Jean-Louis Dupont, the lawyer who was successfully challenged football contract laws for Jean-Marc Bosman in 1995, has now challenged the Financial Fair Play rules with the European Commission. Football Clubs themselves are restricted from easily challenging the FFP rules (other than through the Court of Arbitration for Sport – CAS) because the rules were voted-in by the European Club Association. Hence Dupont is pressing the challenge on behalf of a Belgian football agent, Daniel Striani. There are several strands to the argument but notably, Dupont argues that FFP would reduce revenue for agents such as Striani.
I have attached the un-edited Press Release at the foot of this article.
Dupont is unlikely to have an easy ride given that in March 2012 the EU Competition Commissioner formally backed FFP, saying the rules were “essential for clubs to have a solid financial foundation.” The next steps are outlined by Sports Lawyer Daniel Geey in this article. Geey believes that the challenge process could take a number of years to conclude.
UEFA responded to the news of challenge; "The rules encourage clubs to 'live within their own means,' which is a sound economic principle aiming to guarantee the long term sustainability and viability of European football,. Uefa believes that financial fair play is fully in line with EU law and is confident that the European commission will reject this complaint."
The area of the FFP rules that UEFA could struggle to defend is the restriction on wealthy owners injecting cash into the club to fund spending (e.g. as in Man City, Chelsea or potentially PSG). It might be hard to argue that sustainability is adversely impacted when the club’s debt doesn't grow despite big annual losses (Man City’s owner for example, regularly injects funds to cover any losses and the club is effectively debt-free).
The first punishments for overspending are due to be announced from December this year onwards. Technically, the CFCB decision-making panel is independent from UEFA and should not consider this challenge when determining the punishments for the clubs. However, if Dupont ultimately wins the challenge and FFP is deemed to be unlawful, UEFA would be liable for any historic damages that the sanctions had caused . The compensation could run into hundreds of millions of euros. There is therefore a distinct possibility that the punishments handed-out during the first Monitoring Period may now be less harsh than would otherwise be the case. This challenge will be extremely welcome news to Paris-Saint Germain and Manchester City.
Dupont's Press Release:
Today, 6 May 2013, Mr Daniel Striani, player agent (registered with the Belgian Football Association), represented by lawyer Jean-Louis Dupont, lodged a complaint with the European Commission against UEFA in order to challenge infringements to fundamental principles of EU law caused by some provisions of the UEFA “Financial Fair Play” regulation (FFP).
Specifically, this complaint challenges the restrictions of competition caused by the “Break-even rule” (article 57 of the UEFA FFP regulation).
The rule imposes on clubs that participate in the UEFA Champions League or in the Europa League the obligation “not to overspend” (the expenses of a club cannot exceed income). In effect, a club owner is prohibited from “overspending” even if such overspending aims at growing the club.
The “Break-even” rule (which, according to article 101 of the Treaty on the functioning of the EU, is an “agreement between undertakings”) generates the following restrictions of competition:
- Restriction of investments;
- Fossilization of the existing market structure (i.e. the current top clubs are likely to maintain their leadership, and even to increase it);
- Reduction of the number of transfers, of the transfer amounts and of the number of players under contracts per club;
- Deflatory effect on the level of players’ salaries; and
- Consequently, a deflatory effect on the revenues of players’ agents (depending on the level of transfer amounts and/or of players salaries).
At the same time, because of the aforementioned restraints, the “Break-even” rule also infringes other EU fundamental freedoms: free movement of capital (as far as club owners are concerned), free movement of workers (players) and free movement of services (player agents). Consequently, such restriction of competition and violation of EU fundamental freedoms cannot be justified by the objectives put forward by UEFA (long term financial stability of club football; and integrity of the UEFA interclub competitions).
Moreover, detailed legal and economic analysis shows that, even if the “Break-even” rule may appear initially a plausible concept, the rule is not able to achieve efficiently its objectives as presented by UEFA (whereas other means are available to attain such objectives. For additional information, see The Wall Street Journal op-ed published 25 March 2013 - http://online.wsj.com/article/SB10001424127887324077704578357992271428024.html
As far as the integrity of the UEFA competition is concerned, in order to avoid the risk that club X would jeopardize the smooth running of the competition because its owner stops mid season providing funds (the “overspending”), it is not necessary to prohibit such “overspending” (as implemented by the “Break-even rule”), when it is sufficient to require “overspending” to be fully guaranteed (for instance, by means of bank guarantees) before the start of the competition and for its whole duration.
In short, the current prohibition – even assuming it to be justifiable (quod non) in the light of the pursued objective (i.e. integrity) – is in practice illegal because the rule is not proportionate (since it can be replaced by another measure, equally efficient but less damaging as far as EU freedoms are concerned).
In conformity with article 101.2 of the Treaties of the European Union, the complainant requests the European Commission to declare that the Break-even rule is null.
It is important to note this complaint does not at all question the legality of the UEFA rule (also included in the FFP regulation) that states that any club participating in the UEFA competition must prove – before the start of the competition – that it has no overdue payables towards clubs, players and social/tax authorities. In our view, this rule is justified in principle for the attainment of the integrity of the football competition and proportionate to this objective).
A copy of the complaint has been provided to UEFA.
Note to editors: The Financial Fair Play (FFP) rules were first proposed by UEFA in 2009 and come fully into force in the 2013-14 football season. Clubs that do not comply with this "break-even" principle will face sanctions, including a potential ban on participation in UEFA competitions.
Posted by Ed Thompson.