By Charlotte Smith, Partner, and Adam Melling, Associate, in the Employment & Sport teams at Walker Morris
On 4 October 2024, the European Court of Justice (‘CJEU’) handed down a critical preliminary ruling – the Diarra ruling – on several provisions governing the termination of a playing contract without ‘just cause’ in FIFA’s Regulations on the Status and Transfer of Players (‘RSTP’).
In response, FIFA commenced an ongoing global consultation on the challenged rules. In the interim, mindful that January brought the first major transfer window following the ruling, FIFA made temporary rule changes effective 1 January 2025.
In Diarra, the CJEU considered the relevant provisions of the RSTP to be in breach of specific EU laws, namely, the person’s right to freedom of movement and the prohibition on anti-competitive agreements. Importantly, deviating from these EU laws is (broadly speaking) permissible when it is necessary to meet legitimate objectives.
The CJEU considered that FIFA has a legitimate objective of ensuring the regularity of club competitions, which requires maintaining a certain degree of player stability at clubs. The relevant provisions sought to do this by essentially deterring players and clubs from terminating their contracts without just cause.
Where FIFA came unstuck, though, was in showing the necessity of their rules to meet that objective. In other words, whether the rules were a proportionate means of achieving their objective. FIFA’s interim measures seek to take on board several of the CJEU’s comments and those of other stakeholders while acknowledging the need for more consultation before issuing the final amendments to the regulatory framework.
The following is a summary of the key temporary changes:
| Rule in Issue | Previous position | New interim position |
| The compensation payable by a player to their former club in the event of termination without just cause. | Compensation was calculated with due consideration for the law of the country concerned (which governs the player-club employment relationship), the specificity of the sport, and any other objective criteria.[1] | Compensation is calculated by taking into account the damage suffered (to put the individual in the position they would have been in had the contract been performed correctly), considering the individual facts and circumstances of each case, and giving due consideration to the law of the country concerned. |
| Rule in Issue | Previous position | New interim position |
| Circumstances in which the player’s new club is jointly and severally liable with the player for such compensation (this means the former club could sue either the player or the new club for the full amount of the compensation payable). | The new club was automatically liable (regardless of whether they encouraged the player to unlawfully terminate their contract, albeit there had been a small number of departures from this in exceptional circumstances). | The new club will only assume such liability if the former club can prove that the new club induced the unlawful termination (i.e., reversed burden of proof). |
| Rule in Issue | Previous position | New interim position |
| Circumstances in which authorities can impose sporting sanctions, including a transfer ban on a prospective new club that induces a player to breach the contract. | The new club was presumed to have induced the breach of contract unless it could prove that it had not done so. | The former club must prove that the new club induced the breach of contract (i.e., reversed burden of proof). |
| Rule in Issue | Previous position | New interim position |
| Rules regarding issuing the International Transfer Certification (‘ITC’), which is required to enable a player to register with a new club under a different national association. | The national association of the former club was able to withhold the ITC where, in essence, there was a dispute over the termination of the playing contract. | The former club’s national association cannot reject issuing the ITC (and if they don’t issue it within the now-shorter period of 72 hours following the ITC request, the new club’s national association can register the player anyway). |
Definition of just cause
The interim regulatory framework now also includes a description of the term ‘just cause’, which seeks to codify the existing position in FIFA and CAS case law: ‘In general, just cause shall exist in any circumstance in which a party can no longer reasonably and in good faith expect to continue a contractual relationship.’
Comment on the temporary changes to the termination without just cause provisions:
The temporary measures are not the finished product, and many more months of consultation is expected.
The reversed burdens of proof regarding possible liability and sanctions on the player’s new club align with the CJEU’s comments and will likely receive approval from most stakeholders. The key battleground will likely be over the calculation of compensation in the event of termination without just cause.
- Calculation of compensation
The temporary measures no longer refer to various non-exhaustive factors to consider in calculating compensation (see footnote [1]) – which were criticised by the CJEU – and instead, row back to focusing on the damage suffered by the injured party.
However, case law has recognised the difficulty of quantifying the loss a player causes to their club for termination without just cause. Accordingly, FIFA’s commentary on the RSTP (currently based on the old provisions) summarised the general method adopted by its Dispute Resolution Chamber (‘DRC’) to estimate the loss caused to the club. The method includes variations of the now-omitted factors in making that calculation. Since FIFA acknowledges that the DRC’s approach stems from the difficulty of quantifying loss, it remains to be seen how the DRC will interpret the amended provisions.
The new provisions also require clubs to calculate compensation ‘having regard to each case’s individual facts and circumstances.’ While there’s no longer an express requirement to give due consideration for ‘the specificity of sport, and any other objective criteria’ (including those listed in footnote [1]), the new wording is still broad enough to capture any criterion the judging body considers relevant.
The CJEU in Diarra was critical of the RSTP for its lack of precision and referring to general concepts like ‘specificity of sport,’ both of which made it difficult for anyone to be sure as to how the DRC would calculate compensation (and therefore for parties to verify whether they had done it correctly). Stakeholders can level similar concerns at the imprecise reference to ‘having regard to … facts and circumstances.’ However, reaching an agreement on what to include in the final-form RSTP on this is likely to be a key sticking point between stakeholders, so this broad placeholder remains for now.
Separately, the CJEU in Diarra criticised the fact that the RSTP calculation only required ‘due consideration’ for the law of the country concerned. It noted that FIFA acknowledges parties hardly ever apply such laws, whereas the CJEU expected ‘actual compliance’ with the law in force in the country governing the player-club relationship. FIFA’s temporary rules don’t address this criticism – they still only require ‘due consideration,’ and the explanatory note accompanying the temporary measures puts the onus on the party seeking to rely on the laws of the country concerned to prove its relevance, content and effect.
- Definition of just cause
For completeness, the broad ‘definition’ inserted overlooks the need for just cause to attach to a (sufficiently serious) breach of contract by the other party. On the face of it, it opens the door to premature termination of a contract for reasons unrelated to the other party’s conduct. For example, a club in financial difficulties might argue that it can no longer reasonably and in good faith be expected to continue a contractual relationship with a costly player to save the club’s long-term future.
Similarly, a player who wishes to terminate their contract because they’re away from their family and want to return home permanently for personal reasons may take the position that this meets the just cause test.
It’s clear from FIFA’s commentary on the RSTP and the existing case law it sought to codify that this was not the intention. The outcome of the full consultation will show how the RSTP will look in its final form.
Footnotes:
[1] The RSTP previously listed the following as other objective criteria: remuneration and other benefits due to the player under the existing contract and/or the new contract, the time remaining on the existing contract up to a maximum of five years, the fees and expenses paid or incurred by the former club (amortised over the term of the contract) and whether the contractual breach falls within a certain period.
