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Apr 116 min read

Playing Away in Luxembourg: Sport’s Big Day at the Court of Justice – The First Half

Simon Boyes, Senior Lecturer at NLS https://www.ntu.ac.uk/staff-profiles/law/simon-boyes




On the 21st December 2023 the Court of Justice of the European Union issued three important judgments relating to the regulation of sport and European Union law. In the first of those, it considered the legality of the “homegrown player” rules operated by the governing body of European football, UEFA, as well as domestic football associations. In the second and third cases it considered the compatibility of rules imposed by sports regulators restricting the establishment of rival or ‘breakaway’ competitions and tournaments.


This blog concerns the first of those judgments, concerning “homegrown player” rules, which evaluates the compatibility of such measures with both European Union free movement of persons provisions and competition law. The rules apply to clubs like Manchester City, Arsenal, Manchester United and Newcastle United, the English teams participating in this season’s UEFA Champions’ League competition, but also to clubs competing in UEFA’s other tournaments, the Europa League and Europa Conference League.  UEFA’s “homegrown player” rules require clubs to include, in their squad of first-team players registered to compete in European club competition, eight who have been registered with a club in the same association for a period of three years between the ages of 15 and 21, a minimum of four of whom must have been trained by the club itself. National league competitions, such as the Premier League in England, impose the same rules on their member clubs. This is true, in this case, of the Belgian Football Association (URBSFA) which imposes “homegrown player” requirements for clubs participating in domestic competitions.


The claimants in this case, the well-known Belgian football club Royal Antwerp and one of its registered players known simply as “UL”, had sought to challenge these rules through an arbitration brought before the Belgian Court of Arbitration for Sport (CBAS). Having been unsuccessful, the claimants then sought recourse before the Belgian Court of First Instance in Brussels. That court then sought clarification from the Court of Justice of the European Union – by way of a request for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (TFEU) – as to the compatibility of the rules with Articles 101 and 45 of the TFEU, which regulate anti-competitive, cartel-type activity and restrictions on the free movement of persons, respectively.


As has now become commonplace in the application of competition law principles to the regulations of sports federations, the CJEU found that the rules promulgated by UEFA and URBSFA amounted to a “decision of an association of undertakings”, and so had the capacity to fall within the ambit of Article 101 TFEU. The Court further determined that the measures were, in principle, anti-competitive in that they limit the ability of clubs to recruit and field players beyond those falling in the “homegrown” classification. However, it noted, too, that professional regulatory bodies could legitimately impose ancillary restrictions which might be regarded as necessary in pursuit of wider, legitimate aims, and that such measures would be regarded as falling outside of the scope of Article 101 TFEU. Only if the restrictions were sufficiently severe as to be regarded as having an anti-competitive “object” could they fall to be considered. Even then, the Court noted that there was scope for measures to be justified under the terms of paragraph 3 of Article 101 TFEU. Notably, the Court, while outlining the principles to be applied in this case, emphasised that it was for the referring Belgian court to make determinations of fact in this case.


In considering the application of Article 45 TFEU, the Court identified that the “homegrown player” rules were likely to have a discriminatory effect, albeit indirect, based on a player’s nationality; “homegrown” players were inherently more likely to be Belgian nationals and the rule was likely, therefore, to favour them over nationals of other member states. The Court rehearsed the, now well-established, principle that such indirectly discriminatory measures may be regarded as compatible with Article 45 TFEU where they impose restrictions which are necessary and proportionate to the pursuit of a legitimate policy goal in the public interest. In applying that to this particular case the Court identified the encouragement of clubs to recruit, train and develop young footballers as being a valid public interest objective; it did, however, recognise that the question of proportionality was not a given, and that the rules did not necessarily fulfil their stated aim. Once again, the Court noted that this was a matter of fact for determination by the referring Belgian court.


The judgment of the CJEU is notable for two main reasons. First, it opens up the possibility that the relatively well-established “homegrown player” rule may be open to challenge and, second, it adopts a relatively ‘soft’ approach to the issue by emphasising that the application of European Union legal principle is a matter for the referring Belgian court.


The first of these elements is of interest in that it reaffirms that European Union law continues to pose a genuine risk to sports regulations of this kind, which might – as a consequence of their relatively long-standing – have been thought to be immune from challenge. This reflects a small shift from what might be legitimately regarded as a relatively ‘cosy’ relationship between the European Union institutions – particularly the European Commission and the Court of Justice – and sports regulators, for example in their respective responses to the imposition of Financial Fair Play (now Financial Sustainability) rules (see, for example the CJEU and Commission responses, linked in further reading). This appears to be a return to the approach adopted in the immediate aftermath of the seminal Bosman judgment in cases such as Lehtonen and Deliège (all linked in further reading below). As with this judgment, both these cases emphasised the conditional nature of acceptance of similarly restrictive measures by European Union law.


The second notable characteristic of the judgment is the emphasis on the role of the referring court as the ultimate decision-maker in this case. The CJEU sets out the applicable principle in its judgment, but makes no attempt to apply that to the dispute in question. This stands in stark contrast to the Court’s approach in the aforementioned Bosman case, in which its judgment was effectively determinative of the outcome, despite the fact that both cases reached the Court of Justice by way of a request for a preliminary ruling from a national court. This reflects the more cautious approach adopted in the earlier, pre-Bosman jurisprudence in Walrave and Koch and Dona (linked in further reading).


Taken together, these can be seen to amount to the adoption of a balanced, supervisory-style approach, in which the Court emphasises the ongoing applicability and importance of European Union law, but stops short of the type of direct, aggressive style of judgment adopted in some of its most notable judgments in the field of sport. As such, this case serves as an important reminder to sports federations of their legal obligations, the limits of their discretion and the potential, ultimately, for a much more interventionist approach by the Court of Justice should those boundaries fail to be respected.

 

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