Function over form: The EU’s top court rules on the application of public procurement law to sports governing bodies

We’ve known for a while now that competition law applies to sports governing bodies. The Court of Justice of the European Union (CJEU) has recently clarified that sports organisations can also be subject to public procurement law.

The question at the core of the CJEU’s preliminary ruling was whether national sports federations can be considered public bodies for the purpose of EU public procurement law and thus be subject to enhanced transparency, non-discrimination and proportionality rules when organising tenders.

In its judgment, the CJEU emphasised the substantive legal nature of sports federations and the significance of the way in which their activities are supervised, while considering the legal form of a federation to be irrelevant for the purposes of its analysis.

Background

The preliminary ruling was requested by the Italian Consiglio di Stato.

Italian national sports federations are non-profit associations with legal personality under private law. At the same time, they are entrusted with specific tasks of public nature and are subject to the supervision of the Italian National Olympic Committee (CONI), a public authority.

The Italian Football Federation (FIGC) invited two companies to participate in the tender procedure for the award of a contract for “porterage services”, for accompanying the national football teams and for the FIGC store in Rome. The unsuccessful candidate contested the result in court, arguing that the sports federation must be regarded as a body governed by public law and, as a consequence, should have applied (the stricter) EU public procurement rules.

The Consiglio di Stato, the appeal court, referred two questions on the definition of “bodies governed by public law” under EU Procurement Directive 2014/24/EU to the ECJ for preliminary ruling.

The judgment

The first question focused on whether sports federations meet the first criterion of a public body, i.e. pursuing activities in the general interest, without an industrial or commercial character.

The CJEU recalled that sport is an activity of general interest, pursued by Italian federations as a task of public nature expressly assigned to them, e.g. the supervision of the proper running of competitions and championships and the prevention and punishment of doping. According to the CJEU, these tasks do not appear to be of an industrial or commercial character.

While the final assessment of the “industrial or commercial character” has been left to the national court, the CJEU clarified that the following aspects were not relevant for the analysis:

• the legal form of the sports federation (association governed by private law), as “the concept of a ‘body governed by public law’ must be interpreted in functional terms independent of the formal rules for its application”;
• the pursuit, alongside the activities of general interest, of activities that are not public in nature and with self-financing capacity.

The second question concerned the requirement of being subject to management supervision by a public authority (such as CONI). The CJEU clarified that such supervision must be in the form of active control, as opposed to mere ex post surveillance. It described active control as focussing on the day-to-day organisation and practice of the respective sporting discipline. By contrast, CONI’s control powers over Italian sporting federations (including FIGC) are limited to laying down sporting rules, verifying that they are properly applied and intervening only as regards the organisation of competitions and Olympic preparation. Against this background, and not in complete alignment with the opinion of Advocate General Campos Sánchez-Bordona, the CJEU argued that prima facie CONI cannot be regarded as exercising active control over the Italian sports federations.

However, the CJEU left the final assessment up to the Consiglio di Stato.

As part of its final analysis, the Consiglio di Stato will need to consider CONI’s powers and their real life impact. For example:

• the power to adopt guidelines, decisions, directives and instructions relating to the exercise of the sporting activities. Do these acts provide for abstract rules or general guidelines, without CONI being able to impose on federations a specific course of management, in particular with regard to public contracts?
• the power to approve national sports federation statutes. Could CONI have imposed on FIGC specific conducts / amendments restricting its management autonomy? Could it have revoked the FIGC’s status if the FICG had rejected such restrictions?

Lastly, in the event that the Consiglio di Stato concludes CONI exercises “management supervision” over the national sports federations, the CJEU looked at the majority participation of the sporting federations in CONI’s main bodies. The CJEU noted that this aspect can offset “management supervision” only if each national sports federation, considered individually, can exert a significant influence over the activities of CONI.

The judgment builds on a previous CJEU ruling issued in 2019, concerning the status of the Italian Golf Federation and the Italian Federation of Equestrian Sports as belonging to the private or the public sector for accounting purposes under EU law. In the 2019 judgment, the CJEU determined that the referring Italian court, the Corte dei Conti, should conduct a substantive analysis of the degree of control and impact of CONI’s powers on the federations for accounting purposes. On this basis, the Corte dei Conti ruled in 2020 that CONI’s powers were insufficient to establish public control over the federations.

Despite the differing natures and purposes of the analyses, it will be interesting to see how the Consiglio di Stato will carry out its assessment and whether it will reach a similar conclusion to the Corte dei Conti. With both preliminary rulings, the CJEU reaffirmed that the nature of national sport federations is to be assessed in real and practical terms for the purposes of the relevant legislation. The wording of national regulations entrusting CONI with supervisory powers or the fact that federations are associations governed by private law are in themselves not sufficient to reach a conclusion.

Comment

In some Member States, federations are directly integrated in governmental structures and thus subject to public procurement rules; in others, federations (often those governing football) are entirely independent of government structures, merely allowing some sort of State financing. Other federations, as in the case of Italy, have a less clear-cut status – they are independent of State structures but with various elements of governmental supervision or financing. Federations with this “mixed” status will inevitably face some degree of legal uncertainty as regards their obligations under EU public procurement rules.

In addition to governmental supervision, another criterion which may trigger a federation’s status as a “public body” is the degree of State financing it receives. During current times of enhanced financial support by governments, sports governing bodies need to be aware that the principles established in the FIGC judgment can apply similarly to the criterion of State financing, potentially leading to them being classified as “public bodies” for the purposes of EU procurement law.

Notably, the assessment developed by the CJEU is to be carried out for the purposes of the field of law concerned. For the purposes of EU competition law, the commercial activities of a sports governing body will qualify it as a (profit-oriented) “undertaking” that is capable of abusing the dominant position it holds as a sports regulatory body. By contrast, for the purposes of EU public procurement law, the pursuit of commercial activities cannot preclude the entity’s status as a “public body” that is subject to public procurement rules.

More clearly than ever, sports governing bodies must be alert to the increasing degree of regulation coming their way.

Sign up to SportingLinks for more dedicated legal opinion on topical issues in the sports sector.