Case Background
The case concerns Lassana Diarra, a professional football player, and his dispute with FIFA regarding the transfer system and its compatibility with EU law. Diarra, a French national, had signed a contract with Lokomotiv Moscow in 2013, which was set to run until 2017. Diarra had moved to Lokomotiv Moscow from then free-spending Anzhi Makhachkala in 2013, only for a good start to turn sour and the midfielder to lose his place in the team. Lokomotiv believed that warranted a reduction in salary, which Diarra refused to accept. The club later claimed he missed training sessions on false pretences, which they used as an excuse to sack him in August 2014 and sue him for breach of contract, which still had three years to run.
Following this termination, Diarra sought to sign with another club. However, due to FIFA regulations, particularly the concept of 'contractual stability', any club signing Diarra would have been at risk of paying compensation to Lokomotiv Moscow. This effectively prevented Diarra from finding new employment as a professional footballer for an extended period.
Diarra filed a complaint with the European Commission, arguing that FIFA's regulations violated EU competition law and the free movement of workers. The Commission declined to pursue the complaint, leading Diarra to challenge this decision before the General Court of the EU. The General Court dismissed Diarra's action, prompting an appeal to the Court of Justice of the European Union (CJEU). However, before the case ended at the CJEU, it went through the FIFA DRC and the Court of Arbitration for Sport (CAS) before the CJEU had the opportunity to opine on the case.
FIFA Ruling
In 2015, the FIFA DRC ruled in favour of Lokomotiv Moscow, ordering Lassana Diarra to pay compensation of around €10 million for unilateral breach of contract without just cause. This decision was based on Article 17 of the FIFA Regulations on the Status and Transfer of Players (RSTP), which governs the consequences of terminating contracts prematurely.
Additionally, FIFA imposed a sporting sanction, a 15-month ban from football for Diarra. This ban was later contested by Diarra, and he appealed the case to the Court of Arbitration for Sport (CAS).
CAS Ruling
In 2016, the CAS largely upheld FIFA's ruling, confirming that Diarra was liable to pay compensation for breach of contract, although it slightly reduced the amount he had to pay.
However, the CAS lifted the 15-month ban imposed by FIFA, allowing Diarra to return to professional football. CAS ruled that the financial compensation alone was sufficient and that an additional sporting ban would be excessive. This ruling enabled Diarra to join Olympique de Marseille shortly after the decision.
However, before that, Diarra received an offer from Royal Charleroi. The Belgian club were willing to sign Diarra, but only on the condition that they could sign him as a free agent and not have to pay the compensation to Lokomotiv. Diarra asked FIFA to confirm that he was a free agent, but they said it was a legal matter and that it was up to the DRC to confirm whether this was the case. This took several weeks to clarify, but Diarra claimed the delay meant he lost out on the opportunity to play for Charleroi as FIFA refused to issue him with an International Transfer Certificate [ITC] so that Charleroi could register him with the Belgian FA, but during the delay, the club pulled out of the deal with Diarra. It is this failure to issue the ITC which forms the crux of the case here.
Key Legal Issues
The central issue in the case revolved around whether Diarra had the legal right to terminate his contract without "just cause". Under FIFA regulations, players can only terminate their contracts without facing consequences if they have a valid reason, such as non-payment of wages or other significant breaches by the club.
Article 17 was loosely based on the criteria developed in the Webster case, involving a Scottish footballer who tried to terminate his contract using Article 17 to force a move to the English Premier League. This involved the right for a player to buy out their contract after a prescribed protected period, and if you were over the age of 28, this protected period was the first three years of your contract, and Webster was in the final year of a five-year deal. If exercised, compensation was calculated using the remainder of the player’s salary due to him under the contract, plus future earnings and legal costs.
Another case a year later tilted the scales back towards the clubs. In Matuzalem, he tried to exercise his Article 17 rights to force a move from Shakhtar Donetsk to Real Zaragoza, but the result was that a more club-friendly version for deciding compensation was arrived at by using the players remaining salary plus his unamortised transfer fee (i.e. the original fee paid for the player divided by the length of his contract). This is the current method of calculation in force today.
Furthermore, if a player is required to pay compensation, the player and his new club shall be “jointly and severally liable” for such compensation. Joint and several means that each person is individually responsible for paying a debt, and also all parties can be held liable at the same time or one at a time. For example, if you have a mortgage with your partner in both of your names, the bank can chase the debt with either of you individually, or both of you together.
CJEU held that the compensation mechanism is ‘manifestly disproportionate’, and is a mechanism designed to protect clubs at the expense of players, and its effect is to create a market for players’ contracts as tradeable assets rather than employees or workers. Despite this, CJEU was not opposed to the joint and several liability requirements but stated that the compensation calculation should be based on a more factual evidential basis, and not on presumptions, so this may mean that FIFA will develop a more formulaic approach to the calculation of compensation.
Impact on the Transfer System
As you can see from above, this decision has the potential to fundamentally alter the dynamics of the transfer market and may see that players get more power to exercise their contractual rights to terminate their contracts early. However, there are conflicting opinions as to the extent to which the Diarra decision will have an impact as Bosman did.
To briefly revisit the Bosman case, Jean-Marc Bosman won a ruling from the CJEU that transfer fees for out-of-contract players were a restriction on free movement, so allowed players to move freely within the EU at the end of their contracts without their previous club being able to demand a transfer fee. This resulted in high-profile examples like Sol Campbell and Steve McMananan running down their contracts to secure lucrative moves to new clubs.
Several years after Bosman, the clubs, supported by FIFA and UEFA, managed to persuade the European Commission that excessive freedom of movement was bad for the game and argued that steps should be taken to ensure contractual “stability”, meaning greater control over their players.
This resulted in the first iteration of the RSTP. Viewed as a compromise between the clubs’ need to retain some control of their most valuable assets and every other EU citizen’s right to quit one job and take another, anywhere in the single market.
But, on further analysis, it looks like the impact on the transfer system will not be as widespread as first predicted. The CJEU still upheld the fundamental principles of the transfer system, and the decision only applies to players who exercise their Article 17 rights to terminate their contracts. More will be known once the Belgian court gets the chance to hear the case.
It may be that more players, in parts of the world where employment law is not as robust as it may be in many countries, may enable players to move more freely, and it may encourage players to terminate contracts in search of moves to more lucrative leagues where clubs may be more able to absorb the compensation costs, which may be more reasonable than paying a transfer fee.
Conclusion
While this appears revolutionary at first glance, the decision's impact on the football transfer system may be more evolutionary than revolutionary. For many, the transfer system in modern football is an anachronism to a distant age, involving the buying and selling of players as assets and revenue streams, rather than people and employees. No other major sport employs such a system. It is easy to view it through this simplistic view and forget that the transfer system is foundational to the game as we see it, the excitement of your club signing a new striker and of seeing who your club may sign on transfer deadline day, but the fees that clubs receive for players is an incentive for clubs to focus on player development, and often guarantees the survival of smaller clubs which form the very pyramid that the top levels of the game are built upon.
It should be remembered that this decision focuses on a rather narrow, but important clause in the RSTP on the rights of players to terminate their contracts without just cause (i.e. for any reason). What this decision does is to equalise, or at the very least, further tilt, the balance of power in the direction of players, and this will give more rights to players lower down the football pyramid to exercise their contractual rights and give them more protections, as these are the players which are often forgotten about.
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