Blog #8
From the Bernabeu to the Court of Justice – An Investigation into Diarra vs FIFA
(By Maxwell Kablan and Nikerson Silva Fernandes)
Lassana Diarra, a name familiar to all avid football fans, is currently embroiled in one of the most important legal cases this century in football.
Diarra began by taking action against FIFA in Belgian courts. The case was then referred to the European Court of Justice (CJEU) for a preliminary ruling on FIFA's transfer regulations. He brought the claim after FIFA's regulations stopped Diarra from joining Belgian side Sporting du Pays de Charleroi (Charleroi) after he left Lokomotiv Moscow.
This article will investigate the historical case, unpacking the key issues and providing further comments on the potential implications of the case.
Background
On August 20, 2013, Lassana Diarra signed a four-year contract with Lokomotiv Moscow. The then director of sports, Kirill Kotov, referred to Diarra as a 'high-class central midfielder' and 'the one' to improve Lokomotiv's midfield [1].
One year later, Diarra had his contract terminated at Lokomotiv after refusing to accept a salary reduction. He initially refused to train and play matches, subsequently leaving the team [2]. As a result, Lokomotiv Moscow formally terminated the player's contract for a breach of contract, alleging Diarra breached his contract without just cause [3].
After termination, Lokomotiv sought compensation for the alleged breach. Lokomotiv brought proceedings against Diarra before FIFA's Dispute Resolution Chamber (DRC) [4], one of the three chambers that form FIFA's tribunal. The DRC decides on the basis of equal representation of players and clubs [5].
According to Article 22 1(a) of Regulations on the Status and Transfer of Players, the DRC has the jurisdiction to adjudicate on 'disputes between clubs and players in relation to the maintenance of contractual stability' [6]. The DRC ultimately sided with Lokomotiv and ordered Diarra to pay €10.5m to the Russian club [7].
Article 17 of FIFA's Regulations on the Status and Transfer of Players states that should a player terminate his contract without just cause, they shall be liable to pay compensation to their former club, and when the player joins a new club, that new club will be joint and severally liable for payment of the compensation [8]. In addition, for a player to transfer to a new club they must be issued an International Transfer Certificate (ITC). Where a player is in an ongoing dispute, the federation of the player's former club will not issue the ITC, preventing the player from being registered [9].
At the same time as the dispute at the DRC, Diarra received an offer from Charleroi. Charleroi aware that Diarra was involved in an ongoing dispute, sought assurances they would not be held jointly liable for compensation to Lokomotiv and that Diarra could play in all FIFA, UEFA and Belgian FA-organised competitions [10]. As FIFA and the Belgian FA could not clear his registration, Charleroi formally withdrew their offer [11].
However, Diarra didn't leave it there. Like his playing style, he decided to defend himself. He launched proceedings in the Belgian commercial court against the Belgian FA and FIFA, seeking €6m for loss of earnings not being able to join Charleroi [12]. Diarra felt that the two association's regulations prevented him from being able to join Charleroi. The Belgian commercial court sided with the player. FIFA and the Belgian FA appealed before the Belgian Court of Appeal, who requested a preliminary ruling on the case by the European Court of Justice [13].
The Belgian Court of Appeal wanted clarity on whether FIFA's transfer regulations were consistent with Article 45 (freedom of movement of workers) and Article 101 (prohibition of cartels) of the Treaty of the European Union (TFEU) [14].
Ruling
The CJEU assessed Article 17 of FIFA’s transfer regulations to see if the rules were compatible with EU law – specifically i) the rule on a player paying compensation for terminating a contract with just cause and ii) the player and the player’s new club being jointly and severally liable (both having to pay the compensation) [15].
The CJEU first looked at Article 45 of the TFEU, which states workers in the European Union should be free to move for employment, remuneration and other conditions of work and employment [16]. The court held that FIFA’s transfer regulations result in considerable legal, financial and major sporting risks on both players and clubs wishing to employ them [17].
In regard to players, the rules disadvantage players who may wish to move from a club from one EU member state to another. The fixed compensation they must pay their old club for unjustly terminating a contract, combined with the club jointly paying this compensation and their ITC being withheld could mean clubs are sceptical of sending firm and unconditional transfer offers to such players [18].
The rules also disadvantage the clubs who wish to sign such players, on the basis that they will automatically be held liable to pay the compensation [19]. The CJEU ruled that while FIFA’s transfer regulations are necessary to ensure the regularity of its competitions, parts of the regulations go beyond what is necessary, and are therefore disproportionate [20]. For instance, the presumed liability on the club without considering if a club is at fault for a breach is overly extensive [21], as well as the automatic presumption that the new club would have persuaded the player to terminate their contract with their old club [22].
The second part of EU law that the CJEU considered is Article 101 of the TFEU, which states that agreements which may affect trade between member states by prevention, restriction or distortion of competition are prohibited [23]. The court held that FIFA’s transfer regulations restrict and prevent cross-border competition [24] as the rules essentially hinder and discourage player recruitment due to the risk to clubs of paying compensation or a potential ban from competition [25]. As a result, this fixes the distribution of players and infringes the cartel prohibition, therefore breaching Article 101 of the TFEU [26].
Although the CJEU recognised FIFA’s legitimate need to maintain clubs’ squad stability by preventing aggressive recruitment which could hinder them, [27] this was deemed to be disproportionate due to it being a permanent restriction through the entire European Union, while also, covering the entire duration of each employment contract [28]. As a result, it restricts transfer business beyond necessary. Consequently, the case deemed FIFA transfer regulations to fall foul of EU law on two separate grounds.
Impact
The Diarra ruling will send shockwaves throughout the football transfer system and through football as a whole. As section 17 of FIFA’s transfer regulations has been proven to be unlawful, FIFA will be obliged to change its wording of the section in order to allow for more smooth running of sports competitions [29].
The decision is a win for players, who will be motivated to take on contractual disputes with their clubs which they may have not taken on otherwise [30]. It could also mean players have more bargaining power with their contracts, as they will have the choice of terminating their contract if they want to leave their club. As a result, players will be able to negotiate higher wages with their clubs [31], and clubs may face pressure to grant these at risk of losing their players.
For clubs, a benefit could be them not having to pay joint compensation for signing a player who terminated their contract. However, they will be left in a weaker position when it comes to having bargaining power over their players, and they may have to take up more aggressive recruitment strategies to manage having less control over players [32]. Additionally, another longer-term impact of the ruling could be a fall in transfer fees, as the option of a player terminating means selling clubs will have less power to hold players out until the end of their contracts [33].
The ruling also puts significant doubt on FIFA’s regulations and its ability to appropriately govern international football. As recently as last October, FIFPRO, European Leagues and La Liga filed a joint complaint against FIFA to the European position, regarding the fixture congestion in the international football calendar [34]. The Diarra judgement will only support this claim further, as organisations continue to challenge FIFA’s rules.
The impact can already be seen short term. Only last November, FIFA suspended all of its transfer cases before the Dispute Resolution Chamber (DRC) in relation to Article 17 [35]. The Diarra case is likely to set a precedent which could revolutionise the football transfer system, just as the Bosman case gave power to players allowed players, allowing them to leave at the end of their contracts [36]. It could even allow players to seek compensation for losses going back to 2001 [37].
Conclusion
Overall, the Lassana Diarra case is likely to have immense repercussions on the football transfer market as we know it. Nearly 30 years after the Bosman ruling, football appears to have another landmark change to player contracts and transfers. Whether the impact will be as wide-reaching remains to be seen.
References
[1] Lokomotiv Sign Lassana Diarra, Lokomotiv Moscow, https://www.fclm.ru/en/news/n/lassana-diarra-podpisal-kontrakt-s-lokomotivom-2229/ (last accessed 11 December 2024)
[2] Diarra v Fifa: Some transfer rules break EU law – top court, BBC Sport, Daniel Austin, https://www.bbc.co.uk/sport/football/articles/cjwdydnl3w0o (last accessed 11 December 2024)
[3] The Lassana Diarra case: A New Chapter for FIFA’s Transfer Regulations?, Linklaters, Sinziana Ianc, Benja Arnott, Abe Warraich & Ariel Kaminsky, https://www.linklaters.com/en/insights/blogs/sportinglinks/2024/october/the-lassana-diarra-case-a-new-chapter-for-fifas-transfer-regulations (last accessed 11 December 2024)
[4] Diarra v FIFA – Redefining Football’s Transfer Landscape, Brandsmiths, Maxime Van Den Dijssel, Brandsmiths, https://brandsmiths.co.uk/blog/view/diarra-v-fifa-redefining-footballs-transfer-landscape (last accessed 11 December 2024)
[5] Football Tribunal, Inside FIFA, https://inside.fifa.com/legal/football-tribunal (last accessed 11 December 2024)
[6] Article 22 1(a) FIFA Regulations on the Status and Transfer of Players
[7] The case of Lassana Diarra, Football Legal, Georgi Gradev, https://football-legal.com/content/the-case-of-lassana-diarra (last accessed 12 December 2024)
[8] Article 17 FIFA Regulations on the Status and Transfer of Players
[9] Diarra v FIFA: a game-changer for footballers’ employment rights, LawInSport, Tom Mintern & Elizabeth Orrin, https://www.lawinsport.com/topics/item/diarra-v-fifa-a-game-changer-for-footballers-employment-rights (last accessed 13 December 2024)
[10] ECJ decision in the Diarra case: some of FIFA’s players transfer rules are incompatible with EU law, White & Case, Jasper Wauters & Nikolas Hertel, https://www.whitecase.com/insight-alert/ecj-decision-diarra-case-some-fifas-players-transfer-rules-are-incompatible-eu-law (last accessed 12 December 2024)
[11] Note 3
[12] Note 4
[13] Note 9
[14] Note 3
[15] Note 8
[16] Treaty on the Functioning of the European Union Art 45
[17] Diarra v Fifa Judgement of the Court in Case C-650/22
[18] Note 3
[19] Transforming Transfers? How the CJEU reconsidered FIFA’s Transfer Rules in the Diarra case, LawInSport, Andre Pretorius, Helen Bignall, Max Kaufman, Marie Beacker & Luke Wagner, https://www.lawinsport.com/topics/item/transforming-transfers-how-the-cjeu-reconsidered-fifas-transfer-rules-in-the-diarra-case (last accessed 18th December 2024)
[20] Note 17
[21] The practical implications of the CJEU’s judgement in Lassana Diarra vs FIFA case, Mills & Reeve, https://www.mills-reeve.com/publications/the-practical-implications-of-the-cjeu-s-judgment-in-lassana-diarra-vs-fifa/ (last accessed 18th December 2024)
[22] Note 10
[23] Note 16 Art 101
[24] Note 18
[25] Ibid
[26] Ibid
[27] Note 17
[28] Ibid
[29] Note 21
[30] Ibid
[31] Note 3
[32] Ibid
[33] Ibid
[34] Player unions and leagues file complaint to European Commission over FIFA's imposition of international match calendar, FIFPRO, https://fifpro.org/en/who-we-are/what-we-do/foundations-of-work/player-unions-and-leagues-file-complaint-to-european-commission-over-fifa-s-imposition-of-international-match-calendar (last accessed 18th December 2024)
[35] FIFA suspends all pending cases before the FIFA Disciplinary Committee in relation to Article 17, Football Legal, https://www.football-legal.com/content/fifa-suspends-all-pending-cases-before-the-fifa-disciplinary-committee-in-relation-to-article-17 (last accessed 18th December 2024)
[36] ABSL v Jean-Marc Bosman Case C-415/93
[37] Diarra verdict a landmark day which could alter balance of football power, The Guardian, Paul MacInnes, https://www.theguardian.com/football/2024/oct/04/lassana-diarra-fifa-verdict-landmark-day-alter-balance-of-power-analysis (last accessed 18th December 2024)