The Super League case is about ensuring a proper investment climate in the European model of sport, without which the model is doomed
In the end, greater scrutiny of the European sports sector under competition and investment law will not threaten the model according to which this sector is organised, but indeed is the only thing that can save this model. Poor investment climate can only push the sector into the hands and financial influence of state-owned or oligarch-owned businesses, and feed the corrupting influence of national politics which is ineffaceable in such circumstances.
A hearing before the Court of Justice of the European Union took place last week in a dispute over the legality of FIFA and UEFA’s crackdown on the European Super League. The ESL was created by a handful of the richest European football clubs from the UK, Italy and Spain, but was blocked before the get-go by the football governing body, which threatened to sanction the clubs and players involved. FIFA and UEFA were cheered to battle against “excessive commercialisation” and “Americanisation” of European sport by fans and governments of the EU member states concerned. The dispute over the legality of this blitz is pending before a commercial court in Madrid. The Spanish judge presiding over the case referred some key questions of EU law to the top court.
Abuse of dominance and the intriguing eagerness of the member states
The Super League case is seen primarily as an antitrust matter. Did FIFA and UEFA—both private organisations, but with a virtual monopoly on organising international competitions in Europe—abuse their position by blocking the creation of an elite European league conceived as competitive to their own Champions League? Are the FIFA and UEFA statutes, which grant them the right to authorise any such games or not, and to sanction associated clubs and players who would disobey their dicta, anticompetitive agreements? Do the pro-competitive effects of FIFA’s and UEFA’s prerogatives and actions, essentially consisting in protecting the purportedly less profit-driven and more socially-oriented, and therefore vulnerable, “European model of sport,” outweigh and justify their restrictive effects? Are they necessary and proportionate? These are said to be the key questions raised by the matter.
Interestingly, several member states intervened in the proceedings before the Court of Justice, and almost all of them reportedly sang the praises of FIFA and UEFA during the hearing, while viciously attacking the Super League and its founders. This raises the question of the role of the states in attacking the Super League. Should governments be more concerned about the impact of the powers of FIFA and UEFA (or similar sports governing bodies) on the common market, trade between those member states, and the freedoms of their citizens? Even leaving aside for the moment the particular case of the rather irritatingly elitist and “big business” Super League.
Effect on EU freedoms
One issue referred to the Court of Justice by the Spanish judge, less discussed than the classic antitrust aspects of the case, is whether FIFA’s and UEFA’s conduct blocking the rollout of the Super League violated fundamental EU freedoms, including the freedom to establish businesses, provide services, and move capital (invest) across the borders of EU member states. It is established case law that the provisions of the Treaty on the Functioning of the European Union envisaging these freedoms can apply not only to the conduct of the member states themselves, but also to the conduct of private economic operators whose position on the market enables them to unduly curb intra-EU trade, as is the case with sports governing bodies. The founders of the Super League understandably rely on this doctrine of horizontal application of the EU treaty freedoms, because they are suing FIFA and UEFA and pragmatically pursuing their rights in the specific case.
But there is another provision in the EU treaties that is relevant for the discussion of this fascinating problem: Art. 106 TFEU. It provides that if member states create state monopolies or grant special or exclusive rights to private enterprises, they must make sure that the operations of such entities do not unduly limit the enjoyment of the EU freedoms by EU citizens. In other words, member states cannot wash their hands and escape liability for violating the EU treaties and depriving their citizens of the freedoms enshrined therein by delegating regulatory functions to state-owned or private entities, even when the delegation as such is perfectly legitimate and justifiable.
FIFA, or rather UEFA, which is FIFA’s most powerful regional confederation responsible for the European football market, is essentially such an entity. Like all similar international sports governing bodies, formally it is a private entity—an association established under the laws of Switzerland. Practically, however, it is the regulator of the European football market, owing this special position to the states in which it, and its member national football federations, operate.
In some states, like Poland, this is explicit from the relevant laws, which require a state licence to create a national federation in a particular sport, grant certain exclusive rights to such national federations, and provide that an association wishing to become a national sport federation must be a member of the relevant international sports governing body. In others, the backing of the state for SGBs is more nuanced. However, all relevant European states tolerate or explicitly ensure that virtually all sports clubs active in their territory are members of the relevant national federations and subject to the profoundly autonomous jurisdiction of the relevant international SGBs, including their dicta on whether they can participate in competitive private games or not.
FIFA/UEFA, like other international SGBs, is therefore a monopoly and a private enterprise furnished with special, exclusive and quasi-regulatory rights. The peculiar thing is that it was not furnished with those rights by one member state, but by all of them concordantly. (This might explain why its actions against a disruptor like the Super League receive such praise from practically all member states.) But if this is the case, then all of those member states are jointly and severally responsible to ensure that the actions of their common quasi-regulator does not violate the freedoms of EU citizens—in other words, that it does not unduly restrict citizens’ rights to freely establish sports businesses, provide sports services, and invest in sports across the borders of EU member states. Indeed, it is probably only the joint action of the member states, or the EU, that can ensure this, as some international SGBs have grown to such power that they can easily take on weaker individual states wishing to singlehandedly curb their abuses, as they have repeatedly shown in the past.
Effect on foreign, non-EU investments
Importantly, this is not an internal EU problem. The European sports market attracts large investments from non-EU countries, including countries with which EU members have bilateral investment treaties. And it could probably attract much more investment if at least some of its sectors were better governed. This concerns in particular the potent but particularly badly governed disciplines in many countries of Central and Eastern Europe (such as ice hockey, basketball and rugby).
But this means that actions of formally private SGBs in Europe can lead to liability of European states under their bilateral investment treaties with countries exporting capital into the European sports market. These European countries may be failing to fulfil their obligations stipulated by such treaties to properly promote investments in sport in their territory from the other signatory state, if they do not counter excessive or unreasonable barriers to such investments created by the SGB. They may also be directly liable for the failure by the SGB to treat existing investments fairly and equitably, or at least indirectly liable for failure to protect foreign investments against abusive actions of the SGBs, under those states’ duty to extend to them full protection and security against actions of private parties in their territory.
Notably, the founders of the European Super League complain that even if one could justify granting monopoly powers to FIFA and UEFA to permit or prohibit the establishment of competitive leagues, the lack of objective criteria and the arbitrariness with which these powers can be and are often exercised by these and other SGBs, and the lack of an effective process to appeal against them, is indefensible. This can be seen as both an undue barrier to future investment and a failure to guarantee fair and equitable treatment of investments already made.
European model of sport
None of this prevents states from protecting the “European model of sport.”
Whether this model merits protection is a timely policy question. The arguments about its benefits seem shakier these days. In the more laissez-faire American model, stakeholders seem to have significant sway on the governance of their disciplines through powerful player unions, which were able to grow into a force to be reckoned with, also thanks to courts and law enforcement agencies, which treat professional sport like any other business and have been able to expose and eradicate human-rights violations and abuses of market power in the sector. Whereas in the allegedly more “social” and “democratic” European model, the powers of “athletes’ committees” established at the federations are often purely symbolic, actual players associations which try to stand up for their members’ rights are most often ignored at best, and courts and law enforcement agencies to which they try to appeal rarely have any understanding of the sports business or of the power dynamics and abuses within it, and prefer to refrain from intervening even in the most obvious of cases.
The belief in the social and human-rights-promoting role of sport organised according to the European model has also been undermined recently by the hesitant and untimely reaction of international SGBs to the war in Ukraine and to the attempts of Russia and other authoritarian states to sport-wash their regimes and ramp up the images of their strongman leaders with the help of subservient national sports federations and buying the rights to organise profile-lifting mega-sporting events. This was combined with the SGBs’ failure to prevent shameful policies undertaken in the wake of the war by national federations and politicians in some states against individual athletes playing for local clubs, aimed at expelling them from national leagues purely on the basis of their nationality. Somehow the “profit-oriented” clubs and leagues in America were able to resist this populist mob mentality, while at the same time taking a proper stance in the international sports arena against Russian and Belarusian sports institutions and their representatives.
Nevertheless, choosing between the European model of sport and a more market-oriented model is a perfectly legitimate policy decision for which competition law, EU law, and international trade and investment law all leave ample regulatory space. What these laws prevent is the abuse of the European model by employing arguments about the need to protect it to conserve arbitrary and authoritarian powers of quasi-regulators, and resisting the need to remedy abuses and governance failures as they become more and more glaring, especially in less-developed sports markets.
In the end, greater scrutiny of the European sports sector under competition and investment law will not threaten the model according to which this sector is organised, but indeed is the only thing that can save this model. This may not be immediately seen in the buzzing sports markets in which the idea of the Super League emerged. But in less-developed European sports markets it is all too clear that a poor investment climate can only push the sector into the hands and financial influence of state-owned or oligarch-owned businesses, and feed the corrupting influence of national politics which is ineffaceable in such circumstances. No matter how irritating and snobbish the idea might seem to us, the Super League project deserves to be defended—for the sake of saving the European model of sport.
Stanisław Drozd, adwokat, Sports Law practice, Wardyński & Partners
