Is reform needed?

Written by Katy Sharpe, solicitor at Aberdein Considine

Katy Sharpe looks at the FIFA Regulations on the Status and Transfer of Players alongside the impact of the Bosman ruling.

History of the FIFA regulations and the impact of the Bosman ruling

FIFA introduced its first Regulations on the Status and Transfer of Players (‘the Regulations’) in April 1991. By 1994, the Regulations applied to all participants in international football. The Regulations at that time stated that a player was only free to move to another club if his employment contract with his current club had expired or was due to expire within the coming six months. Further, a club could also refuse to allow a player to move to a club in a different Football Association if no transfer fee was agreed with the other club.

In general terms, this meant that you could be prevented from obtaining a ‘new job’ because your previous employer hadn’t been compensated, even though you no longer had a contract with them. This rule seemed to favour the selling club and placed extremely unfair restrictions on the player.

Fast forward to December 1995, where Jean-Marc Bosman, a Belgian footballer, argued this exact point in front of the European Court of Justice.

What is the Bosman Ruling?

Bosman was a player with Belgian side RFC Liege, with a contract due to end in 1990. He wanted to leave RFC Liege for French side Dunkerque, but Dunkerque failed to meet the transfer demands set by Liege and no deal was reached. This left Bosman without a contract and unable to move teams.

Bosman’s case was referred to the Court of Justice of the European Union (CJEU). Bosman claimed that RFC Liege’s refusal to release him was a breach of the principle of free movement of workers. Five years on from Bosman’s original complaint, the CJEU confirmed that the requirement of a transfer fee and refusal to release a player was indeed a breach of the principle of free movement.

The key issue before the CJEU was whether the transfer system violated EU law, namely whether it inhibited freedom of movement for workers as per Article 39 (now article 45) of the Treaty on the Functioning of the European Union (TFEU).

It was ultimately determined that the demanding of a transfer fee by a former employer, after a fixed-term contract had come to an end, was an obstacle to the freedom of movement for workers as it inhibited a player’s ability to move clubs. Therefore, the Regulations as they stood, were incompatible with EU law. To access the judgment, click here. 

The practical implications of the Bosman ruling were twofold:

1. Interested clubs would no longer need to pay the player’s current club a fee.
2. Clubs were no longer able to hold players to ransom following the expiry of their contracts.

If we look at the January transfer window, many clubs will be considering where their players stand with their current contracts and may need to consider selling those players with only one year left on their contracts, or risk losing them for nothing in 12 months.

Post-Bosman

Professional players across the globe have Bosman to thank for the introduction of what we now know as ‘free transfers’. Following the ruling in 1995, we have witnessed countless free transfers of some of the world’s greatest football players, such as Edgar Davids and Patrick Kluivert (Ajax to AC Milan,1996 and 1997), Brian Laudrup (Rangers to Chelsea,1998), Henrik Larsson (Celtic to Barcelona, 2004) and Steve McManaman (Liverpool to Real Madrid,1999) among many others.

Sir Alex Ferguson noted that the ‘power’ was taken from the club and handed to the player, meaning that players were now able to move clubs easily and often on lucrative new contracts. In response to this, clubs tried to tie players to longer contracts and sought to implement clauses within contracts giving a club the right to extend a contract unilaterally.

Impact of the Bosman ruling on FIFA Regulations

Following the Bosman ruling, and the subsequent backlash from a number of clubs, FIFA had to amend the Regulations to bring them into line with EU Law whilst ensuring that both club and player had sufficient protection. After numerous discussions and amendments, the amended Regulations came into force on 1^st September 2001. The Regulations are updated regularly to keep up to date with market changes.

Importantly, it appears that the amended Regulations are still incompatible with EU Law. Notably, under Article 17 of FIFA’s Regulations, if a party (club or player) terminates a contract without just cause, they are required to pay the current club compensation. Further, if a player terminates their contract without just cause, the new club that employs that player will be jointly and severally liable with the player for payment of compensation to the former club.

But is this incompatible with EU Law? That is exactly what was asked in the case of Lassana Diarra v FIFA.

Lassana Diarra v FIFA

French midfielder Lassana Diarra signed a four-year contract with Lokomotiv Moscow in August 2013. A year later, Diarra was in dispute with the club over alleged unpaid wages and, as a result, he unilaterally terminated his contract by leaving prior to its expiry. The club argued that he terminated the contract without just cause. Diarra counterclaimed alleging unpaid wages. In this scenario, if the club’s complaint had been upheld, the Regulations would have required Diarra and his new club (Charleroi) to compensate Lokomotiv Moscow. Charleroi withdrew its offer, after FIFA refused to clear Diarra’s registration in line with the Regulations and Diarra lost out on future employment.

Diarra filed a complaint with the European Commission, alleging that the Regulations violated EU competition law and the free movement of workers. The European Commission declined to pursue the complaint and Diarra had no other choice but to appeal to the CJEU.

What was the CJEU decision?

The key issues before the CJEU were as following: whether the Regulations were compatible with EU law and the free movement of workers; whether the European Commission’s decision not to pursue Diarra’s complaint was correct; and whether the Regulations were considered necessary to maintain contractual stability and the integrity of sporting competitions.

The CJEU determined that the Regulations were a restriction on the free movement of workers and although the objectives of maintaining contractual stability and the integrity of sporting competitions are legitimate, the Regulations go beyond what is necessary to achieve those objectives.

Diarra’s case has been referred back to the European Commission.

What does this mean for football transfers?

It remains to be seen what impact the CJEU ruling in the Diarra case will have on football transfers. It could be said that the floodgates are now open for players to unilaterally terminate their contracts, which could cause issues for clubs, but once again, the pendulum has swung in favour of the player.