EU top court says some FIFA player transfer rules breach EU law

By Julien Pretot

PARIS (Reuters) - Some of FIFA's rules on player transfers go against European Union laws and free movement principles, the EU's top court said on Friday, in a ruling that could open the door for players to find a new club more easily after their contract is terminated.

FIFA's Regulations on the Status and Transfer of Players (RSTP) say a player who terminates a contract before its term "without just cause" is liable to pay compensation to the club, and where the player joins a new club they will be jointly liable for payment of compensation.

The Court of Justice of the European Union (CJEU), ruling on a high-profile case linked to former France player Lassana Diarra, stated these dispositions were unlawful, and the judgment is expected to prompt FIFA to revamp its transfer regulations.

"The rules in question are such as to impede the free movement of professional footballers wishing to develop their activity by going to work for a new club," said the Luxembourg-based CJEU.

"Those rules impose considerable legal risks, unforeseeable and potentially very high financial risks as well as major sporting risks on those players and clubs wishing to employ them which, taken together, are such as to impede international transfers of those players."

In 2014 Diarra left Lokomotiv Moscow one year into a four-year deal and the club took the matter to FIFA's Dispute Resolution Chamber (DRC), arguing he had breached the rules when his contract was terminated after the player decided to leave without just cause following a pay cut.

Diarra received an offer to join Belgian club Charleroi but the club backed out after FIFA refused to sign the International Transfer Certificate (ITC), preventing the player being registered with the Belgian federation.

According to the CJEU ruling, it is also unlawful to refuse to sign the ITC.

In 2015, FIFA ordered Diarra to pay 10 million euros ($11 million) in damages to Lokomotiv, prompting the former Chelsea, Arsenal and Real Madrid player to sue the world governing body and Belgian FA for damages before a local court.

The CJEU ruling could also lead other players affected by the FIFA regulations to seek damages.

"All professional players have been affected by these illegal rules (in force since 2001) and can therefore now seek compensation for their losses," Diarra's lawyers Jean-Louis Dupont and Martin Hissel said in a statement.

FIFA'S AUTHORITY MAY BE IN QUESTION

Dupont said the whole transfer system would change with the court's ruling.

"FIFA's immunity is over, there will be a before and after in (football) governance after the EU (court) ruling," Dupont told Reuters.

Not quite, according to FIFA.

FIFA said it was "satisfied that the legality of key principles of the transfer system have been re-confirmed in today's ruling. The ruling only puts in question two paragraphs of two articles of the FIFA Regulations on the Status and Transfer of Players, which the national court is now invited to consider."

Its chief legal and compliance officer, Emilio Garcia, said it was not the end of FIFA's transfer system.

"It is important to clarify that today’s decision does not change the core principles of the transfer system at all," he said.

"FIFA has been continuously improving that system for many years – not for its own benefit, but for the benefit of players, clubs, leagues and member associations, to ensure that players can train, be developed and have stability, while safeguarding the integrity of competitions by implementing a robust regulatory framework for the international transfer system."

David Terrier, the president of FIFPRO Europe, said they were happy for Diarra but that he was not the only victim.

"The reality is we are going to see how to repair the damage for all the players who were victims of the (FIFA transfer) system," Terrier told Reuters.

REDUCED TRANSFER FEES?

The ruling could result in reduced transfer fees and more economic power for players, according to Ian Giles, the EMEA head of antitrust and competition at global law firm Norton Rose Fulbright.

"It's entirely possible this means players will feel they can now break contracts and sign on with new clubs, without the selling club being able to hold them or demand significant transfer fees," Giles said.

"But over time things will have to stabilise to allow clubs to remain economically viable. Smaller clubs who rely on transfer fees for talent they have developed may well be the losers in this context."

The European Club Association (ECA), which represents more than 700 clubs, said in a statement: "The football transfer system is designed to establish a balance between the rights of players to free movement and stability of contracts, together with the legitimate objectives of the integrity and stability of squads and competitions.

"ECA believes that this system functions well, on the whole, and succeeds in finding this necessary balance."

The ECA added that transfer system helps medium and smaller clubs compete at higher levels, especially those that develop talent.

"The transfer system as a whole, and transfer fees ... are an efficient and effective means of wealth distribution from bigger clubs to smaller ones," it added.

(Reporting by Tassilo Hummel, Julien Pretot, Rohith Nair and Shifa Jahan; Editing by Alex Richardson, Christian Radnedge and Pritha Sarkar)