It has been suggested that the recent decision by the Court of Justice of the European Union (‘CJEU’) in Diarra v FIFA[1]  has the prospect of shifting the appetite and ability of players to assert their rights against clubs and governing bodies in football.

The case involved the Regulations on the Status and Transfer of Players (‘Transfer Regulations’), which were dissected by the CJEU. Article 17 – on the grounds of freedom of movement and anti‑competitiveness – received particular scrutiny. However, there are also material employment law implications posed by the outcome in this case.

What do these actually mean in practice for clubs moving forward? How can clubs and governing bodies ensure they don’t become subject to legal challenges from players? We get into the weeds (or more accurately, the immaculately pristine turf…) on this below.

In August 2014 (yes, 2014!), former France international footballer Lassana Diarra (‘Diarra’) landed in a contractual dispute with his club, Lokomotiv Moscow (‘Lokomotiv’), over a disagreement relating to his salary. When Diarra refused to train as a result, Lokomotiv formally terminated Diarra’s contract, alleging breach of contract without ‘just cause’ according to Article 17 of the Transfer Regulations and sought compensation of €20 million in FIFA’s Dispute Resolution Chamber. Diarra later counterclaimed.

While these claims were ongoing, Diarra found another club that was willing to sign him, Belgian team Sporting Charleroi (‘Charleroi’). However, the Russian Football Union – Russia’s national football association (‘FA’) – refused to issue the necessary International Transfer Certificate (‘ITC’) for Diarra to move, which it was allowed to do under the Transfer Regulations. Charleroi also wanted assurances they would not be held jointly and severally liable for the damages sought by Lokomotiv against Diarra. Lokomotiv refused, and again the Transfer Regulations didn’t forbid this. In the end, Diarra didn’t move to Charleroi.

Diarra sued FIFA and the Belgian FA for lost earnings as a result of the restrictions he faced due to the Transfer Regulations, arguing these were contrary to EU law. The Belgian court of first instance found in favour of Diarra. FIFA and the Belgian FA appealed to the Belgian Court of Appeal.

Before reaching a decision, the Court of Appeal requested a preliminary ruling from the CJEU on whether some of the Transfer Regulations were precluded by EU law. The decision was delivered on 4 October 2024.

According to Diarra, Lokomotiv left him without the ability to sign for another team, effectively barring him from employment. He argued that the Transfer Regulations unfairly restricted his ability to work freely as protected under EU law, specifically under freedom of movement, a fundamental protection under Article 45 of the Treaty on the Functioning of the European Union (‘TFEU’). This echoes the 1995 Bosman[2] ruling which allowed players to leave their clubs once their contracts expired without the need for a transfer fee to be paid to the club as consideration for the departing player.

While Bosman addressed post-contractual freedom, FIFA v Diarra scrutinises the conditions under which players could leave a club even if they are still contractually bound to it. Diarra argued that the restrictions FIFA imposes – such as financial liability on the signing club or barring a player from registering with a new club by not issuing the ITC until disputes are resolved – can leave players without work for extended periods of time.

For context, the Transfer Regulations were created in 1997 to ensure stability in team composition and to protect clubs from losing players without compensation[3]. The system thus includes a limited number of transfer windows per year and mandates approval from both the current/former club and the relevant league(s) to approve a transfer. In doing so, the business of clubs is reasonably protected.  Indeed, players are a significant asset on a club’s balance sheet and squad composition can have a profound effect on success and league finish and, as a result, clubs’ sponsorship, sporting and licensing rights. The Transfer Regulations do restrict how and when players can transfer, as well as impose sanctions on players and clubs that breach them, but FIFA originally drew up the Transfer Regulations as a legitimate and proportionate measure to ensure contractual safety and certainty from season to season.  It’s also worth noting that the European Commission and FIFA have operated on the basis of a semi-formal agreement regarding the Transfer Regulations since 2001.

From an employment law perspective, however, by restricting players from freely signing with other teams, some commentators have suggested that FIFA’s Transfer Regulations infringe on a player’s basic right to work. On the face of it, this does appear to be a stretch. However, it is nevertheless worthy of discussion.

The legal arguments in Diarra v FIFA centre on several aspects of employment law:

1. Right to work: The Transfer Regulations can lead to players being sidelined without work, sometimes for the duration of a season or longer (in the case of Diarra, this would have been three years – a considerable period in the career of a professional footballer at the top level – and at a time when he was 29 years old, entering the so-called ‘last big contract’ territory). Diarra argued that such restrictions violate the EU Charter of Fundamental Rights, which includes the right to “engage in work and to pursue a freely chosen occupation […] in any Member State”. Although it is important to recognise that this case emanates from the footballing world, employment law generally prohibits rules that unreasonably prevent someone from earning an income, and this case challenges whether the Transfer Regulations align with this principle.
2. Proportionality and fair treatment: Employment law emphasises that any restrictions imposed on a worker (which includes players) should be: (a) proportionate; and (b) justifiable. The CJEU accepted that maintaining the stability of league formation and competitive regularity was a legitimate objective and therefore that the existence of the Transfer Regulations was justifiable. However, in terms of proportionality, the CJEU found that the Transfer Regulations went beyond what was necessary to achieve a balanced position for all parties, especially given they did not allow for specific facts of a case to be considered. The CJEU considered four limbs, namely: (i) the factors laid out in the Transfer Regulations to calculate the financial sanction on a signing club were too imprecise; (ii) holding the signing club liable in all circumstances didn’t allow for cases where it didn’t act with malicious intent as was the case with Charleroi and Diarra; (iii) imposing sporting sanctions on the new club regardless of the facts was overly restrictive; and (iv) giving the current/former club the power to withhold the ITC no matter the respective conduct of the parties was unfair on the player.  This also invokes the concept of bargaining power of the parties, where even star players like Messi and Mbappe have, in the past, alleged they accepted conditions which were not aligned with their commercial (rather than sporting) interests.
3. No presumption of inducement on the signing club: Whereas currently it is on the signing club to prove they haven’t induced a breach by the player in line with Article 17 of the Transfer Regulations – in this case, Charleroi supposedly “enticing” Diarra to breach his contract – the CJEU suggested that the presumption should now shift so that it is up to the current/former club to prove the signing club actively induced the player to breach their contract. This would arguably give players freedom to discuss contracts with new clubs without having the burden to prove discussions happened in good faith. Moving forward, we may therefore find ourselves in a situation where it is presumed that there was no intention to cause disruption to the current/former club and that, if discussions do lead to a transfer before a contract ends, both clubs should work together to find a solution.
4. Implications for fixed-term employment: The case also underscores issues around fixed‑term employment in sport. It is common for footballers to sign between two-to-four-year contracts, although in recent seasons we have seen an increase in six-to-eight-year contracts being offered. We have already seen some suggest that fixed-term contracts could be found to contain unduly restrictive clauses which unreasonably bind players to one employer, particularly in cases where these clauses prevent players from leaving even when the contract has allegedly been broken by the employer – for example, where they are forced to train away from the first team for a prolonged period of time. This is a complicated area and the financial and career security afforded to players through long-term contracts should not be discounted.
5. Freedom of movement: EU law, particularly under Article 45 TFEU, protects workers’ right to move freely within Member States. The CJEU found that limiting transfers effectively blocks players from exercising this right, especially if a transfer ban or registration restriction is placed on them by a current/former club. The fact that Diarra was due to move from a non-EU Member State (Russia) to an EU Member State (Belgium) didn’t discount this finding, as EU law applies at any point in a transaction where a Member State is involved. A factor British clubs may want to consider moving forward.

There are a number of potentially significant consequences which could flow from the case, some of which actually represent opportunities for clubs. Here are just a few:

1. Increased player autonomy: A win for Diarra in the Belgian Court of Appeal (which is where the case heads next) may, but we’ll see, mean greater autonomy for players over their careers. Whether this will impact FIFA’s say over transfers is yet to be seen. There’s a risk that if national employment law is favoured over FIFA’s international Transfer Regulations (as hinted by the CJEU judgment), an unintended consequence may be that players who are employed in over‑friendly employee jurisdictions may see their rights further strengthened, although this impact is more likely to be felt in overseas leagues.
2. Inclusion of new liability / “penalty” clauses: One opportunity for clubs would be to consider the inclusion of detailed liability clauses in player contracts which outline who is financially responsible if a player leaves a club early, precisely to what order and whether indemnities will be sought by the current/former club, rather than relying on the Transfer Regulations. This would present a flexible option for current/former clubs to protect their ‘assets’.
3. Inflated sign-on and end-of-year bonuses: Should the transfer window mechanism change in the future (which isn’t perhaps as unlikely as it might seem), and players become able to leave and join clubs as they please, clubs may need to consider even further(!) financial incentivisation to mitigate the risk of player transfers. This could include alternative forms of bonuses for players (e.g. sign-on bonuses to cover risks of ‘penalty’ clause enforcement and/or end-of-year ‘loyalty’ bonuses) and/or automatic salary increases. These are already utilised by clubs but could become an even greater battleground in the future.
4. Legal precedents for athletes in other sports: The implications of the case could potentially be felt further afield, paving the way for similar cases in other sports and professional leagues where there are also arguably restrictive employment practices in place. Time will tell whether the case itself is so significant as to lead to a weakening of the concept of ‘sport specificity’ generally, and particularly its interplay with fundamental employment protections.

The Diarra v FIFA case challenges the established norms within professional football, examining whether FIFA should impose employment terms that other industries may consider unduly restrictive (albeit that have operated for many decades). Although in this case it was Lokomotiv that terminated Diarra’s contract, we may well see players in future taking the initiative by rolling the dice and waiting to see if their former club pursues a claim for damages, a situation clubs should prepare themselves for. As the burden of proof looks as though it could shift, a signing club may also be more willing to sign players in circumstances where there has been no inducement to breach the contract.

For clubs, squad stability and team performance are at stake, on top of potentially significant financial losses should a player leave before the end of their contract. This can be mitigated by an effective risk management strategy and savvy negotiation at the outset of a contract. For professional sporting governing bodies, the case is a critical reminder that their rules and regulations should abide by overarching legal frameworks, as well as individuals’ employment rights, to reduce the risk of challenge from players.

On a final note, although the Transfer Regulations do contain restrictions, they also help to achieve significant wealth redistribution from larger clubs to smaller clubs which has a transformative effect across the football pyramid. Given the numerous challenges regulators and clubs have faced over the past 24 months, if we are about to enter the pre-season of change for the ‘beautiful game’, it is crucial the process accounts for the interests of all stakeholders – the regulators, the clubs, the players and, of course, the fans.

In response to this ruling, FIFA launched its own consultation which concluded on 15 November 2024 and can be found here. We should have more information in due course.

If you have any questions on the above, please do not hesitate to get in contact with us here at Wiggin.

References

[1] BZ v FIFA (Case C-650/22)

[2] ASBL v Bosman (Case C-415/93)

[3] The full Transfer Regulations can be found here