Compiled by The Law Offices of Nandan Kamath
Introduction
Right to free movement, including free movement of workers, is one of the most important rights guaranteed by the European Union (‘EU’). Every citizen of the EU has a right to move and reside freely in the territory of the member states and has access to all social advantages of that nation. With sport progressively becoming commercial in character, athletes have demanded that they be treated on the same footing as workers or professionals in other disciplines. This module discusses whether such right extends to athletes - both professional and amateur and how the right can be applied to issues regarding transfer rules and discrimination based on nationality. The evolution of these principles in the EU impacts numerous international sports persons and will also serve as important precedent the world over.
Freedom of Movement in EU
Free movement of workers is guaranteed by Article 45 of the Treaty on the Functioning of the European Union (‘TFEU’) and developed by EU secondary legislation and case-law of the European Court of Justice (‘ECJ’). EU citizens are entitled to:
1) Look for a job in another EU country
2) Work there without needing a work permit
3) Reside there for that purpose
4) Stay there even after employment has finished
5) Enjoy equal treatment with nationals in access to employment, working conditions and other social advantages
For a worker to exercise the freedom of movement in the EU he must be a national of a member state and it must be for the purpose of an economic activity.
The Bosman case and the Kolpak ruling are landmark judgments in the advent of this doctrine in the EU nations. The Bosman case dealt with transfer rules and how the rules were obstacles to free movement and nationality quotas as a form of discrimination
Mr Bosman, a Belgian footballer who had come to the end of his contract with a Belgian club, believed that the Federation Internationale de Football Association (FIFA) transfer system had prevented his transfer to a French club. He brought an action against his club, the Belgian Football Federation and the Union des Associations Europeennes de Football (UEFA), on the grounds that the transfer system and the rules governing nationality were discriminatory and invalid because they infringed the right to free movement of workers within the EU. The ECJ held that the rules governing transfers and nationality indeed prevented the free movement of players. Hence, the ECJ found that a club may not prevent a player who is a national of an EU nation from being employed by a club of another EU nation on the expiry of his contract, or complicate matters by requiring that the latter club pay the former club a transfer, training or development fee. Further, according to the judgment, rules on nationality whereby a club may field only a limited number of professional players who are nationals of another EU country are not authorised.
EU before the Bosman Case
In Europe, prior to 1995, the transfer system was on the lines of the U.S. reserve clause or Rozelle Rule system. The transfer system entitled clubs to prevent athletes from transferring to other clubs unless the holding club was satisfied with the amount of compensation received for their athlete.
A system of retain and transfer was followed by football clubs whereby the club could prevent a player from moving by keeping his registration and refusing to send him to another club.
This was done in the case of Eastham v Newcastle United Football Club where the football player George Eastham was not allowed to leave the club after he had a fall out with the club. The club also reduced his wages as he had made a transfer request. Eastham referred to this as a “slavery contract” and in protest, refused to play for Newcastle at the end of the 1959-60 season. Finally in 1960, Newcastle gave in, and sold him to Arsenal for £47,500.
Another subsidiary question was whether discrimination based on nationality was a restriction on the freedom of movement of athlete workers.
This was first questioned by two Dutch nationals in BNO Walrave and LJN Koch v Union Cycliste Internationale (UCI) where the UCI rule that the pacers (persons on the motorcycle) and the stayers (persons on the bicycle) in the competition had to be of the same nationality was challenged. The ECJ held that such a rule was incompatible with the right to freedom of movement of workers guaranteed by the EC Treaty and further pronounced that the practice of sport is subject to community law only in so far as it constituted an economic activity.
In another case Dona v Mario Mantero the agent tried to recruit foreign players into the Italian football federation. The ECJ upheld the decision in Walrave, holding that European Law applies to sport if the matter is considered economic.
Transfer System
The transfer rules restrict the movement of sportsmen who wish to pursue their career in another member state. They restrict the movement of players even without regard to nationality. They can be deemed compatible with EU law only if compatible with the EC Treaty and justified in public interest. The ECJ in the Lehtonen case implied that limited and reasonable restrictions on mobility may be justified such as transfer windows.
An alternative system of transfer was proposed after the Bosman case. In this system, the payment of transfer fees at the end of a contract was substituted by the payment of a fee for a preliminary breach of contract. This resulted in long term contracts so that the player’s contract would never end. The European Commission opposed this practice.
This system was however replaced by FIFA in 2001 and a new draft was prepared in 2005 which required a training compensation to be paid to an athlete’s training club when the athlete signed his first contract and for every subsequent transfer after that till he attained the age of 23. This may also be considered a restriction on free movement as the training club can restrict a player’s movement if it feels a particular club cannot pay the training compensation. However no formal statement has been issued by the European Commission on this system.
Nationality
Rules leading to direct discrimination on the ground of nationality are not compatible with EU law. The principle of non-discrimination is guaranteed by Article 18 of the TFEU. Discrimination can be in the form of a complete ban on taking part in a competition or quotas or reservations for particular nationalities. Any rule limiting the participation in competitions based on nationality is a restriction on free movement. The only grounds of restrictions on free movement are those given in Article 45 of the TFEU.
Freedom of Movement in the U.S.
Unlike Europe and Australia, the principle of freedom of movement in the U.S. for athletes was seen almost a century ago. The U.S. has professional sport and amateur sport unlike Europe which follows a pyramid system consisting of different leagues.
In the U.S., freedom of movement for athletes is generally in the context of the Reserve clause or the Rozelle rule.
The reserve clause was used in baseball where a particular player was reserved to another club. This gave the club the exclusive right to re-contract the player once his contract had expired. The only way he could be transferred to another club was if the new club paid an adequate compensation to the existing club.
Similar to the reserve clause, the Rozelle Rule provided that fair and reasonable compensation needed to be paid to the athlete’s former club before being transferred.
The Rozelle rule was first challenged in Mackey vs. National Football League where Mackey, the president of the players association, argued that this rule limited the players bargaining power because the clubs were not permitted to pay the compensation amount required by the clubs. The Court found that the rule violated restraint of trade laws and ordered the NFL to reduce the restrictions.
However one year after this judgement, the Rozelle Rule was re-introduced since the representative player association and the NFL entered into the collective bargaining agreement permitting the rule.
Conclusion
The free movement of workers in sport is an area that has seen a great deal of litigation, especially in the ECJ which has dealt with numerous cases, from Walrave and Koch in 1974 to Olympique Lyonnais v Oliver Bernard in 2010. It is the area of sport which has most impacted EU law.
The Bosman case has been the landmark judgment relating to this issue. However this judgement has only reduced the problems but has not completely eliminated them. The UEFA‘s recent home grown system faced a lot of criticism for being against the principle of freedom of movement for athletes.
Freedom of movement is a fundamental principle and any derogation must be in conformity with the exceptions given in the TFEU.
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