Diarra vs FIFA’s RSTP – Bosman 2.0?

On 4 October 2024, the Court of Justice of the European Union (the “CJEU”) issued its long-awaited decision in the case of C‑650/22 FIFA v. Lassana Diarra.

By its ground-breaking decision, the CJEU found that certain provisions of the FIFA Regulations on the Status and Transfer of Players (the “FIFA RSTP”) violate EU law on the free movement of workers and EU competition law.

What happened?

The case arose from a dispute between former France midfielder, Lassana Diarra, and Russian club, Lokomotiv Moscow. In 2014, the Club brought a claim against Diarra in the FIFA DRC for allegedly terminating his employment contract without “just cause”, claiming EUR 20 million in compensation. The player disputed the claim, alleging that the club had not paid him in full.

Diarra was ultimately ordered to pay EUR 10.5 million to Lokomotiv. However, pending determination of the claim, Diarra’s career was put on hold. Belgian club, Royal Charleroi S.C wished to sign him, but were unwilling to do so owing to the effect of certain provisions of the FIFA RSTP.

The relevant provisions of the FIFA RSTP are:

1. Article 17(2) – which provides that, where a player has been found to have terminated his contract with his former club without just cause, the player and his new club will be jointly and severally liable for the payment of any compensation owed by the player to his former club (calculated in accordance with Article 17(1) of the FIFA RSTP);
2. Article 17(4) – which provides that the new club shall be presumed to have induced a breach of contract where they sign a player who has terminated his previous contract without just cause during the “protected period” (two or three years from the start of the player’s contract with his former club, depending on the player’s age) and that sporting sanctions (i.e., a registration ban) shall then be imposed on the new club.
3. Article 9(1) and Annex 3 – which provide that, in case of the transfer of a player between clubs affiliated to different national associations, the International Transfer Certificate (“ITC”) that the national association of the new club needs to obtain from the national association of the former club in order for the player’s registration to be lawfully transferred shall not be provided whilst a contractual dispute between the player and his former club is ongoing.

Diarra therefore brought a claim in the Belgian courts against FIFA and the Belgian FA, effectively arguing that these provisions were incompatible with EU law and had caused him to lose EUR 6 million. The Belgian courts partially upheld Diarra’s claim, which led FIFA to appeal the relevant decision.

The issue of compatibility with EU law was subsequently referred to the CJEU and, in its decision of 4 October 2024, the court held that all of the above provisions (including parts of Article 17(1)) of the FIFA RSTP are, on their face, unlawful. Whilst the ultimate decision rests with the Belgian courts, the CJEU’s findings are so damning that it is virtually certain that this ruling will be decisive.

In summary, whilst the CJEU accepted that “ensuring the regularity of club football competitions” and “maintaining a certain degree of stability” in clubs’ squads are legitimate objectives, it held that the existing rules disproportionately restrict players’ freedom of movement and clubs’ ability to compete with each other for players’ services, within the EU.

Importantly, the CJEU emphasised that the “traditional mechanisms of contract law”, such as the right to receive compensation in the event of breach of contract or a third party inducing a breach, are sufficient to ensure contractual stability and the operation of a transfer system.

Further, whilst sporting sanctions may be lawful, this will only be so where such sanctions are proportionate to any wrongdoing. Certainly, a presumption of wrongdoing on the part of a player’s new club, is now dead in the water.

What does this mean for players?

The Diarra decision will undoubtedly have ramifications for the international football transfer system. However, this is not quite a new Bosman.

Players still have to respect their contracts, and compensation will be payable in the event of breach.

However, the manner in which such compensation is calculated in cases within the FIFA RSTP will now be different. It is not entirely clear what this will look like, but the CJEU has made clear that matters such as the value of the player’s new contract and the costs incurred by the former club in signing the player are irrelevant.

The CJEU is clear that compensation must be calculated in accordance with the applicable national law, and that any other applicable criteria must be objective and must genuinely advance the legitimate aims of FIFA, rather than merely preserving the financial interests of clubs.

If compensation is payable for termination without just cause under the FIFA RSTP, though, players will now be on their own in having to foot the bill. Whilst the removal of automatic joint and several liability for a new club reduces the risks for a club signing a player who has terminated a contract with their former club (and therefore improves players’ freedom of movement), Article 17(2) of the FIFA RSTP did provide some comfort for players who would otherwise be financially ruined if ordered to pay compensation, as they knew their new club would pay.

Whilst the new approach to compensation may mitigate this risk, the CJEU’s decision may thus have unintended consequences for players found to have terminated contracts without just cause. Players, and their agents, would therefore be well-advised to seek careful legal advice before taking any action to terminate their contract, or when faced with a threat of termination by a club, noting that the player will likely face a ban from playing if they are unable to pay. However, whilst the CJEU’s decision does not rule out sporting sanctions on players, the Swiss Federal Tribunal’s decision in the well-known Matuzalém case made clear that such sanctions must be limited in duration.

Further, following the court’s ruling regarding ITCs, if a player believes they are entitled to terminate with just cause and this is disputed by their former club, they will not necessarily be prevented from moving on (subject to the possibility of their former club obtaining injunctive relief). This is positive.

However, the CJEU decision does not acknowledge that FIFA already allows player’s registrations to be transferred on a provisional basis pending the resolution of contractual disputes, so as to avoid unduly restricting the player’s right to work, in accordance with the consistent jurisprudence of FIFA’s judicial bodies. Accordingly, the ruling against Article 9(1) FIFA RSTP is not as drastic as it might seem.

What does this mean for clubs?

Clubs, too, still have to respect players’ contracts with other clubs, and compensation will be payable in the event that they induce breaches of such contracts.

As above, though, the manner in which such compensation is calculated may now be different. Whether this will result in lower transfer fees remains to be seen.

Further, without joint/several liability, clubs who have lost players to termination without just cause may struggle to recover what they are owed, as players may not be able to pay.

Sporting sanctions will still be applicable for inducing breach of contract and, thus, there remains a significant disincentive for clubs to do so. However, in the absence of the presumption of inducement, and no automatic joint/several liability, clubs will no doubt wish to take legal advice on what does / does not amount to an inducement, to take advantage of the more open market (as clubs will now be free to sign players who have left their former clubs but remain in a dispute).

What about historic and ongoing disputes?

If a player, club or agent has suffered loss as a result of the application of the relevant parts of Article 17 of the FIFA RSTP historically, they may now have a substantial claim for damages against FIFA. For example, if a club was required to pay compensation under Article 17(2), or if a player missed out on a new contract (and their agent on commission), they may be able to sue FIFA for compensation.

Ongoing disputes may now change direction significantly. But what if a matter has already been heard by FIFA’s judicial bodies or the CAS, but a decision not yet been rendered? It may be open to the parties to argue that the matter should be re-heard.

Authored by

William Sternheimer
Partner

Omar Ongaro
Special Counsel

Ben Cisneros
Associate

Sam Kasoulis
Associate