Has FIFA’s response to the Dortmund Court Order pushed FFAR into a state of suspended animation? This blog aims to address the reasons as to why the approach of FIFA may prove to be favourable for those rallying against FFAR.
In a few days, the controversial and much-debated FIFA Football Agent Regulations (“FFAR”) is due to be enforced wholly and is set to radically transform the football agent business as we know it. However, the recent notification issued by FIFA on 8th September, 2023 (“Notification”) has raised eyebrows amongst certain agents. Albeit, a few sighs of relief amongst those that benefit from the Notification. In order to comply with the preliminary injunction order issued by the District Court in Dortmund (Landgericht Dortmund) (“Dortmund Court Order”), FIFA has temporarily suspended the implementation of FFAR for all transactions that have a ‘link to the German market’. Such a ‘link to the German market’ would exist the moment any party to the transaction has a link to Germany, irrespective of the domicile of the remaining parties.
In theory, this Notification may have seemed to clear the air on how agents are to navigate the implementation of FFAR owing to the Dortmund Court Order. However, it has resulted in a certain set of agents being subjected to different rules in the same market and thereby may prove to be more anti-competitive than FFAR itself. Moreover, by not defining what a ‘link to the German market’ would include, it has added to the confusion amongst agents and left it open for agents to exploit to their benefit. Furthermore, owing to the multiple legal challenges against FFAR in various jurisdictions across Europe and the UK, there is a risk of FFAR being suspended further (if one is to go by the present approach of FIFA). This will result in unaccounted and irreparable damage to several agents in the short term.
Uncertain legal landscape over the implementation of FFAR
For the convenience of the unversed, the FFAR has been riddled with controversy ever since its inception and there are several legal challenges on-going against the validity of FFAR and its implementation in the Netherlands, Germany, Belgium, Switzerland and the U.K. Most of the legal challenges question the authority of FIFA to regulate the football agent business and the validity of the FFAR under competition law. While some of the claims against FFAR are on-going (such as the claims in Belgium and Switzerland), there have been two conflicting decisions by a court in Germany and Netherlands.
Initially, in March 2023, in response to a claim filed by certain football agents, the Regional Court in Mainz, Germany considered it best to refer a question regarding the validity of FFAR within EU competition law for a preliminary ruling to the Court of Justice of the European Union (“ECJ”). Following this, in a similar claim filed by a group of football agents before the District Court in Dortmund, the judge issued a preliminary injunction order against the implementation of FFAR by the German Football Association within Germany until the issuance of the preliminary ruling of the ECJ. The primary reasoning of the Dortmund Court Order was that the FFAR was not purely a sporting rule and contained an anti-competitive element under Article 101 and Article 102 of the Treaty of the Functioning of the European Union. Furthermore, owing to the pending preliminary ruling of the ECJ and the impending implementation of FFAR on 1stOctober, 2023, the court considered that there was an utmost urgency and necessity to protect the agents in the interim. FIFA has appealed the temporary injunction order before the Higher Regional Court of Düsseldorf to set-aside the Dortmund Court Order. The order on the appeal is still pending but will focus on the preliminary issues and not the principal merits owing to the pending ECJ ruling.
Contrarily, in a similar claim filed by the European Football Agents Association and Pro Agent, the District Court for the central region in Netherlands, dismissed the claim for injunction on 10th May 2023 and fined the claimants. The reasoning of the court here was that the claimants failed to show any urgency and that the ECJ was already considering similar questions.
Hence, there are two conflicting rulings within the EU and possibly another decision in the U.K. against FFAR depending on the outcome of the English FA Rule K Arbitration Award which is due to be published on 30th November, 2023 as per the English FA’s press release. In addition to this, the Competition Commission in Switzerland has also commenced preliminary investigations on FFAR’s compatibility with Swiss competition law. It is no doubt that for any resolve in the matter, the preliminary ruling of the ECJ will be decisive in setting a legal precedent across Europe.
FIFA however has a strong weapon in its arsenal in light of the detailed award by the Court of Arbitration for Sport (“CAS”) on 24th July, 2023 on the validity of FFAR under EU Competition law and FIFA’s competence in regulating the football agent business. In the opinion of the author, it was a hasty decision by the Professional Football Agents Association to rush to CAS for relief as it provided an opportunity for FIFA to legitimise the FFAR by a supreme sports arbitration body. Nevertheless, the decision of CAS has stretched the limits of the autonomy of sports associations vis-à-vis competition law and will have a bearing on the preliminary ruling of the ECJ.
Why is the approach of FIFA problematic?
With D-day fast approaching, and the legal validity of FFAR subject to the outcome of the ECJ preliminary ruling, FIFA has possibly pushed FFAR into a state of suspended animation by choosing to suspend FFAR in transactions having a link to Germany.
In the opinion of the author, as the ECJ on average takes on around 17.3 months (as per data in 2022) to issue a preliminary ruling on referral by a national court in the EU, there is no scope of any resolve in the short term on the legal challenges against FFAR. Albeit, the decision of the appeal filed by FIFA against the Dortmund Court Order and the rulings on proceedings on-going in other jurisdictions may have an effect on the suspension of FFAR. Irrespective of the variables, as things stand today, by suspending the FFAR in a particular jurisdiction rather than wholly suspending it, FIFA has unintentionally provided a gateway for agents and agencies to exploit the ‘link to the German market’ criteria to their benefit and avoid the implementation of FFAR.
Agents and big sports agencies, may attempt to incorporate a subsidiary company in Germany (known as Töchtergesellschaft) to conduct their agency business. According to the laws in Germany, such a subsidiary company is considered an independent legal entity, separate from its parent company. Some agents may also decide to establish a limited liability company (known as Gesellschaft mit beschränkter Haftung (GmbH)) to conduct their business. Such a limited liability company requires only one person to set up and a minimum share capital of € 25.000. While this may not be feasible for smaller agents it will be a convenient route for big sports agencies to establish a ‘link to the German market’ and evade the implementation of FFAR. As a result of which, such agents/agencies will be able to benefit from the older regulations, which does not mandate for a service fee cap and charge a higher fee from their clients worldwide. This not only provides such agents an unfair advantage over other agents that are bound by FFAR’s fee cap rules, it also increases the economic gap and defeats the objective of FFAR to ensure that reasonable service fees are charged by agents. Moreover, agents from Germany who have not passed the FFAR license test will benefit from the older regulations and be at unfair advantage compared to agents licensed under FFAR. This may also motivate other agents who are yet to take the test, or have not passed, to establish such a link to the German market and continue to offer agency services. In essence, the FFAR will not be effectively implemented and remain in a state of suspended animation until the ruling of the ECJ.
In addition to the above, owing to the legal uncertainty and fractured suspensions of FFAR, the football legal landscape is going to be more chaotic than ever. National Football Associations will have to consider the effect of the suspension of FFAR in Germany and other jurisdictions and make suitable exceptions in their regulations. Agents will have to amend their representation contracts each and every time either party has a link to the German market, thereby making their tasks tedious. There will be further uncertainty as to the validity and enforceability of the representation agreements entered into between 16 December 2022 and 01 October 2023. The obvious outcome of all of this will be an increased number of disputes between players/coaches/clubs and agents.
The approach adopted by FIFA in response to the Dortmund Court Order may have done more damage to the effective implementation of FFAR and only time will tell if the above-mentioned consequences will materialise. By failing to clearly state as to what a ‘link to the German market’ would include, FIFA has left it open-ended for agents/agencies to exploit to their benefit. The obvious outcome of this is that agents that are largely against the regulation of the service fee cap, may decide to choose the best of the FFAR and accordingly waive the ‘link to the German market’ flag whenever it is convenient for them to evade the application of FFAR. Furthermore, amongst all the speculation, one thing that is definite is that the Notification has in-fact proved to be more anti-competitive than FFAR itself in a way – as it has created an unfair advantage for agents involved in transactions that have a link to the German market. Moreover, if other jurisdictions also rule in favour of the agents and FIFA decide to extend the suspension to those jurisdictions as well, it will only result in the objectives of FFAR being defeated and further destabilise fair competition amongst agents. All the vices of the erstwhile Regulations on Working with Intermediaries, 2015 will be brought to the forefront and there will be an influx of disputes thereby affecting the stability of the industry.
Instead of tackling the issue head-on, FIFA should have adopted a passive approach and suspended FFAR wholly as a negotiation tactic to bring the stakeholders to the table and agree for a mediation on the issues. Mediation is a viable option in such an instance as it is a quick and confidential process that is without prejudice to the interests of the parties. As all stakeholders want agents to be recognised by FIFA and do away with the vices of the earlier regulations, there is scope of an agreement between the parties on the regulations. Such a process would also cater to the cries of those stakeholders that have repeatedly claimed that their opinions were not considered in the implementation of FFAR.
Separately, while the life-line of this blog may be short-lived, it is going to be an interesting period going-forward for legal enthusiasts and sports lawyers as the ruling of the ECJ provides another opportunity for a deeper analysis of the ‘Meca-Medina test’ which will form the foundation for the analysis of the legality of FFAR under EU Competition law. It will also serve as an important jurisprudence for understanding the never-ending tussle between sport regulations and competition law, which is a key issue in regard to the establishment of the European Super league, the PGA-LIV Golf merger and the pending appeal of the International Skating Union.