Author: Maxime Van Den Dijssel

The ECJ's decision could reshape the web of regulations governing football's transfer system. 

This landmark ruling holds profound implications for the autonomy of players, the authority of FIFA, and the delicate balance between the desire to promote contractual stability whilst ensuring free movement rights are respected within the sport.

Background: The Contested FIFA Regulations
At the crux of this legal battle lie FIFA's Regulations on the Status and Transfer of Players (the “RSTP”), the framework that governs the terms and conditions under which professional footballers can transfer between clubs. One of the bedrock principles of the FIFA RSTP is the principle of contractual stability, the notion that agreements entered into must be abided by. The RSTP therefore expressly prohibits the premature termination of an employment contract where there is no just cause for that termination. In order to deter parties from prematurely terminating employment contracts, the RSTP contains various penalties where a termination is without just cause.
In particular, the RSTP contains the following provisions where a player terminates a contract without just cause:

- Players who unilaterally terminate their contracts "without just cause" are liable to pay compensation to their former club.
- If such a player joins a new club, that club becomes jointly and severally liable for the payment of the aforementioned compensation and may be subject to sporting sanctions, including bans on registering new players.
- The issuance of an International Transfer Certificate (“ITC”), a mandatory document required for a player to be registered with a new club, can be withheld if a contractual dispute is ongoing.

These regulations, while aimed at promoting contractual stability within the sport, have faced scrutiny for infringing upon the fundamental rights of players, particularly their freedom of movement within the European Union (“EU”).

The Diarra Saga: A Journey Through Contractual Turmoil
The case itself revolves around the career of former French international Lassana Diarra, whose decision to prematurely terminate his contract with Russian club Lokomotiv Moscow in 2014 set off a chain of events that would eventually lead to this pivotal legal battle.

In August 2013, Diarra signed a four-year contract with Lokomotiv Moscow, but the relationship soured within a year due to alleged salary disputes and missed training sessions. Lokomotiv subsequently terminated Diarra's contract in August 2014, citing breach of contract, and initiated proceedings before FIFA's Dispute Resolution Chamber (the “DRC”) to claim compensation.

The DRC ruled in favour of Lokomotiv, ordering Diarra to pay €10.5 million in damages. Diarra's attempts to appeal this decision through the Court of Arbitration for Sport (“CAS”) proved unsuccessful, leaving him in a precarious position as he sought to secure a new club.

In early 2015, Belgian club Sporting Charleroi expressed interest in signing Diarra, but the deal ultimately fell through due to complications arising from the ongoing contractual dispute with Lokomotiv. The Russian Football Union refused to issue an ITC for Diarra, effectively preventing him from being registered with a new club, while Sporting Charleroi sought assurances that they would not be held jointly liable for any compensation owed to Lokomotiv.

Frustrated by these obstacles, Diarra filed a lawsuit against FIFA and the Belgian Football Association, seeking €6 million in compensation for the loss of earnings resulting from the associations' decisions, which ultimately prevented him from joining Sporting Charleroi. The Belgian court initially ruled in Diarra's favour, ordering FIFA and the Belgian FA to compensate him for the harm caused. This decision was then appealed to the Court of Appeal in Belgium, who subsequently referred a number of questions to the CJEU, on whether the contested provisions of the RSTP are compatible with the freedom of movement of workers and with EU competition law.

The Decision of the European Court of Justice
On 4 October 2024, the CJEU handed down the much-anticipated decision and determined that the contested provisions of the RSTP are not compatible with EU law.

In particular, while the decision recognises the legitimate objective of maintaining contractual stability between players and clubs, the CJEU determined that the contested provisions go beyond what is necessary and proportionate to achieve that objective. In coming to this conclusion, the CJEU conducted a robust assessment on each of the contested provisions and made the following observations:

- The Joint and Several Liability: the RSTP currently provide that a club will be jointly and severally liable for the compensation a player is ordered to pay, without actually taking into account the individual circumstances in that case or whether the club played a role in the player’s decision to prematurely terminate the employment contract with his former club. One of the foundations of the principle of proportionality requires an assessment of the circumstances specific to each individual case. In turn, the CJEU held that holding the new club liable regardless of the circumstances cannot be seen as necessary and proportionate to ensuring contractual stability between a player and club.

- The Sporting Sanction: similarly, the CJEU further found that imposing sporting sanctions on the player’s new club was not proportionate or necessary to achieve the legitimate objective. In particular, the CJEU found that the presumption that a new club induced the player to breach their employment contract and the fact the burden is on the new club to show that they did not induce the breach was unduly onerous. The CJEU held that a registration ban, which cannot be adapted based on the specific circumstances of the case, is clearly contrary to the principle of proportionality.

- Withholding the ITC: The CJEU held that the ability of the former association to withhold a player’s ITC, similarly fails to appreciate the specific circumstances of case, for example, the factual context under which the breach occurred or indeed whether or not the contract was in fact terminated without just cause.

A Watershed Moment for Football
The CJEU's judgment in the Diarra case represents a watershed moment for the world of football. The decision could be a catalyst for a profound transformation of the transfer market, recalibrating the balance of power between players and clubs, and potentially redefining the very fabric of contractual relationships within the sport.

The decision further has a drastic impact on football players, who face considerable uncertainty when embroiled in a legal dispute about the termination of an employment contract. Whether or not a contract was terminated without just cause is not black or white and that termination can result in lengthy legal disputes. Leaving players in precarious positions when seeking new employment.

There has been much speculation on what this decision could mean in practice for the transfer system moving forward. It has been argued that the decision could lead to an increase in players prematurely terminating their contracts to pursue more lucrative employment opportunities elsewhere in Europe. However, as it stands, nothing in this decision suggests that players will suddenly be able to start terminating their contracts without just cause or consequence. The decision does however recognise the contested provisions in their current form are contrary to EU law. FIFA will therefore need to amend the provisions to ensure they are proportionate to their aims whilst still providing a deterrent for premature contract termination (to support the wider aim of promoting contractual stability between players and clubs).

The changes FIFA will need to address at the very least includes the following:

1. A review of the criteria utilised in calculating the compensation due when an employment contract is terminated without just cause, ensuring due regard is given to the specific facts and circumstances of each individual case.

2. A review of the sporting sanctions that can be imposed on a club which enters into an agreement with a player found to have terminated a contract without just cause. Such a review will need to address the burden imposed on the new club to provide evidence that it did not induce the player to leave the former club.

3. A review of the principle of joint & severally liability and the refusal to issue a player’s ITC. It is unclear whether FIFA will need to scrap these regimes altogether, or whether amendments will be made to the existing regime to ensure proportionality. The CJEU decision does not declare the measures invalid altogether, but rather puts forth the notion that they are disproportionate as result of their failure to give due regard to the circumstances of each specific case.

While the Diarra case has garnered significant attention, it is further part of a broader trend within football, where the sport's regulations are increasingly being scrutinised and challenged through legal channels. The decision has been welcomed by organizations like FIFAPRO, for its impact in protecting a football player’s rights as a worker. It remains to be seen how FIFA respond and what the long terms impacts of the decision will be on the transfer market more generally.