Today, the Court of Justice of the European Union (CJEU) has ruled that certain aspects of FIFA's football transfer rules – whereby players who break their contracts without “just cause” are liable to pay compensation to the club they leave, with their new club jointly and severally liable and also at risk of other sanctions – infringe European Union (EU) law.

This judgment has potentially very significant implications for FIFA’s transfer system. Although Belgium’s Cour d’appel de Mons - which referred the matter to the CJEU - must now apply the judgment, the decision essentially says the current system is too restrictive and so will have to change.

What does this mean for players and clubs?

It’s entirely possible this means players will feel they can now break contracts and sign on with new clubs, without the selling club being able to hold them or demand significant transfer fees. This will likely result in reduced transfer fees and more economic power for players – but over time things will have to stabilise to allow clubs to remain economically viable. Smaller clubs who rely on transfer fees for talent they have developed may well be the losers in this context.

In terms of free movement, the CJEU recognises that there may be a justification on public interest grounds to maintain the stability of playing squads, but considers the current rules go beyond what is necessary.

It’s a similar story regarding the EU competition law rules. The CJEU has deemed the relevant transfer rules to amount to a “by object” restriction – a serious restriction similar to a “no poach” agreement. Concerns about labour market restrictions, including “no poach” agreements, are a particular area of focus for competition authorities globally at the moment.  

Under competition law, it’s possible for otherwise restrictive agreements to be exempt - and therefore not problematic - if they lead to certain overriding benefits, but it’s generally difficult for “by object” restrictions to meet the specific requirements for exemption. The exemption criteria require that any restrictions must be indispensable to achieve the relevant benefits, but the CJEU’s view is that FIFA’s existing restrictions are neither indispensable or necessary.

What next?

The key question now for FIFA will be how they can adapt their transfer rules so that they are less restrictive and therefore compatible with both EU competition law and free movement rules, while seeking to maintain the stability of playing squads. It will also be interesting to see whether more players start to breach their contracts in the meantime, emboldened by the CJEU’s judgment. Something else to keep an eye on is whether we could see other players bring damages claims, alleging they’ve suffered harm as a result of FIFA’s transfer rules, with damages claims for breaches of competition law generally on the rise in the UK and also elsewhere in Europe.