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European Union Economic

Chapter 2- A brief history of sports within European Union:

The European Union is an intergovernmental union of twenty seven states and was formed in 1992 by the Treaty on European Union (The Maastricht Treaty) replacing old European Economic Community founded by six EU countries in 1957. The European Union has a unique legal system which works simultaneously with the domestic laws of Member States of the European Union (EU). EU law has direct effect within the legal systems of its Member States, and overrides national law in many areas, especially in terms of economic and social policy. There are Treaty provisions having a great impact on sport and most significant provisions are:

(1) Free movement provisions

(2) Competition law provisions

(3) Social provisions.

(1) Free Movement provisions and Sports:

According to EU law there are four fundamental freedoms and these four freedoms derived from treaty provisions, secondary legislation and court decisions. Fundamental purpose of having these freedoms is to protect the ability of goods, services, capital, and labour to move freely within the internal market of the European Union. These four freedoms are part and parcel of the substantive EU law ;

• The free movement of goods;

• The free movement of persons (and citizenship), including free movement of workers, and freedom of establishment;

• The free movement of services ;

• The free movement of capital.

These fundamental freedoms prohibit both open and hidden discrimination and especially Article 14 of the Treaty ensures the fair treatment for migrant workers. Everybody at least in theory is equal and expected to be treated equally compared to domestic people. However when theory are been put in to practice we have seen totally different situation. Labour mobility is considered be a fundamental right in EC law and therefore from economic perspective, it helps for the creation of a single European market and contributes to economic prosperity. In relation to sports various Treaty Articles and secondary regulations provide the necessary legal authority and background for the freedoms discussed above in relation to sports. The freedom of movement set out Article 39 of the Treaty, the freedom of establishment, set out in Article 43 of the Treaty and the freedom to provide cross border services, set out in Article 49, are three of the “fundamental freedoms” which are directly related sports and fundamental to the effective functioning of the EU Internal Market. The principle of freedom of establishment enables an economic operator (whether a person or a company) to carry on an economic activity in a stable and continuous way in one or more Member States. The principle of the freedom to provide services enables an economic operator providing services in one Member State to offer services on a temporary basis in another Member State, without having to be established.The million dollar question is at what point the rules of EU free movement apply to work situations carried out within the EU? According to some scholars the definition of ‘worker' is a matter for Community law and not national law.If it were not, member states could modify the meaning of a worker in order to obstruct the application of free movement rules.When we consider the application of EU free movement provisions to the sports one might have a question whether or not it is equally applicable for the professional, semi-professional, and amateur sports. It is a well known factor that EU free movement law most obviously applies to professional and semi professional sports. Application to the Amateur sport can very much depend on whether or not particular sporting activity in the issue amounts to an economic activity even if a sports association or federation classifies its members as amateur athletes.

Various secondary legislations expand the scope for the freedom of movement in relation to sports workers extensively. Article 12 EC, Regulation 1612/68 along with Directive 68/30 has strengthened the rights secured by Article 39 EC.

Whereas freedom of movement for workers should be secured within the Community by the end of the transitional period at the latest ; whereas the attainment of this objective entails the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment, as well as the right of such workers to move freely within the Community in order to pursue activities as employed persons subject to any limitations justified on grounds of public policy, public security or public health;

The Regulation entitles all nationals of a Member State to take up and engage in gainful employment on the territory of another Member State in the same way with the relevant regulations applicable to national workers. This entitlement without discrimination is for permanent, seasonal and frontier workers and those who providing services. Directive 2004/38/EC makes Union citizenship the fundamental basis of nationals of the Member States when they exercise their right of free movement and residence on the territory of the Union. Previously, there were various Community instruments dealing separately with workers, self-employed persons, students and other inactive persons. It also incorporates the rights of family members of workers in this new approach.

(2) Competition Law provisions and Sports:

The purpose of the EU competition law is to control a number of important functions within EU. The most important function is to enforce various institutions to drop anti-competitive practices, and thereby make effective contribution to industrial efficiency and that ultimately leading to protect the consumers. In other words EU competition law breaks down barriers to trade within and between EU member states thus strengthening national markets and the Single Market. The main provisions of EU competition law are:

Article 81(1) provides that, ‘The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the common market'.

Article 81(3) provides that, ‘The provisions of paragraph 1 may, however, be declared inapplicable in the case of, any agreement or category of agreements between undertakings; any decision or category of decisions by associations of undertakings; any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question'.

Article 82 provides that: ‘Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between member states. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts'.

Article 87 provides that: ‘Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market'.

Even though this essay does not intend to analyse the EU competition law aspect in detail, at least, we need to make some form of clarification in relation to sports. The most important question is that what sort of sporting activities are subjective to EU competition law regime and how EU competition law applies to sports. As matter fact in order to be subjective to EU competition law there has to be agreement in relation to economic activity between undertakings. If amateur, professional and semi-professional sporting bodies and individual are involving in the provision of goods and services, they will deem to undertakings. Therefore, when there is sporting undertaking between parties in relation to a activity amounts to a ‘economic activity', all such activities are subjective to EU competition law provisions. However, we need to bear in mind that the Commission's definition of ‘agreement' in relation to ‘purely sporting interest' as they do not fall within the application of EU competition law regime. They all fall outside the reach of competition law as long as the rules have been applied in an objective, transparent, non-discriminatory and proportionate way. Therefore, we need to carefully distinguish between agreements that constitute rules of ‘purely sporting interest' and those of an economic nature. Rules of ‘purely sporting interest' are covered by the ‘sporting exception' and are thus incapable of being defined as a restriction.

(3) Social provisions and Sport.

Articles 138 and 139 of the EC Treaty play a vital role in providing the form of forum to achieve a collective agreement in European sport which ultimately create healthy relationship between employer and employee. The employment relationship between employers (sports bodies) and employees (sports workers) through a social dialogue always help to reduce the potential conflicts which may arise from sports relationship with EU free movement and competition law. Article 2 of the Council of Europe's European Sports Charter defines sport as "all forms of physical activity which, through casual or organised participation, aim at expressing or improving physical fitness and mental well-being, forming social relationships or obtaining results in competition at all levels". In 1974 the Court of Justice ruled that, as an economic activity, sport was subject to Community legislation. Sport is also mentioned in the conclusions of the Adonino report on European citizenship. Sport within EU is subject to secondary policy status and therefore, it is essentially a secondary policy matter for Member States. However, during recent history of EU there had never been any attempt for a harmonization of European sport and according to some never will be in the future Commission's aim.

According to 'The Impact of Community Activities on Sport' sport is unique in that, it performs five functions:

· an educational function: active participation in sport is an excellent way of ensuring balanced personal development for all age groups;

· a public health function: physical activity offers an opportunity to improve people's health; it is an effective means of combating certain illnesses such as heart disease and cancer and can help to maintain good health and quality of life among the elderly;

· a social function: sport is a suitable tool for promoting a more inclusive society and for combating intolerance, racism, violence, alcohol and drug abuse; sport can also assist in the integration of people excluded from the labour market;

· a cultural function: sport gives people an additional opportunity to put down roots, to get to know an area better, to integrate better and to protect the environment to a greater degree;

· a recreational function: sporting activity is an important leisure occupation and provides personal and collective entertainment.

The EU policy towards sport

The Commission promulgated its first communication setting out guidelines in relation to sport in 1991. It was stated in those guidelines that all actions related to sports should be concerned “to respect the independence of cooperative effort in general and in sport in particular”. This gave the way forward to genuine flat form which enables constructive discussion between the Commission and sports associations and this has helped to improve relations paving way to set up the European Sport Forum. Last year European Sport Forum was held at Bonn in Germany. The Forum gathered together fifty young volunteers from 22 different countries to discuss and work on topics complimenting the German EU presidency: diversity, anti-discrimination and social inclusion through and in sports. The European Parliament's report on the European Union and sport, underlining the importance of sport as an agent for social integration and a key element in the drawing up of Community policies relating to education, young people or public health.

Some sports commentators argue based on a distinctive legal and political analysis, that the EU is receptive to the sports sectors and claims for special treatment before the law. In his book “Sports Law and Policy in the European Union” this author analyse the birth of EU sports law and policy by examining significant court decisions, the possibility of exempting sport from EU law, sport and the EU treaty, and more. Other EU gurus like Professor Blanpain argue about the lack of concrete sports policy within the EU.

“Such pretexts as the 'special nature' of sport - publicly urged by such European eminences as Tony Blair and Gerhard Schroder - have institutionalized the human trafficking of players, depriving them of basic rights guaranteed under all the laws enjoyed by Europeans. They may be well-paid as long as they are in the limelight, but they have no surety. They can be, and are, bought and sold repeatedly, each time returning profits to those who trade in their athletic prowess”.

Moreover, Erika Szyszczak also argues about the lack of defined policy on sports.

“The EU does not have a defined policy on sport. In 1957 sporting activity was not seen as a significant economic activity and over the years the EU has struggled to find a role that sport could play in the integration process. From the recommendations of the Addonnino Report sport had been used as a tool of integration but there was no Treaty amendment or special policy created for sport. Instead the Court of Justice triggered an awareness of the special nature of sporting rules and their relationship with Community law”.

Accordingly, the Court has defined the special nature of sporting rules and their relationship with the community law. Sport has certain unique characteristics; therefore, difficulty lies in clarifying how Community law can be applied to the economic aspects of sport while taking account of its uniqueness and character.

In Walrave the Court stated that “the practice of sport is subjective to Community law only in so far as it constitutes an economic activity within Article 2 of the Treaty.” The Court further defined the economic activity as “…the character of gainful employment or remunerated service” in relation to community activity of free movement of workers. Uniqueness of the sport was addressed by the Court of Justice and recognised the possibility of certain restrictions to the freedom of movement, taking into account particular requirements in relation to matches involving national teams in Donàruling. In Dona the issue was related to a football scout over a dispute of non payment of fees for a news paper advertisement. The fee for the advertisement placed by Dona in a Belgian news paper for recruiting players was refused by the authorities of the Italian football club Rivigo. According to Italian Football Federation rules only Italian national can be affiliated to the Federation and it was pre-condition of eligibility to play in the Italian League. Dona argued that this Italian Football Federation rules constituted direct nationality discrimination in breach of Article 12 EC. However, the Court argued that “... Unless such rules or practice exclude foreign players for reasons which are not of an economic nature...” without first examining the activity concerned here amount to an economic in nature and also without assessing the justification of the Italian law.

In Deliege, it was argued that the selection rules had the effect of limiting the number of participants in a tournament, but such a limitation was justified and regarded as being “inherent in the conduct of an international high-level sports event, which necessarily involves certain selection rules or criteria being adopted”.Therefore, it was also argued that these rules could not be regarded as constituting a restriction on the principle of freedom of movement. The Court had thought that: “on a large number of considerations unconnected with the personal situation of any athlete, such as the nature, the organization and the financing of the sport concerned.”

However, it must be said that the Court refines in this case the rules relation to economic activity and the situations where the non-discrimination on grounds of nationality rule does not apply. For a example, in order for a athletes to have the nationality requirement of the country of which they represent, the national team in that country must be taking part in a international sporting events, and the authority should derive from a need in the organisation of such a competition, constitute a restriction on the Treaty free movement provisions. However, the prohibition does not affect the composition of the sports teams as far as formation in question purely related to sporting interest and nothing to do with economic activity.

Most of the legal battles fought so far within EU in relations to sports, have arisen between sports person and their sports federations or clubs about freedom of movement of athletes and specifically in relation to nationality requirements. The cases cited above and the cases like, Bosman, Kalpak and Simutenkov, are clear examples about this fact. All these cases are found to be related to sports related economic activities and thereby subjected to a Community law to a some degree.

The Court in dealing with the above cases especially with nationality clauses face with two dilemmas. First the Court had to consider instances where, in the light of the sporting association's internal nationality rules, the sporting associations have to either exclude certain athletes from playing for a certain team or taking part in certain competition players who are not fall within the nationality rules. The secondly the Court had to consider whether or not those nationality clauses or restrictions are amounting to a constitutive restrictions that deprive foreign national from taking part in official contests.

Historically, according to some the Court has been constantly reluctant and refused to interfere with the cases with nationality discrimination in relation to matches between national teams. As outlined above, according well established case law the free movement provisions “do not prevent the adoption of rules or of a practice excluding foreign players from participation in certain matches for reasons which are not of an economic nature, which relate to the particular nature and context of such matches and are thus of sporting interest only.”It was therefore argued by some as ‘hand-off' approach of the Court where the Court ought to have made substantive criticism about ‘internal nationality clauses' of sporting associations. In Bosman the issue of nationality based restrictions were discussed extensively and the Court refused to accept that nationality based restrictions within the club football constituted legitimate rules of sporting interest. As A.G Lenz opined Bosman that in contemporary society the Court's explanation for “restricting on the scope of Community law” does no longer reflect reality in the society. He further opined that in many sporting disciplines, the matches between national teams are no longer of so call “purely sporting interests” and therefore the stance of the Court appears to have become extremely favourable for sports associations.

In 2003 the Court was invited express its opinion about a nationality requirement once again in the case of Kolpak. In this case, a Slovak handball goalkeeper named Maros Kolpak was instrumental to abolish the rule limiting the number of licensed Slovak players per club in the German handball competition. Mr Kolpak argued that he was entitled to take part without any restrictions whatsoever in competitions under the prohibition of discrimination provisions set out in the Association Agreement between the EC and Slovakia. The Court concluded that as Mr.Kolpak was legally in Germany at the time of the dispute, could in fact, legally adjure the relevant provision of Art.38(1) of the Association Agreement reached between European Communities and Slovakia, which gives equal rights to Slovak nationals in relation to working conditions , remunerations, and dismissal within the EU. However, the Court showed no compulsion to accept the arguments to justify the ‘home grown' rules which are pretty much same with that of Bosman reasoning. At the time of the Kopak decision Slovakia was on the verge of becoming a EU member and therefore the potential impact of this decision far reaching beyond the boundaries of EU as EC has concluded international agreements containing similar equal treatment clauses with large number of third countries. Undoubtedly, therefore the impact of the Kolpak decision is far reaching as lot of the above mentioned other agreement fulfils the criteria of a direct effect.

After Kolpak the situation is not clarified completely as yet. There had been an excellent occasion which applied the Kopak principles two year latter. The famous Simutenkov-case the European Court of Justice acknowledged the similar line of reasoning to that of Koplak and concluded the direct effect of the partnership-agreement between the European Communities and Russia. In this judgment Spanish nationality-clauses for non-EU footballers were found in breach with Community law. The Court here held that nationality restrictions in sport are incompatible with Article 39 of the Treaty (free movement of workers). This is actually the case in relation to EU national and however in Simutenkov, it causes surprise that the rights of free movement enjoyed by EU nationals can also be relied on by non EU nationals.

Article 23 of the EU / Russian agreement states that: 'subject to the laws, conditions and procedures applicable in each member state, the Community and its member states shall ensure that the treatment accorded to Russian nationals, legally employed in the territory of a member state shall be free from any discrimination based on nationality, as regards working conditions, remuneration or dismissal, as compared to its own nationals'.

This is not so well understood. In nutshell, the scope of Article 39 has been extended to non-EU nationals through the existence of international agreements between the EU and third states.

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