EU court ruling dismantles FIFA’s transfer system

*Eduardo Carlezzo, sports lawyer and partner at Carlezzo Advogados

The ruling announced on 4 October by the Court of Justice of the European Union directly and profoundly affects relations between clubs and players, especially the transfer system and contractual stability rules FIFA introduced in 2001. FIFA will have to make substantial changes to core rules on compensation for breach of contract, liability for payment and sporting sanctions on players and clubs.

The 2001 system itself was introduced in response to an earlier European court ruling, the landmark 1995 Bosman case, which essentially held that the “passe” — the registration right that tied a player to a club indefinitely — was unlawful.

Required by the European Union to create a new player-transfer system, FIFA abolished that right and tied a player’s registration to the duration of the employment contract. Once the employment relationship ended, the player would be free to move to another club.

At the same time, seeking stability in club–player contracts and to prevent premature termination without just cause, FIFA established compensation and sporting sanctions for clubs and players where a contract ended without just cause.

Another significant rule allowed liability for compensation owed by a player to a former club for breach of contract to extend to the new club that signed him. This occurred in Lassana Diarra’s case. He had a contract with Lokomotiv Moscow, and a dispute arose in 2014. FIFA found that he had breached it and ordered him to pay the Russian club €10.5 million. His next club would also be jointly liable for that amount, making a new signing more difficult.

Those are precisely the aspects now rejected by the European court. In Diarra’s particular case, it found FIFA’s decisions unlawful as to the amount of compensation, the sporting sanction for breach of contract and any liability imposed on a new club for the compensation owed to Lokomotiv Moscow.

Beyond the direct effect on future club–player relations, the ruling raises a question about the past: hundreds, perhaps thousands, of similar FIFA and Court of Arbitration for Sport decisions resulted in compensation payments. Will a wave of claims seek to hold FIFA liable in the European courts for those payments? The next chapter remains to be seen.