On 4 October 2024, in case C-650/22 Fédération Internationale de Football Association (FIFA) v. BZ, the Court of Justice of the European Union (the “Court”) ruled on the interpretation of Articles 45 and 101 of the Treaty on the Functioning of the European Union (TFEU), relating to the free movement of workers and anticompetitive agreements respectively. In the ruling, the Court held that FIFA’s rules governing unilateral contract termination between clubs and players, as well as the conditions for player transfers, breached the European Union (EU) rules by hindering the free movement of professional footballers seeking to develop their careers with a new club and by restricting cross-border competition among clubs within the Union.
Background to the dispute
In 2014, Mr. Lassana Diarra, a former Real Madrid professional football player, quit Lokomotiv Moscow amidst a dispute in which the club had accused him of terminating the contract without just cause. While the dispute was still being reviewed by FIFA’s Dispute Resolution Body ("DRB"), Mr. Diarra failed to sign with Sporting du Pays de Charleroi. The club had promised to hire him conditional upon the player’s being duly registered in the national federation and FIFA’s confirmation that the club would not be held jointly liable to compensate Lokomotiv Moscow.
As FIFA refused to provide assurances on these two points, alleging that only the DRB would be competent to do it, Mr. Diarra could not satisfy any of the two requests. FIFA’s Regulations on the Status and Transfer of Players (the "Regulations") actually provide that a certificate of international transfer, which is an essential requirement for a player’s registration with a league affiliated with FIFA, could not be issued until the end of the dispute. Furthermore, the Regulations also stipulate that, in case of undue termination by a football professional, any new professional football club hiring the player would be held jointly and severally liable to compensate the player’s former club, thereby having to share the financial harm of the player’s decision to withdraw from the contract. The new club would also be presumed to have induced the professional to breach the contract, implying wrongdoing without requiring FIFA to prove that inducement actually occurred. As a result, the new club would face heavy sanctions.
Having lost the opportunity to sign for Sporting du Pays de Charleroi, Mr. Diarra was subsequently also sanctioned by the DRB to compensate Lokomotiv Moscow, whose claim on grounds of unjust contractual termination was upheld. In this framework, Mr. Diarra sought compensation before the Belgian courts, inter alia, for having been prevented from playing professionally during the 2014/2015 season in breach of the EU rules on the free movement of workers and competition. The Belgian courts’ first instance judgment upheld Mr. Diarra’s claim for compensation but was appealed by FIFA. Having to judge on the compatibility of the Regulations with Articles 45 and 101 TFEU, the Belgian Court of Appeal referred to the Court certain questions on the interpretation of the provisions.
The issues at stake
FIFA’s stakes were particularly high, not only because of the legality of the pillar provisions in the Regulations being overtly questioned by a professional football player. On 21 December 2023, the Court had actually adopted two seminal judgments in the Royal Antwerp Football Club (judgment in case C-680/21) and European Superleague Company (judgment in case C-333/21), which cast a doubt on the compatibility of the rules devised by FIFA with the EU rules on competition, thereby upholding the challenges brought to FIFA’s legal system. The risk of a third setback was therefore important, even more so considering that the legality of the Regulations was now being questioned with respect to the rules on the free movement of persons, thus recalling memories of the now long-standing Bosman ruling which revolutionized the then transfer system (judgment of 15 December 1995 in case C-415/93).
The Regulations, and FIFA’s system in general, are generally aimed at preserving the legal and financial stability of clubs, the basic units forming national federations. These need to enjoy the conditions to remain competitive, both in national and international competitions. Healthy clubs ready to compete would enhance the attractiveness of the competitions of the most loved sport in the world. This would attract billions of viewers worldwide and enhance the commercial appeal of football, boosting sponsorships, broadcasting and gambling deals, as well as other revenue streams in the wealthiest markets.
Undeniably, clubs also have to bear considerable expenses for the organisation and maintenance of competitive teams. This prompted FIFA (which, in the end, is the federation of the associations to which clubs are affiliated) to apply rules, such as the Regulations, embodying a certain contractual imbalance in favour of clubs, inter alia, in order to reduce, as far as possible, the risk of losing the players in which they invested in favour of other competing clubs. Unfortunately for FIFA, national football associations and clubs, such contractual imbalance also entails a breach of the EU internal market pillar rules, as was anticipated in the (non-binding) opinion of Advocate-General (AG) Maciej Szpunar, adopted on 30 April 2024, who had already authored the opinion in the Royal Antwerp Football Club case.
The findings of the Court
The Court found that the Regulations directly affect football players and the clubs possibly wishing to sign them, as well as the economic activities inherent therein, and, as such, are incompatible not only with the EU rules on competition, but with those on the free movement of workers. The twofold deterrent effect of FIFA’s rules appears to be particularly harmful regarding players’ mobility. On the one hand, under the Regulations, players would be discouraged from unilaterally terminating the contract with their club and sign with a new club, prior to expiration (or their being monetised by the clubs through transfers), in order to avoid the risk of their old club calling the termination unjust. On the other, the significant legal, financial and sporting risks inherent in the Regulations are such as to dissuade new clubs, though potentially interested in signing professional players in this condition, from hiring them.
From this standpoint, the case of Mr. Diarra, a French national failing to sign for Sporting du Pays de Charleroi, a Belgian club, signifies the importance of such deterrence mechanisms on the free interplay of the EU market forces.
The constraints inherent in the Regulations are further strengthened by the prohibition on the issuance of the transfer certificates for as long as there is a dispute. By delaying the registration of professional players with new clubs established in other member states, the relevant rules end up secluding players in their country of origin or residence, depriving their possible engagement by clubs established elsewhere in the EU and partitioning markets along national lines.
The Court also observes that the deterrence mechanics of the Regulations per se restrict competition between professional football clubs established in different member states vis-à-vis the recruitment of other players already signed by a given club. Despite this being an essential parameter of competition on the football market, unless the former club agrees to a negotiated transfer, the mere act of signing such a player would expose the new club to the risk of being held jointly and severally liable for compensation, as well as being sanctioned.
Moreover, the generalised restriction on cross-border competition between clubs diminishes the clubs' access to market of players under contract, both geographically, as this extends (at least) to all of the EU member states, and materially, as it covers the entire duration of each contract which players may sign. In practice, this restriction gives each club the virtual certainty of retaining its own players until the expiration of the contract concluded with them, a club’s decision to terminate accepted by (or imposed to) the player, or a negotiated transfer of the player to another club, in return for payment of a transfer fee.
Of course, the Court is not unaware of the high requirements clubs, federation and, ultimately, FIFA need to meet in order to keep the entertainment at the highest level possible and that, notwithstanding their incompatibility with the internal market and competition rules, it recognises that their potential can be justified in light of, respectively, overriding reasons of public interest or the justifications per Article 101, par. 3, TFEU. However, if the stability of the football system can well be a valid justification to restrict the application of the provisions of the EU law, nonetheless such restrictions should not exceed what is strictly necessary to pursue such target. The assessment whether such draconian rules, as embodied in the Regulations, could meet the proportionality principle, is left to the Belgian Court of Appeal competent for the national procedure. The Court, however, voices its doubts as to the outcome of such evaluation.
The way forward
The ruling marks a significant moment as it brings attention to the regulatory and legal challenges faced by FIFA, particularly considering that the case is the third major one – and the third setback for the federation – within less than one year. The undeniable wave of legal scrutiny underscores the growing pressure on FIFA to align its practices with European legal standards in the internal market. On this, the Court’s assessment of the Regulations in light of the free movement of persons creates an ideal continuity with the precedent in the Bosman case-law which, by the very nature of the provisions at stake, is stronger than in the European Superleague Company case.
It is predictable that FIFA's current framework for player transfers and compensation be subjected to further legal challenges, as the Court’s interpretation may encourage more stakeholders (essentially clubs and players, but maybe also other governing bodies), to challenge FIFA's authority. The federation may be compelled to reform its regulatory policies in ways that balance commercial interests with individual rights within the EU's legal framework. FIFA may need to align with EU principles in areas such as player mobility, compensation systems, and competition rules.
As this is the third major legal threat in less than a year, it suggests a growing willingness among European courts and institutions to challenge long-standing practices in sports governance. This could lead to reconsidering FIFA’s regulatory powers, driving reform towards more transparency, fairness, and alignment with EU internal market, competition and fundamental rights principles. In the long term, FIFA may need to strengthen its legal defences while adapting its structures to minimize future litigation risks.
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