The CJEU and Sport: Revolution, Evolution and Arbitration

A month has passed since the Court of Justice of the European Union (CJEU) delivered three significant judgments in the European Super League (ESL), International Skating Union (ISU) and Royal Antwerp cases, though it will be many more before the full scale and scope of their impact is fully realised.

Our immediate takeaways focused on the implication of the ESL and ISU cases on the standards and conditions that sport governing bodies (SGB) must meet and operate within. This second blog post considers some other aspects – and effects – of the judgments, including (i) the compatibility of “home-grown players” (HGP) rules with EU law; (ii) the role of Article 165 of the Treaty on the Functioning of the European Union (TFEU) and the legitimacy of the European Sports Model; and (iii) the compatibility with EU law of certain arbitration arrangements established by SGBs to preside over disputes on their rules.

Royal Antwerp: a revolution for “home-grown players” in the EU?

The CJEU’s judgment was delivered after Advocate General Szpunar’s Opinion had advised that UEFA’s and the Royal Belgian Football Association’s (URBSFA) rules on HGPs (partially) unjustifiably restrict the free movement of workers within the EU.

The CJEU considers that the rules on HGPs are prima facie incompatible with both EU competition and freedom of movement rules because they risk discrimination at the expense of players from other Member States. However, it is ultimately for the national referring court to determine, “having regard to all the arguments and evidence submitted by the parties”, whether the rules on HGPs are – as a matter of fact – incompatible with EU law. In particular:

• HGP vs EU competition rules: The rules on HGPs limit one of the essential parameters of interclub football competition, namely the recruitment of talented players. Their actual impact can be shown, in particular, by the proportion of players affected by the rules on HGPs. Even if found to be restrictive of competition, these rules might be justifiable. For instance, rules on HGPs might encourage football clubs to recruit and train young players, resulting in a favourable impact on players, clubs, spectators, and TV viewers.

• HGP vs EU freedom of movement rules: To the extent that the URBSFA rules define HGPs as players who were trained at a Belgian club, the rules are of an expressly national character and give rise to indirect discrimination at the expense of players from other Member States. Nevertheless, such discrimination might be justified if the rules are suitable to encourage the recruitment and training of local young players. It is worth noting the CJEU’s point that such an objective could be undermined by clubs buying HGPs from other clubs.

While the CJEU provides guidance on the compatibility of HGP rules with EU law, the ball now lies in the referring court’s court. SGBs are well-advised to review their rules on HGPs in light of the CJEU’s clarifications as well as the particulars of their domestic recruitment and training system. 

Article 165 TFEU and the European Sports Model: not so special after all?

In his Opinion in the ESL case, AG Rantos gave express recognition to the constitutional underpinning of the European Sports Model through Article 165 TFEU, which raised legitimate questions on the evidential bar for challenges brought under EU law against SGBs.

A few months later, in his Opinion in the Royal Antwerp case, AG Szpunar diluted the exceptionalism of sport and the role of SGBs within the wider European legal framework, in particular by stating that SGBs cannot obtain a “blank cheque for the purposes of restrictions on the fundamental freedom of Article 45 TFEU by reference to Article 165 TFEU”.

In its judgments, the CJEU has followed the path set out by AG Szpunar. It limits the importance of Article 165 TFEU, while at the same time acknowledging the relevance of sport’s special features to the interpretation of EU competition and freedom of movement rules:

• Sport is subject to EU law: As has long been established, the practice of sport is subject to EU law insofar as it constitutes an economic activity. This is not the case for rules which (i) are adopted exclusively for reasons of a non-economic nature, and (ii) relate to questions of interest solely to sport per se (e.g., rules on the exclusion of foreign players from national teams, or the determination of ranking criteria used to select athletes participating individually in competitions). In this context, Article 165 TFEU does not constitute a special rule exempting sport from EU competition and freedom of movement rules.

• Sport has some special features: The “undeniable specific characteristics of sporting activity may be taken into account along with other elements and provided they are relevant” when assessing both whether a rule adopted by a SGB constitutes a violation of EU competition and freedom of movement rules, and whether it can be justified. Such special features include the organisation of competitions at both European and national levels, which involves the participation of numerous clubs and players, where qualification to – and participation in – those competitions is limited to those teams which have achieved certain sporting results.

Arbitration arrangements: capable of reinforcing the restriction of competition?

As well as providing further clarity on the standards and conditions that SGBs must meet and operate within, the CJEU’s ISU judgment reflects on the inter-relationship between EU law and arbitration arrangements established by SGBs (see here for our take on the ISU judgment from a commercial arbitration perspective).

The ISU’s rules include a mechanism for arbitral dispute settlement, which confers on the Court of Arbitration for Sport (CAS) exclusive jurisdiction to hear disputes on ISU regulations. The European Commission and the General Court reached different conclusions when assessing these rules:

• Commission decision: While not in themselves in violation of EU competition law, these rules were found by the Commission to reinforce the restriction of competition resulting from the ISU’s prior authorisation and eligibility rules. The Commission’s crucial finding was that the rules did not enable the persons concerned to obtain effective judicial review of decisions adopted by the ISU with regard to EU competition rules. This is because CAS awards can only – by virtue of CAS’s seat in Switzerland – be reviewed by a Swiss court, which is neither empowered to apply EU competition rules nor to refer a question to the CJEU for a preliminary ruling.

• General Court ruling: The General Court disagreed with this finding. It held that the ISU arbitration rules did not reinforce the restriction of competition, on the basis that (i) they could be justified by legitimate interests linked to the specific nature of the sport; and (ii) there were other available remedies for athletes (such as claiming damages before national courts and/or filing a complaint before the European Commission).

The CJEU mostly agrees with the Commission’s view: while it does not per se take issue with rules that confer the review of decisions at first instance to the CAS as an arbitration body, it considers that under such rules the ISU effectively benefits from a legal immunity with respect to EU competition rules. As such, the ISU rules reinforce the restriction of competition.

The CJEU also provides some guidance as to how arbitration arrangements established by SGBs can comply with EU law. In particular, the court called upon to review the arbitral awards must be able to (i) ensure compliance with EU competition rules (i.e., be a national Member State court); and (ii) refer questions relating to EU competition law to the CJEU for a preliminary ruling. If the ISU did not amend its rules on the arbitration mechanism, compliance with the CJEU ruling would effectively require a relocation of the CAS’s seat within the EU. A more realistic solution would be for the ISU to amend its rules to limit the types of disputes that shall be heard by the CAS, to avoid a scenario in which its decisions effectively become immune to EU competition rules. However, this approach can also give rise to disputed jurisdiction, in particular as to whether the subject-matter of the dispute properly falls within the purview of EU competition rules.

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