Analysis of the Bosman Case

Analysis of the Bosman Case The decision of the ECJ in the Bosman case[1] had an extremely significant impact on professional sports within the European Union. As has been pointed out by a number of commentators the decision in Bosman led to an overhaul of the existing transfer rules of club football within Europe. It also had a wider impact on professional sports as a whole as the post-Bosman period witnessed a significant influx of migration of professional athletes within the EU.[2] Within the EU, sport has assumed a special status and forms an integral part of European identity and its culture. The European parliament has coined the term specifity of sports to address the interaction of Community law in the sporting arena and the extent of such an interaction.[3] This interface between sports and community law was first addressed in Welgrave and Koch v Union Cycliste Internationale[4] followed closely by another decision in the case of Dond v Motero.[5] Almost twenty years down the line came the decision in Bosman which clearly elucidated the role of Community law within the sporting arena and in the process reaffirmed and elaborated upon some of the principles discussed in the two above mentioned decisions. The controversy around the Bosman decision stems from the fact that it put an end to the existing transfer process in European football by abolishing player transfer fee system and creating free agency for European footballers. It also brought an end to the existing UEFA Non-National rules. Both the above regulations followed by European clubs were tested against the Community provisions aimed at protection of labour rights and were found wanting. The transfer rules as well as the nationality rule was found to be violative of Article 48 of the Community treaty safeguarding against free movement of labour as well as anti-discriminatory treatment of workers. The significance of the Bosman judgment lies in the fact that it managed to make a significant contribution to the corpus of labour law by emphatically reinstating that sportspersons rights were protected within Community law and also laid down the framework for subsequent judgments which further established the labour rights of pr ofessional sportspersons. The paper will first explain in brief the background in which the Bosman judgment arose. Then paper will delve into the intricacies of the judgment along with some of the most persuasive arguments raised by the parties to the dispute. Then judgment of the court along with the reasoning behind the judgment will be explored. At the outset it has to be mentioned that the paper will only address the issues of transfer rules and nationalily rules which were evaluated on the anvil of Article 48. The ancillary issue of related to Article 85 and Article 86 of the Community treaty would not be addressed. In the next section the paper will explore the extent to which the judgment in Bosmans case contributed in settling the law related to free movement and non discrimination of sportspersons within the EU. In this section of the paper subsequent judgments would also be briefly looked into to describe the establishment and development of the principle of applicability of non discriminatory princ iple within the arena of sports in the EU. Finally the paper will briefly look back at the arguments raised in the Bosman case related to the need for keeping sports outside the ambit of the provisons of Community treaty. In this section existing regulations in England as well as the United States will be looked into to evaluate whether the guidelines laid down in Bosman is in sharp contrast to the sporting regulations existing in those states. Literature Review A Closer Look at the Judgment of Bosman Background and Facts Within the European Union football is played either as an amateur or a professional sport. The structure of professional football comprises of clubs which belong to national associations or federations. The national associations including Belgiums ASBL Union Royale Belge des Societes de Football Association (URBSFA) are members of the Fà ©dà ©ration Internationale de Football Association (FIFA). FIFA is again divided into confederations, UEFA being the confederation which governs football in Europe. As per the rules framed by the URBSFA prior to Bosman case, every player whose contract is expiring must be offered a new Contract by April 26, failing which he is given amateur. The player has the option of accepting or rejecting the contract offer. If the player rejects the contract, he is placed on the compulsory transfer list for a month from 1st may onwards. In this period any club can buy the player from his existing club even without the permission of the existing club by paying certain compensation fee for training which is called transfer fees. On 1st June the period of free transfers begins and in this period a player can be transferred by the mutual agreement of both clubs after the payment of the requisite transfer fees. If the transfer does not take place the clubs are required by URBSFA to offer a contract to the player which is not less than the initial contract of April 26. If this contract is rejected by the player, he is classified as an amateur and has two wait two years to obtain a transfer without the clubs consent. Jean Marc Bosman, player for Belgian club RC Liege, was offered a contract before the expiry of his existing contract which entailed a substantial reduction in his wages, of almost 75%. As a result Bosman refused this new offer and as a consequence was put on the transfer list. During the period of free transfer the French second division club US Dunkerque became interested in employing Bosman. However as per rules for international transfers, the Belgian football association had to pass a transfer certificate to the French football association within a specific time. However in spite of RC Liege and US Dunkerque agreeing upon the amount of transfer fee for a seasons, RC Leige refused to give permission to the Belgian league to pass on the certificate to the French association as they were unsure about the financial solvency of Dunkurque. Thus Bosman was preveted from joining RC liege leading to the initition of a suit in the Court of First Instance in Leige which finally culminated in the landmark decision of ECJ in 1995. Transfer Rules and Article 48 The Courts assuming jurisdiction under Article 177, restated the principle of applicability of Article 48 of the EU Charter to sporting activity as long as there is an the existence of, or the intention to create, an employment relationship. ECJ decided in favour of Bosman and against the respondents namely RC Liege, URBSFA and UEFA. The court ruled on two main issues. Firstly the Court overhauled the existing transfer system by holding that transfer fees for out-of-contract players were illegal and in violation of Article 48 of the EU treaty when the players were moving from one E.U. nation to another. Secondly the court also found nationality clause to be inconsistent with Article 48 and as a result struck it down. Firstly in spite of the arguments raised by the respondents the ECJ found that the right to movement of workers as enshrined under Article 48, which is one of the four fundamental rights guaranteed by the EU charter, was being violated by the existing transfer rules of URBSFA.The Court rejected the contention that transfer rules governs relationship between culbs and does not affect the players. The Court pointed out that transfer fees is a burden which the clubs has to bear and the failure to pay such fees ultimately affects the employment rights of the players.The Court then pointed out that in spite of being contrary to Article 48 the transfer rules could be saved if they could be justified on the grounds of pressing public interest and the principle of proportionality between the means exercised for the objectives sought. However in Court went on to reject the different justifications forwarded by the respondents. The Court found merits in UEFAs goal of maintaining financial and competitive balance but rejected the claim that the transfer rules furthered this object because the existing rules had failed to preserve the level of financial and competitive balance as the rules failed to prevent the richest clubs from securing the best players. The merit of the second justification advanced by respondents regarding UEFAs goall of encouraging the recruitment and training of young talent was also accepted by the Court. However the Court failed to establish the nexus between the transfer system and the achievement of that goal. The Court found no relationship to exist because the amount of a transfer fee is unrelated to the actual cost of training and recruitment, and because receipt of such fees for any particular player is speculative. Finally the argument that transfer fees are acceptable on the grounds that such transfer fees are necessary for clubs to buy players was rejected because the Court o bserved that obstacles to freedom of movement cannot be justified simply on the grounds tat such obstacle was in existence in the past. Finally the Court reaffirmed the opinion of the Advocate general that as alternatives which does not tantamount to an obstacle to freedom of work can be used to achieve the ends sought by the transfer rules and hence the transfer rules has to be struck down. Nationality Principle The ECJ also rules that the 3+2 rule which restricts the employment of footballers of a different EU state is in direct violation of Article 48(2) of the EU treaty which expressly seeks to abolish any discrimination based on nationality between workers of the member states of the EU in relation to employment, remuneration and conditions of work and employment.[6] In this regard the Court further refers to Regulation 1612/68 of the Council which seeks to enforce the provion under Article 48. Finally the court extends this principle of non discrimination to the existing transfer rules by referring to the principle propounded in the Dona case where regulations of sporting bodies were held to fall under this principle of non discrimination. In light of the conflict between the nationality provision of the ransfer rules and Article 48 the Court examines a few possible justifications which can save the nationality rule followed by UEFA. It was argued by the respondents that the nationality rule can be justified on non-economic grounds including maintaining a natural link between the club and the country, the maintenance of a pool of national players and to maintain the competitive equilibrium between the clubs. However the Court referring to the Dona case observed that though non economic objectives may justify the exclusions of certain players in certain fixtures but that principle is not relevant in this case because the 3+2 rule of UEFA applies to all clubs and all matches. Similarly the Court also observed that the nationality rule is not adequate enough to prevent rich clubs from acquiring the richest players. Further the argument regarding the nexus between club and country was also rejected along with the point regarding the maintenance of a pool of national players. Another important point which was argued and rejected by the Court was that the 3+2 rule was developed in cooperation with the Commission and hence should not be struck down. In this case the Court observed that Finally, as regards the argument based on the Commissions participation in the drafting of the 3+2 rule, it must be pointed out that, except where such powers are expressly conferred upon it, the Commission may not give guarantees concerning the compatibility of specific practices with the Treaty Hence if the rule in violation of Article 48 then the fact tht it was made in cooperation with the European Commission will not validate it. Community Law and Principle of Non Discrimination of Foreign Nationals In order to understand the interface between nationality restrictions and its conflict with the EU treaty it is imperative to briefly look into the framework of the EC treaty. Sports per se has not found a place in the present EC treaty, but as has been discussed before, it falls within the competence of EC law when it concerns an economic activity.[7] Article 12 of the EC treaty prohibits discrimination on the grounds of nationality. More specifically discrimination on the basis of nationality of workers is dealt with in Articles 39[8] to 42 of the EC Treaty. However it has to be remembered in this context that the compatibility of a sporting rule with a particular article of the Treaty does not release the rule from the requirement to comply with other Articles of the Treaty.[9] However, the general protection against nationality discrimination can only be invoked in the absence of any specific provision within the treaty. This principle was elucidated in the case of Lehtonen and C astors Canada Dry Namur-Braine v. Federation Royale Belge des Societes de Basketball (FRBSB),[10] where it was observed that Article 39 of the treaty dealing with nationality discrimination of workers will be applicable in the instant case. The Court further observed that Article 12 will only be applicable independently in case of the absence of any specific provision.[11] In light of the above framework of Community law the Lehtonen judgment can be briefly evaluated to determine whether it has also followed the Bosman line and determined whether a sporting rule can be discriminatory within the EC treaty in the absence of objective justification. In Lehtonen different periods of transfers were applicable in the Belgian basketball league of players from Belgian clubs and European clubs. This vires of the transfer rule was challenged to be in violation of the non discriminatory rule enshrined under Article 48. The ECJ observed that Article 48 precludes the application of rules laid down in a Member State by sporting associations which prohibit a basketball club from fielding players from other Member States in matches in the national championship, where they have been transferred after a specified date, if that date is earlier than the date which applies to transfers of players from certain non-member countries, unless objective reasons concerning only sport as such or relating to differences between the position of players from a federation in the European zone and that of players from a federation not in that zone justify such different treatment.[12] In other words the Court followed the line of Bosman and held that Article 48 can act as a threshold which specific sporting regulations have to abide by. However a divergence from the non-discriminatory principle is allowed if they can fulfill the test of objective satisfaction. One more interesting aspect of the non-nationality principle, which has come to the limelight in subsequent cases, is the status of individuals belonging to non-member states who have entered into Cooperative agreements with the EU containing non discriminatory terms in relation to nationality of the members of those states as well as the members of third party states. In the Malaja[13] ruling a Polish basketball player Malaja, challenged the restriction of the French Basketball Federation on the number of foreign players in a club. She based her claim on the basis of an agreement entered by Poland with the EU which ensured non discrimination of Polish workers within the EU. The Council the Etat held that the non-discriminatory principle enshrined in the EU treaty will also be applicable to eastern European states along with Poland who had entered into cooperation treaties with the EU. Another landmark decision in this respect is Kolpak case. Kolpak who was a Slovak national, signed consecutive fixed-term contracts in 1997 and 2000 as a goalkeeper for a second division handball team. However the German Handball Associations imposed a cap on the number of non-EU players who could play in one team. This precluded Kolpak from performing his duties under the employment contract. Kolpak held a valid residence permit in Germany. He took the dispute to the German courts arguing that the agreement between Slovakia and the EU would prevent the Handball association from treating him differentially from other non-EU or German players. The dispute was referred to the ECJ. The Court observed that the agreement with Slovakia did not contain any specific provision safeguarding against anti-discrimination. However the Court compared the agreement with Article 48 of Treaty of Rome and came to the conclusion that the agreement embodied the same principles which have been enshrined u nder Article 48. Hence even in the absence of any specific provision preventing discrimination, the Court held that the principles of non-discrimination established in Bosman can be extended to the present case. However the Court restricted the scope of the non-discriminatory principle by holding that the non-discriminatory principle construed from the agreement will be limited to Slovakian workers already employed in the member states of the EU. The final judgment that has to be mentioned in this regard is the Simutenkov case in which the Courts closely analyzed the Bosman and the Kolpak decisions. The decision of the Court in the Simutenkov mirrored the judgment in Kolpak and extended the principle of non-discrimination to Russian workers employed within the EU. The decision followed Kolpak to the extent that the scope of the non-discrimination principle was restricted to existing workers. In other words it did not bestow a general right on all EU members to circulate freely within the EU. A Closer Look at the Sporting Exception In Bosman, UEFA had argued that sports was always respected within the European Union and owing to the difficulty in extrapolating the economic aspect from football Article 48 should be interpreted in a flexible manner. German Government further emphasized on sports being an expression of European culture and hence should be protected under Article 128 of the Treaty of Rome which seeks to safeguard the national regional diversity of culture. However as has been discussed previously the Court relied on previous ECJ decisions in Walgrave and Dona to determine the extent to which Article 48 of the treaty of Rome can regulate sporting activities. Again as recently as 2006, The ECJ in its decision in Meca-Medina v. Commission[14], reaffirmed the principle of Bosman when they observed that having regard to the objectives of the Community, sport is subject to Community law in so far as it constitutes an economic activity within the meaning of Article 2 However the approach of the Court in this respect has been severely criticized in certain quarters. Commentators have alleged that the Court has in their zeal to extend economic regulations have failed to recognize the specific nature of sports.[15] However a brief look at sporting regulations and the legal restrictions imposed on such sporting rules in US and UK points to the shortcomings of bestowing unfettered power in respect of sporting activities. The transfer system in British football can be traced as far back as the last decade of the 19th century when football clubs started to purchase and sale football players. The concept of transfer fees was in existence even in that period. Even though these rules flagrantly violated the contractual and labour rights of the players, these rules remained in existence throughout the majority of the twentieth century and were justified on the grounds of regulating player mobility and competitive equilibrium. The landmark case of Eastham[16] the retention and transfer system[17] was challenged by George Eastham who wanted to move from Newcastle to Arsenal. However Newcastle simply retained him despite his repeated request for transfers. As a result a writ was filed in the High Court against Newcastle for restraint of trade. Five issues was considered by Judge Wilberforce out of which the one of relevance where whether there was actual restraint of trade and whether such restrain was necessary for the maintenance of the nature of the league or its members. The Court found that Newcastle had indulged in activities which tantamount to restraint of trade. More importantly the Court found that the transfer and retention system was also an unreasonable restraint on trade on the ground that it acted as a barrier to the movement of players even when their contracts have expired unless a transfer fee was paid.[18] As a consequence of the Eastham rulin the retention and transfer system was overhauled and a new system was introduced where a player was free to move from his existing club unless the club offered a contract which atleast equaled the terms of the previous contract between the club and the player. In 1978 further changes were brough about which gave players the right to reject contracts and move to a different club. Further it was provided that in case of a dispute between the new and the former club regarding transfer fee a four member panel will be constituted to determine the amount of transfer fees. Finally the regulations existing in the baseball league in US [MLB] and its interface with different fields of law can be briefly explored. The major contentious issue in American Baseball league was surrounding the reserve list and reserve clause: which raised significant questions regarding players right to movement and free agency. However in the early years of the twentieth century the US legal system was averse to the idea of collective bargaining rights and hence there was a lacuna in the law related to labour rights. Further the Sherman Act, which sought to prevent restraint of trade also provided an exception to the MLB and as a result the employment rights of the players suffered. However the gradual development of collective bargaining culminated into the creation of baseball players association[MLBA] which entered into a collective bargaining agreement with the club owners. The significance of this collective bargaining agreement was that it contained an arbitrational clau se for addressing players grievances. On the basis of this collective bargaining agreement, arbitration proceedings were initiated inNational American League Professional Baseball Clubs v. MLBPA[19] where baseballs reserve system was challenged. The arbitrator found in favour of the players. However the true significance of the judgment lies in the fact that the arbitrator held that though it was possible to negotiate a reserve system which contained the option of continuous renewal, however the option clause was not implied into the contract and had to be bargained for. In other words the arbitrator laid down that the though the reserve system cannot be overhauled, however the incorporation of such a clause in player contract cannot be implied. The presence or absence of such a provision will be decided on the basis of collective bargaining between the parties. This was also affirmed by the [1] Union Royale Beige des Societes de Football Assn ASBL v.Bosman, 1995 E.C.R. 1-4921, 1 C.M.L.R. 645 (1995 [2] [3] [4] [1974] ECR 1405 [5] [1976] 2 C.M.L.R. at 587 [6] [7] [8] [9] [10] [11] [12] [13] [14] Meca Medina v. Commission, 2006 E.C.R. I-6991 [15] It has been argued that players have been treated as mere factors of production and the link of sports with the culture and identity of the Community have been overlooked. Further it has been suggested that one of the primary shortcomings of Article 6 dealing with discrimination in general and Section 48 dealing with discrimination against workers is that these two article fail to recognize this important characteristic of sports. [16] Eastham v. Newcastle United Football Club, Ltd., 1964 Ch. 413, 419. [17] Prior to the Eastham case this system existed in England where a club could virtually retain control over a player even after the expiry of a contract by withholding his player registration. A player could not move until the registration documents were released by the club which was usually done on the payment of a transfer fees. [18] [19] 66 Lab. Arb. Rep. (BNA) 101 (1975) (Seitz, Arb.).