Diarra case: commotion in professional football

On Friday October 4, 2024, the Court of Justice of the European Union delivered an interesting ruling concerning the employment relationship of professional footballers. It was ruled that a number of rules from the FIFA transfer regulations are in conflict with European law. The ruling could have major consequences for the current transfer system.

The dispute

The case revolves around an employment law dispute between (former) professional footballer Lassana Diarra and football club Lokomotiv Moscow. Lokomotiv Moscow terminated Diarra's contract in 2014 after he stopped showing up for training due to a disagreement with the coach. Lokomotiv Moscow requested FIFA's dispute resolution body, the Dispute Resolution Chamber, to order Diarra to pay EUR20million in damages for breach of contract and 'termination of a contract without just cause' within the meaning of Article 17 paragraph 1 Regulations on the Status and Transfer of Players (hereinafter: RSTP).

Diarra then went looking for a new club. He ended up at the Belgian club Charleroi, who demanded confirmation that (i) he had to be registered and designated as eligible to play by the Royal Belgian Football Association (hereinafter: KBVB) by March 30, 2015 at the latest and (ii) Charleroi would not be held jointly and severally liable for the payment of damages. The KBVB informed Diarra that he could not be registered at Charleroi until they had received an International Transfer Certificate from the Russian Football Union. Charleroi then withdrew.

The Dispute Resolution Chamber partially granted Lokomotiv Moscow’s claim, setting the amount of damages due at EUR10.5m and imposing a 15-month ban on Diarra. Diarra summoned FIFA and the KBVB in late 2015. He claimed EUR6m in damages for loss of income, which he claimed to have suffered as a result of the application of the RSTP, which was said to be in breach of European law.

The ruling

After the Belgian court upheld Diarra’s claim in 2017, FIFA and the KBVB appealed. The Belgian Court then referred preliminary questions to the Court of Justice of the European Union.

The core of the questions is whether FIFA’s specific rules on contract termination are in breach of the free movement of workers (Article 45 TFEU) and European competition rules (Article 101 TFEU). In professional football, the RSTP has been declared applicable to player contracts. The provisions contained therein on ‘termination of a contract without justifiable reason’ state that a termination in violation of this can lead to (very) high compensation for which the player and the new club are jointly and severally liable (Article 17 paragraphs 1 and 2 RSTP). In the case of Diarra, this was EUR10.5m. By way of comparison, an employee who unilaterally terminates his fixed-term employment contract without an interim termination clause under ‘normal’ Dutch employment law is obliged to pay compensation equal to the salary for the remaining term of the employment contract. Furthermore, under the RSTP, the new club is also faced with so-called sporting sanctions in such a case (such as a transfer ban, Article 17 paragraph 4 RSTP) and the football association of the old club refuses to issue an International Transfer Certificate (Article 9 and Annex 3 RSTP).

The Court of Justice of the European Union has ruled that the contested regulations may impede the free movement of workers. This is only permissible if a legitimate objective of general interest is pursued and the regulations do not go beyond what is necessary to achieve the legitimate objective (principle of proportionality). The Court acknowledges that ensuring a certain degree of stability at clubs and the smooth running of football competitions may be legitimate objectives, but the contested regulations go beyond what is necessary. For example, the compensation is partly calculated on the basis of the costs that the old club had to incur to bring in the player. Such a criterion seems to be intended more to protect the financial interests of the clubs than to guarantee the integrity and smooth running of football competitions.

The contested regulations are therefore contrary to the free movement of workers. In addition, the Court has ruled that the regulations are also contrary to European competition rules.

What does this mean in practice?

This judgment will most likely lead to changes in the FIFA transfer system as we know it today. The media has already made a comparison with the infamous ‘Bosman ruling’. Players will be able to get out of their contracts more easily, without being confronted with (very) high compensation payments. This will improve their negotiating position. How this will crystallize in practice remains to be seen.