Body blow for breakaway sports events – Advocate General’s Opinions endorse the European Sports Model

On 15 December, at the Court of Justice of the European Union (CJEU), Advocate General Athanasios Rantos (AG Rantos) delivered two significant Opinions for the future of sports governance in Europe. The Opinions related to (i) a Spanish Commercial Court’s European Super League (ESL) request for a preliminary ruling (the ESL Opinion); and (ii) whether the General Court’s judgment of 16 December 2020 in respect of the International Skating Union (ISU) case should be set aside (the ISU Opinion).  

The governance role of sports governing bodies (SGBs) has increasingly been threatened in recent years by legal challenges. Competition law has been a common theme at the heart of a number of disputes concerning football, ice skating, cycling and equestrian sports, to name a few (see here, for our previous analysis). The European Sports Model (a concept recently reaffirmed by the European Commission) has been highlighted in the ISU and ESL cases, with AG Rantos’ Opinions providing significant clarification on the Model’s position under EU law.

ESL tries to break away

In April 2021, 12 of Europe’s top football clubs announced the creation of the so called European Super League. Following mass protest by almost all stakeholders (including politicians, national and supranational governing bodies, other clubs, and – arguably most importantly – football fans), nine of the 12 football clubs abandoned the project shortly after its announcement, and entered a ‘Club Commitment Declaration’ committing to UEFA and domestic club competitions and agreeing a range of ‘reintegration measures’.

The three remaining clubs – Real Madrid, Barcelona, and Juventus – faced stronger proposed financial punishments and the threat of a ban from UEFA competitions, but challenged these and UEFA’s and FIFA’s respective dual roles as football governing body and exclusive organiser of football competitions before a Madrid Court. By the time UEFA abandoned its disciplinary proceedings against the rebel clubs,  the Madrid Court had already requested the CJEU to provide a preliminary ruling on the question(s) of whether UEFA's rules and decisions (in particular “Articles 49 and 51 of the UEFA Statutes, and any similar article contained in the statutes of the member associations and national leagues”) amount to anti-competitive concerted practices and/or abuse of dominance, infringing Articles 101 and 102 TFEU respectively (summary available here).

ESL Opinion

• UEFA (and FIFA)’s rules subjecting any new competition to prior approval do not violate EU competition law or the fundamental freedoms. Any restrictive effects arising from the scheme are inherent in, and proportionate to achieving, the legitimate objectives related to the specific nature of sport that UEFA and FIFA pursue; 
• EU competition rules do not prohibit FIFA, UEFA, their member federations or their national leagues from threatening sanctions against clubs affiliated to those federations, when those clubs attempt to set up a new competition that would risk undermining the legitimate objectives of those federations; 
• FIFA’s restrictions on the exclusive marketing of commercial rights relating to FIFA and UEFA competitions are not precluded by EU law as those restrictions are inherent in and proportionate to the pursuit of legitimate objectives; and
• in respect of (i) a conflict of interests; and (ii) the obligations of a “dominant” body, “the mere fact that the same entity performs the duties both of regulator and of organiser of sporting competitions does not entail, in itself, an infringement of EU competition law”, and “the main obligation on a sports federation in UEFA’s position is to ensure that third parties are not unduly denied access to the market to the point that competition on that market is thereby distorted”.

The European Sports Model

The ESL Opinion also contains some significant observations on the European Sports Model and the interaction between sport and EU law. AG Rantos finds that:

• Article 165 TFEU “gives expression…to the ‘constitutional’ recognition of the ‘European Sports Model’, which is characterised by a series of elements applicable to a number of sporting disciplines on the European continent, including football”.
• The model is “based…on a pyramid structure with, at its base, amateur sport and, at its summit, professional sport”, with its primary objectives including “the promotion of open competitions…accessible to all by virtue of a transparent system in which promotion and relegation maintain a competitive balance and give priority to sporting merit”.
• Finally, the model is “based on a financial solidarity regime, which allows the revenue generated through events and activities at the elite level to be redistributed and reinvested at the lower levels of the sport”. 

The express recognition of the constitutional underpinning of the European Sports Model through Article 165 TFEU is significant; it is the most explicit reliance on and application of such constitutional underpinning, since Article 165 was inserted into TFEU in 2010. If this observation is ultimately affirmed in the CJEU judgment, it could serve as a notable clarification of the legal basis on which UEFA and FIFA (as well as other international SGBs in the EU) may govern. Crucially, this could raise the evidential bar for challenges brought under EU law in respect of the organisation of football (and sports generally). 

What next for the Super League?

The final ruling of the CJEU is expected in spring 2023. While the opinions of Advocates General are not binding on the CJEU, the judges very often rely on these opinions to render their rulings.

If the CJEU agrees with AG Rantos’ findings on the compatibility of UEFA (and FIFA)’s stance with EU law, the ESL clubs will without prior authorisation be unable to lawfully organise their own independent competition outside the UEFA and FIFA domains while continuing to participate in FIFA and UEFA competitions. This would not necessarily stop the establishment of a new European competition without approval per se, but it would mean that any such competition and its participating clubs would need to operate outside the existing governance structures of UEFA and FIFA. With AG Rantos finding that the ESL’s proposal of an effectively closed competition potentially conflicted with the pursuit of legitimate objectives such as participation based on sporting merit and equal opportunity, it remains to be seen whether a less conflicting structure would lead to a different analysis.  

Skating in circles?

In 2017, the European Commission (Commission) issued a decision finding that eligibility rules imposed by the ISU, the governing body of professional ice skating, which prevented athletes who participate in events not authorised by the ISU from participating in ISU events, were in breach of EU competition rules. It considered that such rules were restrictive by object insofar as they sought to protect the economic interests of the organisation. 

The ISU challenged this decision before the General Court. The judgment dismissed in part the ISU’s challenge, confirming the Commission’s finding that the ISU’s penalty system was disproportionate, and that its severity could dissuade athletes from taking part in competitions not authorised by the ISU. It also found that the authorisation criteria for third party competitions gave the ISU a broad discretion enabling it to refuse to grant market access to any competing organiser of competition based on vaguely described conditions, which could lead to the adoption of refusal decisions on grounds which are not legitimate. The General Court did, however, find that the Commission had erred when relying on the economic nature of the objectives pursued by the pre-authorisation system put in place by the ISU.

The ISU partially appealed the judgment of the General Court. At the same time, the two athletes whose complaint had led the Commission to initiate proceedings against the ISU, sought to appeal part of the judgment in which the General Court found that the exclusive and binding arbitration mechanism established by the ISU could not be regarded as ‘reinforcing’ the restriction of competition by object identified by the Commission. 

ISU Opinion

The ISU Opinion advises that the ISU’s appeal be upheld, the General Court judgment be set aside in part, and the case referred back to the General Court. It also advises that the athletes’ cross-appeal be rejected. AG Rantos considers that the rules of SGBs such as the ISU are not, in principle, exempt from the application of EU competition law. Given that the matter concerns rules established by sports federations, references to the specific characteristics of sport in Article 165 TFEU may be relevant, in particular for the purpose of assessing any justifications for restrictions on competition.

The ISU Opinion points out, with respect to the ISU’s alleged conflict of interest (and in a similar way to the ESL Opinion), that:

• Given that the ISU organises events and also has the power to authorise events organised by third parties, it is clear that a conflict of interest is likely to arise on occasion. As such, the ISU ought to comply with certain obligations in the exercise of its regulatory functions, in order not to distort competition.
• However, the mere fact that the same entity performs “a dual role” as regulator and organiser of sporting events does not in itself entail an infringement of EU competition law. The regulatory and economic activities of the sports bodies are linked and interdependent and separating them would itself risk falling foul of the European Sports Model. The main obligation of a sports federation in the situation of the ISU is to ensure that third parties are not improperly denied access to the market to the extent that competition on that market is distorted. 
• Sports federations may, under certain conditions, deny market access to third parties, without this constituting an infringement of competition law, provided that the denial of access is justified by legitimate objectives and that the measures taken by those federations are proportionate to those objectives. 

Contrary to the view of the Commission, AG Rantos argues that the General Court was right in finding that the fact that the ISU sought to protect its own economic interests was not in itself anticompetitive. A different view “would be tantamount to prohibiting any economic activity by sports federations which are in the same situation as the ISU, a position which is difficult to reconcile with the fact that […] the pursuit of economic objectives is inherent in their activity”. AG Rantos accordingly rejects the notion that the principle that an undertaking is entitled to pursue its economic interests cannot be applied to the ISU. 

Comment

AG Rantos’ Opinions read together provide important clarification on the interpretation of the European Sports Model, and recognise, inter alia, that (i) the protection by an SGB of its economic interests is not, in and of itself, anticompetitive; (ii) the mere presence of a conflict of interest is not problematic under EU competition law; and (iii) the ‘special responsibility’ borne by a dominant body lies in its obligation to ensure that third parties are not unduly denied access to the market. 

However, the extent to which the CJEU will rely on (and/or follow) AG Rantos’ Opinions remains to be seen. Subsequent to the CJEU’s decisions, the ESL matter will return to the Madrid Court for judgment and the ISU matter will either be given final judgment by the CJEU or be referred back to the General Court, for a fully-fledged analysis of the effects of the eligibility rules on the relevant market. While UEFA, FIFA and the ISU will no doubt be buoyed by the Opinions, AG Rantos also highlighted the ‘special responsibility’ borne by dominant federations. This was just one battle, not the entire war, and SGBs must continue to be cognisant of competition law risks. 

Linklaters LLP is instructed by the Premier League to advise on aspects of the ESL proceedings. 

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