The 14th Update - Diarra
[Edition 7 – October 2024 - Diarra Special]
Welcome back to the 14th Update, a Newsletter curated by 14 Sports Law, where the world of sports law unfolds with the rhythm of a well-struck penalty kick. This time, the 14th Update is a special on the recent decision by the Court of Justice of the European Union (‘CJEU’) in C-650/22, FIFA v. Lassana Diarra.
This decision is being termed as Bosman 2.0 and is expected to bring considerable changes in the transfer system as we know it. This ground-breaking decision by the CJEU on certain aspects of FIFA’s Regulations on the Status and Transfer of Players (‘FIFA RSTP’), holds them to be incompatible with EU Law. We’re here to understand the ruling and its implications.
As always, we invite you to share your thoughts, feedback, and questions with us at [info@14sportslaw.com].
Happy reading!
Best,
Luis Cassiano Neves
Founding Partner, 14 Sports Law
The Bosman ruling, delivered by the CJEU in 1995, fundamentally reshaped the landscape of the beautiful game. The case was brought by Belgian footballer Jean-Marc Bosman, who challenged the transfer regulations that restricted players from moving to another club freely after their contracts had expired. Prior to the ruling, clubs could demand transfer fees even for out-of-contract players, severely limiting athletes’ freedom of movement. The Court had ruled in favour of Bosman, declaring that such restrictions violated the European Union’s principle of free movement of workers.
This decision had profound business implications, not only allowing players to move freely between EU clubs after their contracts ended but also abolishing quotas that limited the number of foreign EU players a team could have. It paved the way for players to negotiate better contracts and salaries, while also forcing clubs to rethink their financial strategies in talent management and transfers. The Bosman ruling democratized player mobility across Europe, driving a wave of globalization and commercial growth in football, while also contributing to skyrocketing wages and transfer fees in the sport. It is in this light that we now have to analyse the ruling in Diarra, and then it is up to you to decide whether or not the latest judgment can be considered as ground-breaking as the one in Bosman.
Background of the Case
The decision by the CJEU in C-650/22, FIFA v. Lassana Diarra, was pronounced on 4 October 2024, sending shockwaves through the world of football.
The roots of this legal battle trace back to 2013 when Lassana Diarra, a former French international midfielder, signed with Russian club Lokomotiv Moscow until 2017. The relationship soured quickly, leading to a complex dispute that would ultimately challenge the core of FIFA RSTP. Here’s a chronological timeline:
24 August 2014: Lokomotiv Moscow terminated Diarra’s contract, citing alleged breaches. The club filed a claim before FIFA’s Dispute Resolution Chamber (‘DRC’), demanding EUR 20 million in compensation. The player filed a counter-claim, disputing the termination and alleging that Lokomotiv had failed to pay him in full.
February 2015: Diarra was offered a new contract by the Belgian Club Charleroi; however, this was contingent on upon obtaining a guarantee from FIFA and the Royal Belgian Union of Football Associations (‘URBSFA’) that they would not be jointly and severally liable for any termination fees owed by the Player to Lokomotiv Moscow. Insofar as neither FIFA nor URBSFA provided this assurance, Charleroi did not sign Diarra and the deal fell through. Furthermore, the Russian Football Union (Lokomotiv’s National Association) refused the release of the Player’s ITC, on account of the ongoing proceedings before the FIFA DRC, which it was entitled to do in accordance with the FIFA RSTP, in particular Articles 9.1, and 8.2.7 of Annexe 3.
18 May 2015: FIFA’s DRC ultimately ordered Diarra to pay EUR 10.5 million to Lokomotiv Moscow in compensation in accordance with Article 17 of the FIFA RSTP. Diarra appealed to the CAS but was unsuccessful [CAS 2015/A/4094 Lassana Diarra v. FC Lokomotiv Moscow].
July 2015: Diarra commenced a new employment relationship with the French Club Olympique de Marseille.
December 2015: Diarra sued FIFA and URBSFA before the Commercial Court of Hainaut (Charleroi division, Wallonia region), seeking EUR 6 million in compensation for lost earnings due to his enforced inactivity.
19 January 2017: The Belgian Court found FIFA’s interpretation of Article 17.2, as applied by the URBSFA, to be incorrect, as it violated the principle of free movement of workers under Article 45 of the TFEU. The Court labelled the provisions in question as “pre-Bosmanian” and ordered FIFA and URBSFA to pay the footballer EUR 6 million in damages.
19 September 2022: FIFA appealed the above-mentioned decision to the Mons Court of Appeal. It is at this time that the real Diarra Saga began, insofar as the Mons Court of Appeal referred the case to the CJEU.
30 April 2024: The CJEU First Advocate General, Maciej Szpunar, pronounced his opinion, deeming the disputed provisions of the FIFA RSTP constitute a restriction on competition in accordance with EU Law.
4 October 2024: The Decision was finally pronounced by the CJEU.
The Disputed Provisions
In this case, it is imperative to take note of some provisions of the FIFA RSTP (2014 Edition) that were the bone of contention between the parties.
In cases of early termination without just cause, Article 17(1) of the FIFA RSTP holds the breaching party liable for compensation, determined by several criteria. Additionally, Article 17(2) states that if a player is required to pay compensation, both the player and their new club will be jointly and severally liable.
Beyond financial compensation, sporting sanctions are also applied to both the player and the club found in breach of contract during the “protected period.” This is because the club is presumed to have induced the player to terminate the contract. The “protected period” is defined as three full seasons or three years, whichever is shorter, for contracts signed before the player turns 28, and two seasons or two years, whichever is shorter, for contracts signed after the player turns 28.
If a player breaches the contract, they face a four-month ban from official matches, extendable to six months in cases of aggravating circumstances, according to Article 17(3) of the FIFA RSTP. For clubs, Article 17(4) imposes a ban on registering new players, both domestically and internationally, for two consecutive transfer windows. The club may only register players in the following transfer window after fully serving the sanction.
Regarding player transfers, Article 9 of the 2014 FIFA RSTP mandated that players can only be registered with a new association once the previous association issues an International Transfer Certificate (ITC). According to Annex 3, Article 8(7) of the 2014 RSTP, the former association may withhold the ITC if there is a contractual dispute between the club and player over the contract's expiration or mutual agreement on early termination.
Issue
In relation to the abovementioned disputed provisions of the FIFA RSTP, the key issue which the CJEU essentially delved into was whether or not are these provisions which form a key aspect of the transfer system, contrary to Articles 45 (Freedom of movement for workers) and 101 (Restriction of competition) TFEU?
Analysis of the Decision
Sports Federation Rules and EU Law: The CJEU reaffirmed its stance from the recent Superleague Case [C-333/21, 23 December 2023], emphasizing that the rules of sports federations generally fall under EU law, unless they address purely non-economic matters with relevance solely to the sport itself, such as rules about foreign players in national teams or selection criteria for individual competitions. Beyond these limited exceptions, sports-related rules are subject to EU legal scrutiny. In the case at hand, the CJEU confirmed that FIFA’s RSTP regulations fall within the scope of Articles 45 and 101 TFEU, as they directly affect the economic activities of both football players and clubs.
FIFA RSTP and Article 45 TFEU: The CJEU found certain FIFA transfer rules, particularly those concerning compensation and sporting sanctions, incompatible with guarantee of free movement embodied in Article 45, TFEU. It was categorically held that these rules deter clubs from making offers to players from other Member States due to legal and financial uncertainties, hindering cross-border player mobility. Although the FIFA RSTP aims to maintain contractual stability, the CJEU held that its compensation criteria and automatic joint liability were excessive and disproportionate. The presumption of a new club’s inducement of a contractual breach, combined with severe sanctions, lacked consideration for individual case circumstances and was deemed unjustifiably harsh.
FIFA RSTP and Article 101 TFEU: The CJEU also ruled that certain aspects of the FIFA RSTP, notably joint liability for compensation and automatic sporting sanctions, constitute a restriction of competition under Article 101 TFEU. While it acknowledged FIFA’s role in ensuring fair play and competition, the Court emphasized that the restrictive nature of the rules, which cover the entire EU and extend throughout the duration of player contracts, effectively amounts to a non-poaching agreement between clubs. These rules, in the CJEU’s view, artificially limit cross-border competition and restrict clubs’ ability to recruit players unilaterally. The Court concluded that such rules pose significant harm to competition and are unlikely to meet the exemption conditions under Article 101(3) TFEU due to their discretionary and disproportionate nature.
Conclusion: In essence, the CJEU acknowledged that objectives such as maintaining competitive integrity in club football and ensuring a degree of squad stability are valid. However, it found that the current rules excessively limit both players’ freedom of movement and clubs’ ability to compete for talent within the EU. The court underscored that the “traditional mechanisms of contract law”, like the right to seek compensation for breaches or third-party inducement, are sufficient to safeguard contractual stability and regulate the transfer system effectively. Moreover, it was observed that while sporting sanctions may be permissible, they must be proportionate to the offense. The presumption of misconduct via inducement by a player’s new club is now decisively rejected.
What Next? The case will now return to Belgium’s Court of Appeal for a final decision, with guidance from the CJEU’s ruling. Although the national court is not bound by the CJEU’s preliminary ruling, it is unlikely they will deviate from it, given their request for clarification in the first place. Diarra’s legal team, who also represented Jean-Marc Bosman in his landmark case, celebrated the CJEU’s judgment, noting that all professional players affected by the RSTP since 2001 may now seek compensation for losses suffered under the current system. In support of the ruling, FIFPRO issued a statement criticizing Article 17, stating that it has deterred many players from unilaterally terminating their contracts and seeking new opportunities. They argued that the current rules fail to protect players’ rights as workers and are unjustifiable. FIFPRO also praised Diarra for his courage, likening his case to Bosman’s pivotal fight for player rights; FIFPRO also expressed a willingness to negotiate with FIFA to address the regulatory issues highlighted by the CJEU.
Furthermore, on 14 October 2024, FIFA’s Chief Legal and Compliance Officer Emilio García Silvero explained FIFA’s position with respect to the Diarra ruling, emphasizing that “FIFA looks forward to developing its regulatory framework further, obviously taking into account views and input from all relevant and affected parties” and “FIFA will now initiate a global dialogue with key stakeholders. Together with them, FIFA will determine what conclusions must be drawn from the Diarra decision, and which changes are most appropriate and suitable to make to article 17 of the RSTP”. The full interview published by FIFA can be found here: https://digitalhub.fifa.com/m/3ed083bc1084a958/original/FIFA-s-position-on-the-Lassana-Diarra-case.pdf
Potential Implications for Players and Clubs
There is no doubt that this ruling will have impact on the international football transfer system. Although the ruling is not as significant as the one in Bosman, it will bring about some considerable changes, which are yet to be seen.
For Players, they will have to still respect contracts and will have to pay compensation in the case of breach without just cause. However, one difference here is that the calculation of compensation in such cases will be different. Players will now bear the financial burden of compensation themselves. The removal of joint liability for new clubs reduces risks for them when signing players who have terminated contracts, improving players’ freedom of movement. However, Article 17(2) previously offered players security by ensuring their new club would cover compensation costs, which will no longer be the case. This change could have unintended consequences for players found to have terminated contracts without just cause.
Additionally, while the CJEU’s ruling on ITCs is positive, allowing players to move on despite disputes with their former clubs, FIFA already permits provisional transfers during such disputes to protect players’ right to work. Therefore, the impact of the ruling against Article 9(1) of the RSTP may be less drastic than it seems.
For Clubs, they must also respect contracts, and compensation will apply if they induce breaches. However, without joint liability, clubs losing players through termination may struggle to recover compensation if players cannot pay. It goes without saying that solid legal advice will be key for clubs navigating this new environment, particularly regarding what constitutes inducement to breach a contract.
Finally, if the ruling prompts a shift in the transfer system and a drop in transfer fees due to increased unilateral contract terminations, the impact on FIFA’s Solidarity Mechanism, which relies on transfer-related compensation, will need careful consideration.
This judgment marks a potential shift in the bargaining power from clubs to players, pushing stakeholders to adapt to a transfer system that aligns more with individual freedoms under EU law, while maintaining the fundamental principles of competitive balance. It may also pave the way for future challenges to other elements of FIFA’s regulatory structure.
In a recent interview for leading Portuguese sports outlet Maisfutebol, our founding Partner Luis Cassiano Neves discussed the implications of the Diarra case, which is being compared to the landmark Bosman ruling of 1995.
Neves emphasized that this case challenges aspects of FIFA’s transfer system, particularly those that restrict players’ freedom of movement. The CJEU ruled that FIFA’s regulations, which impose compensation requirements on players who terminate contracts without just cause, breach EU law. This decision, like the Bosman case, could significantly reshape the football transfer market by increasing player autonomy and reducing clubs’ control over player mobility.
Read the full interview here (Portuguese): https://maisfutebol.iol.pt/fifa/mercado-de-transferencias/ha-um-novo-caso-bosman-a-pairar-sobre-o-mercado-europeu-tudo-o-que-precisa-de-saber
Last but not the least, the 14th Update shall continue to monitor all updates regarding this development; do not forget to subscribe for free, and directly receive all monthly editions straight to your inbox.
Disclaimer: This Newsletter is the intellectual property of 14 Sports Law. Readers are strictly advised not to take any action based solely upon the information and analysis provided herein without seeking professional advice. The authors as well as 14 Sports Law explicitly disclaim any and all liability to anyone who has read this Newsletter, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents herein. It is imperative that readers exercise caution and seek legal counsel before relying on the information presented in the Newsletter.