EU Rights to Do Business
The Famous Bosman case found that the Belgium Football Association Rules contravened European Union law on freedoms to establish and provide services throughout the EU.
It has been held since the early days of European Union that sports is an economic activity subject to EU law, Cultural significance is a factor but cannot preclude the application of basic EU law economic principles. There is an exception where nationality is strictly necessary, as in the case of representative national teams.
Sport and participation in sport will be economic for the purpose of the European Union freedoms, notwithstanding that the sums of money may be relatively small. Any relatively small amount of money will engage the rules.
Effect on Sports Bodies
The EU principles may conflict with the manner in which national sports organisations are organized, in particular rules which seek to restrict access by non-nationals. In representative sport, there may be justification in eligibility being based on nationality, for the purpose of competitions.
The rules on freedom of movement apply both to public bodies but also to private bodies such as sports bodies and federations. The treaty freedoms have direct effect and force of law in State. Even national laws must yield to them.
In the early mid-1970s, the European Courts of Justice struck down national permit rules in football associations which effectively limited participation to nationals only and excluded other EU citizens, European Community citizen.
Requirements to have national sport qualification have been struck down as in breach of the principle. Although States may ensure that workers and persons providing services are properly qualified, there must however be a mechanism by which equivalence is judged in accordance with fair procedures. Increasingly, rules have been harmonised on an European Union wide basis.
UEFA, the European Association of Football Associations mandated national rules that provide that clubs might retain rights to players after their contract expired. Transfer fees were payable. The purpose was notionally to assist clubs in their investment in players and to generate income for the game.
UEFA’s rules had allowed two non-nationals following threatened legal action from the Commission. A maximum of four non-nationals were permitted per squad, while only three could play. Two assimilated players who had joined, who played in the country for five years, including three years in junior teams could also play.
In the famous Bosman case, a challenge was made by a Belgian player to the requirement to pay a transfer fee. He had been offered an extension of contract at very low wages which he refused and was placed on the transfer list. Under the Belgian rules, the fee could be determined by the Belgian FA. He was in effect disabled from moving on account of transfer fees and on account of the operation of the transfer system.
The European Court of Justice held that rules which prevented an out of contract player from moving to another State, interfered with free movement of workers. It found the transfer fee requirements violated the Treaty insofar as it allowed the club to place restraints on a former player /former employee with whom no contract existed.
While the European court accepted the legitimacy of some of the objects of the rules including the need to support and find younger players and provide for their training, it did not accept them a sufficient justification. The limitations and quotas for nationals was held to be discriminatory.
It was argued that the requirements were justified in terms of identifying teams with particular places but was rejected on the basis that there was no local link between clubs and permissible players. Justification based on fostering homegrown talent for the national team was also held insufficient.
The case emphasised that even the most fundamental well entrenched rules could be potentially invalidated on basic European Union principles.
Restrictions may be effectively imposed on, in-contract players. However on contractual principles, sums paid for breach of contract must not be penalties. In strict terms, the Bosman rule apply only to where there are cross-border elements within the EU.
The European Court of Justice did accept that it may be legitimate for sports governing bodies to provide and promote transfer and other rules that allow smaller club to be financially compensated for their work in training younger players. The rules must be proportionate to their objective. Later cases have been allowed such restrictions which have a justifiable objective and have shown more deference to the needs of particular sports.
A declaration on sports was incorporated in the Amsterdam treaty. A later case challenging closed parts of the season during which transfers could not be made failed. It was held to be justifiable in order to protect sporting competition from distortion. It was accepted that the rules were sporting rather than economic. It does not follow that all transfer windows are necessarily justifiable. They must be proportionate and necessary in the circumstances.
Challenges have been made by alcohol groups to restrictions on alcohol sponsorship of sports. Rule restricted the availability of advertising for alcoholic drinks due to restrictions on it being televised were held to be justified on public health grounds.