-year contract with Russian Club Lokomotiv Moscow in August 2013. In August 2014, the Club terminated the contract for alleged contractual breaches by the Player.

In early 2015, the Player received employment offers from Belgian Club Royal Charleroi S.C., under the following conditions:

(a) the Player being registered with the Club until 30.03.2015 (subject to the delivery of an ITC by the Russian Football Federation)

(b) FIFA and the Beglian Football Federation confirming that the Charleroi would not be held jointly and severally liable for any compensation. FIFA and the Belgian Federation refused to answer to the request of the Player.

On 10.04.2015, the FIFA DRC determined that Lokomotiv Moscow had just cause to terminate the contract due to breaches by the Player, and awarded Lokomotiv compensation of EUR 10,500,000 on the basis of art. 17 FIFA RSTP.  The DRC also found that, since at the time of the decision the Player had not found new employment, his future employers would not be deemed liable to pay compensation as per article 17.2 FIFA RSTP.

The rejection of FIFA and the Belgian Federation to provide assurances that Charleroi would not be liable for any compensation arising from the relevant FIFA DRC decision, and the non-issuance of the required ITC by the Russian Football Federation, impeded the Player from being employed by Charleroi.

For this reason, the Player filed a lawsuit against FIFA and the Belgian Federation before the Commercial Court of Charleroi, claiming that the FIFA regulations violated his right to free movement, as per article 45 TFEU, and constituting an anti-competitive agreement under art. 101 TFEU.

The Court of First Instance upheld the claim of the Player, acknowledging amongst others that the provisions of the FIFA RSTP prevented the Player from finding employment for the whole of the 2014/15 season.

 

Preliminary Reference to the CJEU

This decision was appealed by FIFA to the Court of Appeal of Mons. The Court sent a preliminary reference to the CJEU, asking whether articles 45 and 101 TFEU are violated by:

1. The principle that the Player and the club that wish to employ him shall be severally liable in respect of the compensation due to the club whose contract with the Player has been terminated without just cause (art. 17.2), combined with the sporting sanctions provided for in article 17.4 and the financial sanctions provided for in article 17.1

and

2. The ability of the association of the Player’s former club not to deliver the ITC (international transfer certificate) required if the Player is to be employed by a new club, where there is a dispute between that former club and the Player (art. 9.1 FIFA RSTP & art. 11.3(b) Annex 3 to the FIFA RSTP).

 

The decision of the CJEU

On 04.10.2024, the Court announced the conclusions of its preliminary ruling on the aforementioned questions.

In an emphatic manner, the Court stated that “all those rules are contrary to EU law”.

Impediments on Free Movement

As regards the right of free movement, the Court stated that the rules in question are such as to impede the free movement of professional footballers by going to work for a new club.

The Court made reference to the imposition of considerable legal risks, unforeseeable and potentially very high financial risks as well as major sporting risks on players and clubs that wish to employ them. All those rules collectively, are such as to impede international transfers of those players.

The Court says that players and their potential new employers will be exposed to an unpredictable process, since the methods of calculating the compensation due to clubs for breaches on behalf of players are not as standardized as one would expect. Also, it states that the financial consequences are usually quite severe. What is more, an employee and his future club cannot always be certain from a legal point of view, about the outcome of the dispute, regarding the existence of just cause, whether compensation will be awarded, or if sanctions will be imposed. The Court effectively states that the outcomes are unpredictable, or, so to say, not as predictable as would be required when a footballer needs to secure his availability for new employment. On top of that, the unpredictability of the potential sporting sanctions is coupled with the existence of extremely harsh sanctions.

The Court acknowledges the legitimate objectives pursued by the provisions in question (the regularity of interclub football competitions and contractual stability). Nevertheless, it notes that they “go beyond what is necessary to pursue that objective”

Anti-competitive provisions

The Court determined that the provisions at hand are anti-competitive “by object”, aiming to restrict, and even prevent, cross-border competition between clubs in the EU.  The Court found that the said provisions prevent clubs from “unilaterally recruiting players under contract with another club or players about whom it is alleged that the employment contract was terminated without just cause”. 

This finding was justified by the fact that the recruitment of trained players constitutes an essential means of competition in the professional football sector, and this competition is effectively restricted by the FIFA regulations that are similar to a “no-poach agreement”. 

In view of the above, the Court found that the relevant regulations do not appear to be indispensable or necessary.