The European Super League: Moving the Goalposts Too Far?
First published by Keep Calm Talk Law in 2019
“Some people think football is a matter of life and death. I don't like that attitude. I can assure them it is much more serious than that.” – Bill Shankly
The news revealed by Football Leaks and Der Spiegel that the elite European football clubs were planning to form a new breakaway competition sent shockwaves throughout the footballing world. The proposed European Super League (ESL) comprises 16 clubs, involving the top five English teams—Arsenal, Chelsea, Liverpool, Manchester City and Manchester United—in a brand-new competition away from UEFA’s jurisdiction to start in 2021. While, understandably, many have decried the moral and sporting aspect of such a move, there perhaps needs to be a closer look at whether such a competition would even be legal. This piece aims to do just that by looking at the English Football Association (FA) and the FA Premier League (FAPL) rules on club membership, potential issues for players taking part, a comparison with the Euroleague Basketball (EB) which follows a similar model, and finally whether the new competition would fall foul of EU competition law under Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).
The ESL: The Proposal
In February 2016, senior executives at Bayern Munich Football Club started to explore the idea of an ESL. After protracted and secret discussions in October of that year, details of the initial idea began to be fleshed out. It is alleged that financial projections presented to each of the proposed founder clubs showed that they could each make as much as €500 million a season, in comparison to the c.€80 million Real Madrid received for winning the UEFA Champions League in 2016 and the €40 million Barcelona received for winning La Liga in 2017/18. High stakes, indeed.
The proposed ESL would see 11 ‘elite’ European football clubs join together as founders alongside five ‘initial guests’ to form a 16-team league-style format competition. The 11 founder clubs include AC Milan, Arsenal, Barcelona, Bayern Munich, Chelsea, Juventus, Liverpool, Manchester City, Manchester United, Paris Saint-Germain and Real Madrid. The other five clubs to be invited would include Club Atlético Madrid, Borussia Dortmund, Inter Milan, Olympique Marseille, and Roma. The ‘founder’ clubs would be guaranteed their places in the new league for 20 years, meaning, in effect, that they would not face relegation during this period. This new competition would be scheduled to start in 2021 when the current round of broadcasting rights deals expires. Significantly, the new league would not be under the jurisdiction of UEFA. Such a move would have potentially severe legal and financial consequences were it to happen; clubs could be liable for lost revenue from national associations and UEFA, creating potential contractual and reputational issues for players, as well as calling into question its compliance with EU competition law.
Can English Clubs Submit Their Own ‘Article 50’ to the FAPL?
The first aspect to assess is whether it is legally possible for an English club to leave the confines of the FAPL in order to join the proposed ESL. To do so, we would need to look at the FAPL rules, which clubs are contractually bound to follow.
The FAPL rules provide for a member club to resign their membership, specifically at Rule B.7, which allows a club to tender their notice of resignation at any time, but with the proviso that any notice will only be effective at the end of the third season after the notice was given (for example, if a Club were to serve notice to resign during Season 2023/24, that resignation would only take effect from the end of Season 2026/27). Rule B.9 allows for the resigning member to confirm or withdraw their notice by the 31st March following the giving of a notice under B.7, and if no notice is given by this date, then it will be considered to be withdrawn. Rule B.10 follows the principles established in The Satanita by stating that a resigning member must indemnify the FAPL and remaining clubs against all losses, damages, liabilities, costs and expenses, without limitation, incurred as a result of the resignation. In The Satanita it was held that competitors were under a contractual obligation to observe the rules of the competition and make good all damage caused by a breach of those rules. This would include loss of income from broadcasting contracts. With the current round of FAPL broadcasting rights worth at least £4.464 billion, any potential bill for a resigning member is likely to be huge.
The FA rules spell out a similar procedure for a club to resign. Rule A.3.5 stipulates that a member club must submit their notice to resign by 31st December of that playing season and must fulfil its playing obligations until the end of that season when the resignation notice would take effect. Unlike the FAPL rules, there appears to be no indemnity clause in the rules applicable to a resigning member club, nor a requirement to confirm the resignation subsequently.
From a procedural point of view, there appears to be little to bar a club from resigning their membership to join a new league. In many respects, it would bear the hallmarks of when the 24 First Division clubs (as it was then known) resigned from the English Football League in 1992 to join the newly established FAPL. The obstacles any resigning club would face would be the contractual obligations flowing from league membership.
Player Considerations
We have looked at the potential implications for English clubs, but the proposed ESL could have a considerable impact on players from all associations participating in the new competition. During the early planning stages of the new competition, Der Spiegel reveals that Michael Gerlinger, senior legal counsel for Bayern Munich, asked lawyers at Cleary Gottlieb to investigate whether leagues could penalise players for participating in the ESL and whether the players could have their contracts annulled if their club switched to the ESL. Additionally, they looked at whether clubs would still be required to allow players to play for their national teams after leaving UEFA’s jurisdiction.
In their assessment, they anticipated problems if clubs withdrew from their national associations. Clubs would still need to release players to their respective national teams due to the impact that playing in global and continental tournaments, such as the World Cup and the European Championships, can have on players’ earning power and transfer value. Preventing players from competing in international competitions could open clubs up to litigation. This would be due to possible restraint of trade concerning the impairment of a player’s right to undertake his profession. Additionally, this may restrict competition for the ESL by further damaging the product of international football by preventing many of the best players from participating. The loss of at least some of the world’s leading players who are likely to be playing in the ESL is likely to make international football a less attractive product to sponsors and broadcasters and may also affect attendance at games, so it may significantly damage international football.
Also from the public’s perspective, there may be a significant backlash against any attempt to prevent players from representing their country in major tournaments, as ESL clubs would be seen as putting their own financial and sporting interests above that of the national association. This is something that clubs and national associations would have to consider and is bound to be something discussed should the situation ever arise.
To complicate matters, clubs joining the ESL could be breaching contracts with their players. For example, standard contracts in the Bundesliga, Germany’s top division, contain clauses which tie players exclusively to that league. This means that if Bayern were to resign from the Bundesliga, then it may be possible for players to unilaterally terminate their contracts due to a breach of a fundamental term of the contract, allowing them to switch to other teams without commanding a transfer fee. Moreover, in Greig v Insole, rule changes intended to prevent English cricketers from signing up to play in Kerry Packer’s World Series Cricket (WSC), a competition not authorised by the International Cricket Council and Test and County Cricket Board (predecessor of the England and Wales Cricket Board), were held by the High Court to be an unlawful restraint of trade as in order to play international cricket, any cricketer who had signed up to WSC would have to break their contract with WSC in order to play for their country. Although this case involved a different sport, the principle at the heart of the judgment would apply to any player involved with the ESL who was prevented from playing international football.
Interestingly, Article 72.1 of the FIFA Statutes states that players and teams affiliated to a member association may not participate in matches or competitions or make sporting contacts with players or teams that are not affiliated to member associations or provisional members of the confederations without the approval of FIFA. So if FIFA disapproves of the ESL should it come into existence, then it would pose an interesting legal challenge to the ability of players involved to participate in FIFA competitions, such as the World Cup, and create a similar situation to that in Greig v Insole.
Under EU law, the position would be similar. In 1999, The European Commission issued a Statement of Objection regarding rules formulated by the FIA, the governing body of Formula One motor racing, which prohibited drivers and race teams that held an FIA licence from participating in non-FIA events. The Commission’s objection centred around the fact that the rules violated Articles 101 and 102 TFEU, which form the basis of competition law within the EU (see below). Many sports governing bodies have dual roles, one as a regulator of the sport and another as a commercial entity primarily through its organisation of competitions. In this case, the FIA used its role as a regulator to restrict competition by preventing its drivers and teams from competing in non-FIA competitions. By doing so, it stood to benefit through its other role as a commercial beneficiary of the sport through its role as an event organiser and promoter. It forced the FIA to separate the dual roles and allow teams and drivers to participate in non-FIA affiliated competitions provided safety standards were met. Such a settlement would further strengthen the hands of players taking part in the ESL should it come to fruition.
Euroleague Basketball: Slam Dunk for the ESL?
To some of you eagle-eyed basketball enthusiasts out there, the suggested format of the ESL may look familiar; that would be because the proposed ESL format has been deliberately designed to mirror the 16-team Euroleague Basketball (EB). The EB is the top-tier European basketball competition run by Euroleague Commercial Assets (ECA), a private corporation domiciled in Luxembourg, which is owned by 11 of its competing clubs. EB has the same club licencing model in that 11 member clubs hold long-term licences, making them immune to relegation. The remaining five clubs are invited annually, with one place going to the winner of the EuroCup, the second-tier European competition, and the rest to a combination of wildcards and national domestic league winners. It is no coincidence that Bayern, Barcelona, and Real Madrid all have basketball teams participating in the EB.
The EB started life in 2000 when it broke away from FIBA Europe, the European basketball governing body, to form its own continental competition, which initially competed with the FIBA-run competition, the FIBA SuproLeague. In 2001, the competitions combined with the all-European club competition fell under EB’s umbrella. However, in 2016, FIBA Europe attempted to restate their authority by launching the Basketball Champions League in cooperation with national leagues and threatened to expel any national association whose clubs participated in ECA competitions.
This led ECA to file a complaint against FIBA and FIBA Europe to the European Commission for alleged abuses of their dominant position under Article 102 TFEU by threatening national associations with expulsion from international competitions. FIBA Europe then filed a counter-complaint to the European Commission alleging that ECA also abused their dominant position by threatening national associations with the exclusion of their clubs from EB competitions. At present, this dispute is yet to be resolved, but a ruling by the Commission in another sports law case involving the International Skating Union imposing severe penalties on athletes participating in unauthorised events found those penalties to be in breach of EU competition law.
The ISU ruling may be a guide to how the FIBA/ECA dispute may play out, and it appears likely that the Commission would favour ECA in light of the ISU decision. This would be a huge boost for the proposed ESL if it were to do so, as it would lessen the ability of UEFA and FIFA to impose punitive measures on ESL players and clubs.
ESL and Articles 101 and 102: An Uncompetitive Competition?
The basis for EU Competition Law can be found in Articles 101 and 102 TFEU. Article 101 prohibits agreements intended to prevent, restrict, or distort competition within the European single market. Article 102 prohibits undertakings which hold a dominant position within a market from abusing that position to restrict or distort competition within that market. The goal of Articles 101 and 102 is to ensure that free and fair competition prevails throughout the single market. It is possible for any undertaking to justify the restrictive practices under Article 101 (3) if they are proportionate and do not substantially eliminate competition in the relevant market.
In applying Articles 101 and 102 to the ESL scenario, it may be possible to argue that the structure and format of the ESL would constitute a restriction of competition under Article 101 and possible abuse of dominant market position under Article 102. The fact that 11 of the 16 clubs involved could not be relegated for 20 years is restrictive as it means that there is not a level playing field for all competitors. The inequality would also have economic consequences, as the 11 founding members would effectively guarantee themselves €500 million a year for 20 years with little or no sporting risk. As a result, their financial resources would grow greater and greater, meaning that they would likely have a further advantage in the recruitment of playing and coaching staff. This may help UEFA make the case that restrictions on new competitions are justifiable and proportionate due to the detrimental impact on other clubs who are not part of the league.
Another factor involved is how the competitive balance of European football would be affected by the ESL. To do so, we would need to consider the principles behind what is known as the ‘European Sports Model’, which, at its core, endorses the notion of promotion and relegation as the basis of pure sporting merit. Regulation 9 of the Regulations Governing The Application of The FIFA Statutes explicitly states that a club's entitlement to take part in a domestic league championship shall depend primarily on sporting merit, and that includes the principle of promotion and relegation. The proposed format for the ESL appears to go against everything that Regulation 9 stands for.
In addition to this, in May 2018, UEFA and the EU signed a new Memorandum of Understanding. This stated that the Council of Europe and UEFA recognise that the European sports model “is based on sporting and financial solidarity mechanisms,” citing “the principle of promotion and relegation” and “open competitions with a balance between clubs and national teams;” strongly suggesting that the EU would oppose the proposed relegation exemption.
Conclusion:
There are many sporting and moral reasons to oppose the proposed creation of a new ESL by the elite European football clubs. The idea that clubs would be willing to dispense with tradition, romance, and sporting ideals for what seems purely financial reasons will cause dismay among many football fans who feel that the game is moving further away from its working-class roots. Compelling as these reasons may be, this piece aims to look at whether it is legally possible. While any club that resigns from the FAPL risks being hit hard financially due to the indemnity clause in Rule B.11, procedurally, it is relatively easy for a club to resign. There are further complications for Bundesliga clubs by way of the contractual clause which ties players exclusively to the Bundesliga.
Although there is a strong possibility that UEFA and FIFA would not recognise the ESL, the ruling in the International Skating Union makes the threat of barring players from participating in international tournaments illegal. Players can take comfort in knowing they could still play international football, as per the decision in Greig v Insole.
Ultimately, the biggest obstacle facing the ESL lies in the fact that the 11 founder member clubs cannot be relegated for 20 years, striking at the very heart of what sport should be about. Not only does this contravene FIFA regulations, but it is likely to be against EU Competition law due to the overt restriction of competition and the lack of true competitive balance. On balance, it seems likely that the ESL is going to run into substantial legal issues unless it can adequately justify the restriction of competition; something which seems unlikely considering the EU’s recently stated position in the May 2018 Memorandum of Understanding with UEFA. In the battle between sporting integrity and economic realities, this may be one that requires extra time and penalties to resolve.