The Lassana Diarra case: could an overhaul of FIFA’s transfer regulations be on the horizon?

On 4 October 2024, the Court of Justice of the European Union (“CJEU”) will clarify whether FIFA’s international transfer rules are compatible with the free movement of workers and the cartel prohibition under EU law (see our blog post on the CJEU referral here). Ahead of the judgment, we recap the details of the case, the questions the CJEU will answer, and the potential impact if it follows the non-binding opinion of its Advocate General.

Background

The Contested FIFA Regulations

FIFA’s Regulations on the Status and Transfer of Players (“RSTP”) mandate that a player who terminates their club contract ahead of the term “without just cause” shall: (i) be liable to pay compensation to the club; and (ii) where the player joins a new club, that new club will be joint and severally liable with the player for payment of compensation.

The RSTP further mandates that the International Transfer Certificate, which a player must obtain from their former football association to be lawfully transferred to a new club, shall not be delivered if such a contractual dispute is ongoing

Lassana Diarra

In 2013, Lassana Diarra signed a four-year contract with Lokomotiv Moscow. Due to the club reducing his salary, Diarra chose to leave the club prior to the expiry of his contract. In response, Lokomotiv Moscow formally terminated his contract and took the matter to FIFA's Dispute Resolution Chamber (“DRC”), alleging that Mr Diarra had breached the RSTP by terminating his contract “without just cause”. Subsequently, Mr Diarra filed a counterclaim with the DRC, requesting payment of his due wages and compensation equal to the amount he would have received if the contract had reached its full term.

Mr Diarra subsequently received an offer from Belgian club Sporting Charleroi. However, the club refused to sign the player after FIFA and the Belgian FA (Union Royale Belge des Sociétés de Football-Association ASBL) refused to provide clearance that: (i) Diarra could be registered and able to play in any official competition, and (ii) Sporting Charleroi would not be held liable for the compensation claimed by Lokomotiv Moscow.

In 2015, FIFA’s DRC upheld Lokomotiv Moscow’s claims and ordered Diarra to pay €10.5m in damages to the Russian club. Diarra launched an action against FIFA and the Belgian FA before the local commercial court, seeking compensation of €6m for the loss caused by the two associations’ decisions, which ultimately prevented him from joining Sporting Charleroi. The local court upheld the player’s claims and ordered FIFA and the Belgian FA to compensate him for the harm caused. This judgment was appealed before the Court of Appeal of Mons, which subsequently sought guidance from the CJEU on whether the Contested FIFA Regulations were consistent with articles 45 (freedom of movement of workers) and 101 (prohibition of cartels) of the Treaty on the Functioning of the European Union (“TFEU”).

AG Szpunar’s Opinion

In respect of the compatibility of the Contested FIFA Regulations with the free movement of workers, AG Szpunar found there is “little doubt as to the restrictive nature of all the contested provisions”. The main reason being that the Contested FIFA Regulations give rise to a considerable financial risk for clubs considering engaging any players subject to them, thereby deterring clubs from doing so. As a consequence, the Contested FIFA Regulations prevent players from exercising their profession by freely moving within the internal market.

In relation to any potential justifications, the AG recalled that a restriction on the free movement of workers can be justified if it “serves… an overriding reason relating to the public interest” and is proportionate. AG Szpunar takes the view that, even if the Contested FIFA Regulations seek to fulfil an overriding justification of public interest (for example contractual stability) and are a suitable means to attain that purpose, the rules go beyond what is necessary to achieve that aim.

With regard to the compliance of the Contested FIFA Regulations with the cartel prohibition, AG Szpunar considers that the consequences for a player are “so draconian” that players are more likely to choose not to leave their current club rather than terminate their contract. According to the AG, the Contested FIFA Regulations have “a deterrent effect and send a chill down each player’s spine”, as it would be particularly costly in practice for a player to decide to leave a club without a just cause. With this in mind, AG Szpunar qualifies the Contested FIFA Regulations as disproportionate.

Unsurprisingly, the Opinion applies the same legal test as the CJEU in its landmark decisions such as Royal Antwerp and European Super League / ISU.

Potential consequences

Whilst not legally binding, AG Opinions are authoritative statements on EU law that are often followed by the CJEU. If the CJEU follows this Opinion in its 4 October 2024 judgment, then the Contested FIFA Regulations will likely be found by the referring court to be in breach of article 45 TFEU and article 101(1) TFEU.

This could mean that FIFA’s mechanism of enforcing player contracts via rules around registrations and the deterrent effect of acquiring clubs being jointly and severally liable to pay compensation will no longer be available, and it may be difficult for FIFA to find a lawful workaround using revised registration rules. One might expect that this could lead to: (i) an increase in players terminating their contracts early to pursue lucrative transfer opportunities at other European clubs, and (ii) changes in the transfer strategy of European clubs who may wish to induce players to terminate their contracts early. This could ultimately lead to a shift in the balance of power from clubs towards players, with players being better able to negotiate employment rights on their own terms (which would be a win for players in strengthening employment rights in advance of the ongoing proceedings in the Belgian courts and before the European Commission).

Ultimately, the decision and reasoning from the CJEU in its judgment will provide greater clarity on the potential impact of this case on the football world (and potentially beyond). We will explore this in detail in a future blog post.