OPINION OF ADVOCATE GENERAL

Sharpston

delivered on 16 July 2009 ( )

Case C‑325/08

Olympique Lyonnais

v

Olivier Bernard and Newcastle United

(Reference for a preliminary ruling from the Cour de cassation (France))

(Freedom of movement for workers – National rule requiring a football player to compensate the club which trained him if, on completion of training, he contracts as a professional player with a club in another Member State – Obstacle to freedom of movement – Justification by the need to encourage recruitment and training of young professional players)

1. To those who follow ‘the beautiful game’, it is a passion – even, a religion. ( ) Armies of dedicated fans travel the length of the Union to support their team at every match; and the likely performance of potential new recruits (possible transfer signings and home-grown talent) is a matter of burning importance. For gifted youngsters, being spotted by a talent scout and given an apprenticeship (that is, a training contract) with a good club is a magic key opening the door to a professional career. Sooner or later, however, the dream of footballing glory is necessarily allied to the hard-nosed reality of earning the highest income achievable over a limited time span as a professional player with the club that is prepared to offer the best wages packet. At the same time, clubs are understandably reluctant to see ‘their’ best young hopefuls, in whose training they have invested heavily, poached by other clubs. Where the apprenticeship club is small and relatively poor and the poaching club is large and vastly more wealthy, such manoeuvres represent a real threat to the survival (both economic and sporting) of the smaller club.

2. The facts giving rise to the present reference may be set out briefly. A young football player was offered a professional contract by the French club which had trained him for three years. He declined, but accepted another offer to play professionally for an English club. At the time, the rules governing professional football in France rendered him liable in damages to the French club. That club sued both him and the English club in the French courts for a sum based on the annual remuneration which he would have received if he had signed with the French club.

3. In that context, the Cour de cassation (Court of Cassation) asks whether the rules described conflict with the principle of freedom of movement for workers enshrined in Article 39 EC and, if so, whether they can be justified by the need to encourage the recruitment and training of young professional players.





Relevant provisions

Community law

4. Article 39 EC secures freedom of movement for workers within the Community. Such freedom entails in particular the right, subject to limitations justified on grounds of public policy, public security or public health, (a) to accept offers of employment actually made, (b) to move freely within the territory of Member States for that purpose and (c) to stay in a Member State for the purpose of employment.





National provisions

5. At the material time, ( ) Article L. 120‑2 of the French Code du Travail (Employment Code) provided: ‘No one may limit personal rights or individual or collective liberties by any restriction which is not justified by the nature of the task to be performed and proportionate to the aim sought.’

6. Article L. 122‑3‑8 of the same code provided that a fixed-term employment contract could be terminated prematurely only by agreement between the parties or in cases of serious misconduct or force majeure. If the employer terminated the contract prematurely in other circumstances, the employee was entitled to damages at least equal to the salary he would have received had the contract run its term. If the employee terminated the contract, the employer was entitled to damages corresponding to the loss incurred.

7. At that time, the Code du Sport (Sport Code) contained no provision relating to training of sports professionals, although Article L. 211‑5 now provides that professional training contracts may require a trainee, on completion of training, to enter into a contract of employment with the training club for a period of no more than three years.

8. Employment of football players was further regulated in France by the Charte du Football Professionnel (Professional Football Charter), having the status of a collective agreement for the sector. Title III, Chapter IV, of the charter (1997-1998 version) concerned a category known as ‘joueurs espoir’ – promising players between the ages of 16 and 22 hoping to embrace a professional career, employed as trainees by a professional club, under a fixed-term contract. Article 23 of that chapter ( ) provided, inter alia:

‘…

On the normal expiry of the contract, the club is then entitled to require that the other party sign a contract as a professional player.

…

1. If the club does not exercise that option, the player may resolve his status as follows:

(a) by signing a professional contract with a club of his choice, without any compensation being due to the previous club;

…

2. If the player refuses to sign a professional contract he may not, for a period of three years, sign with another club in the [French national football league] in any capacity whatever, without the written agreement of the club in which he was a “joueur espoir” …

…’

9. At the material time, that charter – which applied and continues to apply only within France – did not regulate compensation between clubs in cases where a player had been trained by one club and then signed a contract with another club, although it now does. According to the agent for the French Government at the hearing, the rules now applicable in France correspond closely to the present FIFA rules set out below.





International rules

10. As regards transfers between football clubs in different countries, the FIFA Regulations on the Status and Transfer of Players now contain rules on training compensation when a player signs his first professional contract or is transferred before the end of the season of his 23rd birthday. Those rules were elaborated in collaboration with the Commission, in the wake of the Court’s Bosman judgment. ( )

11. In accordance with Article 20 of the FIFA regulations and Annex 4 thereto, training compensation is paid to a player’s training club or clubs when he signs his first contract as a professional and, thereafter, each time he is transferred as a professional until the end of the season of his 23rd birthday.

12. On first registration as a professional, the club with which he is registered pays training compensation to every club that has contributed to his training, pro rata according to the period spent with each club. For subsequent transfers, training compensation is owed to his former club only for the time he was effectively trained by that club.

13. Clubs are divided into categories according to their financial investment in training players. The training costs set for each category correspond to the amount needed to train one player for one year multiplied by an average ‘player factor’ – the ratio of players who need to be trained to produce one professional player.

14. The calculation takes account of the costs that would have been incurred by the new club if it had trained the player itself. In general, the first time a player registers as a professional, compensation is calculated by taking the training costs of the new club multiplied by the number of years of training. For subsequent transfers, the calculation is based on the training costs of the new club multiplied by the number of years of training with the former club.

15. However, for players moving within the EU or the EEA, if the player moves from a lower to a higher category club, the calculation is based on the average training costs of the two clubs; if he moves from a higher to a lower category, the calculation is based on the training costs of the lower category club.

16. There is also a ‘solidarity mechanism’ governed by Article 21 and Annex 5. If a professional is transferred before the expiry of his contract, any club that has contributed to his education and training between his 12th and 23rd birthdays receives a proportion of the compensation paid to his former club. It amounts in all to a maximum of 5% of the total compensation, spread over the seasons and among the clubs concerned.

17. As with the situation in France, no such international rules existed at the material time.





Facts, procedure and questions referred

18. In 1997, Olivier Bernard signed a ‘joueur espoir’ contract with the French football club Olympique Lyonnais, with effect from 1 July that year, for three seasons. Before that contract was due to expire, Olympique Lyonnais offered him a professional contract for one year from 1 July 2000. Mr Bernard (apparently dissatisfied with the salary proposed) did not accept the offer but, in August 2000, signed a professional contract with the English club Newcastle United. ( )

19. On learning of that contract, Olympique Lyonnais sued Mr Bernard before the Conseil de prud’hommes (Employment Tribunal) in Lyon, seeking an award of damages jointly against him and Newcastle United. The amount claimed was EUR 53 357.16 – equivalent, according to the order for reference, to the remuneration which Mr Bernard would have received over one year if he had signed the contract offered by Olympique Lyonnais.

20. The Conseil de prud’hommes considered that Mr Bernard had terminated his contract unilaterally, and ordered him and Newcastle United jointly to pay Olympique Lyonnais damages of EUR 22 867.35 on the basis of Article L. 122‑3‑8 of the Employment Code. The judgment did not give any reasons for the difference between the amount of damages claimed and the amount awarded.

21. The defendants appealed to the Cour d’appel (Court of Appeal), Lyon, which considered that Article 23 of the Football Charter was unlawful. The restriction it imposed was incompatible with the fundamental principle of freedom to exercise a professional activity and with Article L. 120‑2 of the Employment Code. In particular, there was no provision specifying the compensation to be paid in respect of training in the event of premature termination. To require a player to continue to work for the club which trained him was a restriction on freedom to contract which was disproportionate to the protection of the club’s legitimate interests, regardless of the cost of the training.

22. Neither of those courts considered it necessary to refer a question for a preliminary ruling, although asked to do so by Newcastle United. The Cour d’appel, however, while its ruling was based on French law, did consider that the requirement imposed by Article 23 of the Football Charter was also contrary to the principle in Article 39 EC.

23. Olympique Lyonnais has now appealed to the Cour de cassation. That court points out that Olympique Lyonnais’s claim is based on Mr Bernard’s failure to comply with the obligation to sign a contract with the club that trained him, not on the prohibition on signing with another club in the French league. The obligation in question does not prohibit a player from signing with a foreign club, but is likely to dissuade him from doing so in so far as he is likely to incur liability in damages. On the other hand, such liability might be justified by the club’s legitimate interest in keeping a novice player whom it has just trained.

24. The Cour de cassation refers to the ruling in Bosman, that Article 39 EC ‘precludes the application of rules laid down by sporting associations, under which a professional footballer who is a national of one Member State may not, on the expiry of his contract with a club, be employed by a club of another Member State unless the latter club has paid to the former club a transfer, training or development fee’, and considers that the case raises a serious difficulty in interpreting that article.

25. It therefore seeks a preliminary ruling on the following questions:

‘(1) Does the principle of freedom of movement for workers laid down in [Article 39 EC] preclude a provision of national law pursuant to which a “joueur espoir” who at the end of his training period signs a professional player’s contract with a club of another Member State of the European Union may be ordered to pay damages?

(2) If so, does the need to encourage the recruitment and training of young professional players constitute a legitimate objective or an overriding reason in the general interest capable of justifying such a restriction?’

26. Written observations have been submitted by Olympique Lyonnais and Newcastle United, by the French, Italian, Netherlands and United Kingdom Governments, and by the Commission. At the hearing on 5 May 2009, Olympique Lyonnais, the French Government and the Commission presented oral argument.





Assessment

Preliminary remarks

Implications of the questions

27. It seems to me important to remember that the pursuit of sport falls within the scope of Community law only and precisely because and to the extent that it takes place within the sphere of the economic and individual activities and freedoms with which that law is concerned. That is indeed one of the basic premisses underlying the Bosman judgment. ( )

28. If, consequently, the principles and rules of Community law apply to a situation such as that in the present case, then, by the same token, the Court’s ruling in this case has, potentially, wider implications for employees and employers in all sectors concerned by those principles and rules.

29. The Netherlands Government is therefore right to point out that the case impinges on the general issue of an employer willing to invest in training an employee but reluctant to see that employee immediately carry off the valuable skills acquired and place them at the service of a competing employer. That issue concerns Community law in so far as any restrictions placed on the employee’s freedom to seek or accept other employment might restrict his freedom of movement within the Community.

30. The specific characteristics of sport in general, and football in particular, do not seem to me to be of paramount importance when considering whether there is a prohibited restriction on freedom of movement. They must, however, be considered carefully when examining possible justifications for any such restriction – just as the specific characteristics of any other sector would need to be borne in mind when examining the justification of restrictions applicable in that sector.

31. Having said that, however, I do not consider that the Court has heard sufficient submissions to deal with the wider issue adequately. The Netherlands Government, which raised the more general issue in its written observations, was not present at the hearing, and none of the parties who were present enlarged upon the issue, even after prompting by the Court. In those circumstances, I do not propose to consider the broader implications of the case in any detail; and I suggest that the Court should confine its ruling to the specific context of the main proceedings.





Scope of the contested rule

32. As both Newcastle United and the United Kingdom Government point out, Article 23 of the Football Charter contains no explicit requirement for compensation to be paid by a player who contracts with a club in another Member State on completion of his training with a French club.

33. However, the questions referred concern the compatibility with Community law not of any specific provision, but of a rule ‘pursuant to which a “joueur espoir” who at the end of his training period signs a professional player’s contract with a club of another Member State of the European Union may be ordered to pay damages’. That is the effect which the Conseil de prud’hommes gave to Article 23 of the Football Charter and Article L. 122‑3‑8 of the Employment Code, and neither the Cour d’appel nor the Cour de cassation has taken the view that it was mistaken in that interpretation – merely that the effect in question is, or may be, incompatible with a higher rule of law.

34. Consequently, this Court’s concern must be with the effect described, whatever the provisions in which it is embodied.





Question 1: Compatibility with Article 39 EC

35. The first question may be answered briefly and simply: a rule which produces the effect described is, in principle, precluded by Article 39 EC. The reasoning which leads to that conclusion has been set out, in greater or lesser detail, in most of the observations submitted to the Court.

36. Sport is subject to Community law in so far as it constitutes an economic activity within the meaning of Article 2 EC. The remunerated employment of professional or semi-professional footballers is such an economic activity. ( )

37. Article 39 EC extends not only to the actions of public authorities but also to rules of any other nature aimed at regulating gainful employment in a collective manner, including football association rules. ( ) All the provisions referred to in the present case fall within one or other of those categories.

38. The situation of a French player, resident in France, who enters into a contract of employment with a football club in another Member State, is not a wholly internal situation which would fall outside the scope of Community law. It is the acceptance of an offer of employment actually made, to which Article 39 EC specifically applies.

39. Rules are liable to inhibit freedom of movement for workers if they preclude or deter a national of one Member State from exercising his right to freedom of movement in another Member State, even if they apply without regard to the nationality of the workers concerned, ( ) unless the potential impediment to the exercise of free movement is too uncertain and indirect. ( )

40. Rules which require payment of a transfer, training or development fee between clubs on the transfer of a professional footballer are in principle an obstacle to freedom of movement for workers. Even where they apply equally to transfers between clubs in the same Member State, they are likely to restrict freedom of movement for players who wish to pursue their activity in another Member State. ( ) Rules under which a professional footballer may not pursue his activity with a new club in another Member State unless it has paid his former club a transfer fee constitute an obstacle to freedom of movement for workers. ( )

41. If a rule which requires the new employer to pay a sum of money to the former employer is thus in principle an obstacle to freedom of movement for workers, that must be equally or all the more true if the employee is himself liable to any extent. Either he must persuade the new employer to cover his liability or he must meet it out of his own resources, which are likely to be less than those of an employer. Nor is the potential impediment to the exercise of free movement in any way uncertain or indirect. A requirement to pay a sum of money is an immediate and important consideration for any worker contemplating refusing one offer of employment in order to accept another. ( )

42. That analysis is not, in my view, affected by the submissions of Olympique Lyonnais to the effect that a situation of the kind in issue is not concerned by Article 39 EC because that article was intended to cover discrimination on grounds of nationality, not restrictions of freedom to contract in the context of reciprocal onerous obligations, and/or because the dispute in fact falls within the sphere of competition law, as an instance of (allegedly) unfair competition.

43. As regards the first point, it is clear from the Court’s case-law that Article 39 EC does indeed cover restrictions on freedom to contract if they are such as to preclude or deter a national of one Member State from exercising his right to freedom of movement in another Member State, at least as long as they derive from actions of public authorities or rules aimed at regulating gainful employment in a collective manner. As regards the second point, whilst the dispute between Olympique Lyonnais and Newcastle United may well touch on matters of competition law, those matters have not been raised by the referring court, so that the Member States and the Commission have not had an opportunity to comment on them. Moreover, if the dispute did raise issues of competition law, that would not of itself preclude the application of the Treaty provisions on freedom of movement. ( )





Question 2: Possible justification

44. National measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty may none the less escape prohibition if they pursue a legitimate aim compatible with the Treaty. In order for that to be so, however, they must fulfil four further conditions: they must be applied in a non-discriminatory manner; they must be justified by overriding reasons in the public interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary for that purpose. ( )

45. It can hardly be questioned that the recruitment and training of young professional footballers is a legitimate aim which is compatible with the Treaty. Not only do all those who have submitted observations agree on the point, but the Court itself has said so. ( ) Nor is there any suggestion in the present case that the rules in issue are applied in a discriminatory manner.

46. As the Court pointed out in Bosman, ( ) it is impossible to predict the sporting future of young players with any certainty. Only a limited number go on to play professionally, so that there can be no guarantee that a trainee will in fact prove a valuable asset either to the training club or to any other club. Rules such as the one in question here are therefore perhaps not decisive in encouraging clubs to recruit and train young players. None the less, such rules ensure that clubs are not discouraged from recruitment and training by the prospect of seeing their investment in training applied to the benefit of some other club, with no compensation for themselves. An argument that rules with that effect are justified in the public interest seems plausible.

47. On the one hand, professional football is not merely an economic activity but also a matter of considerable social importance in Europe. Since it is generally perceived as linked to, and as sharing many of the virtues of, amateur sport, there is a broad public consensus that the training and recruitment of young players should be encouraged rather than discouraged. More specifically, the European Council at Nice in 2000 recognised that ‘the Community must … take account of the social, educational and cultural functions inherent in sport and making it special, in order that the code of ethics and the solidarity essential to the preservation of its social role may be respected and nurtured’. ( ) In addition, the Commission’s White Paper on sport ( ) and the Parliament’s resolution on it ( ) both place considerable stress on the importance of training.

48. On the other hand, more generally, as the Netherlands Government has pointed out, the Lisbon Strategy adopted by the European Council in March 2000, and the various decisions and guidelines adopted since then with a view to its implementation in the fields of education, training and lifelong learning, accord primordial importance to professional training in all sectors. If employers can be sure that they will be able to benefit for a reasonable period from the services of employees whom they train, that is an incentive to provide training, which is also in the interests of the employees themselves.

49. It is, however, rather more difficult to accept that a rule such as that at issue in the present proceedings is suitable for securing the attainment of that objective and does not go beyond what is necessary for that purpose.

50. All those who have submitted observations – including Olympique Lyonnais – agree that only a measure which compensates clubs in a manner commensurate with their actual training costs is appropriate and proportionate in that way. Consequently, compensation based on the player’s prospective earnings or on the club’s prospective (loss of) profits would not be acceptable.

51. That appears to me to be a correct analysis. Of the last two criteria, the former might be susceptible to manipulation by the club and the latter would be too uncertain. Neither would appear to have any particular relevance to the essential question of encouraging (or at least not discouraging) the recruitment and training of young players. Compensation related to actual training costs seems considerably more relevant. A number of further caveats have, however, been expressed.

52. First, since only a minority of trainee players will prove to have any subsequent market value in professional football, whereas a significantly greater number must be trained in order for that minority to be revealed, investment in training would be discouraged if only the cost of training the individual player were taken into account when determining the appropriate compensation. It is therefore appropriate for a club employing a player who has been trained by another club to pay compensation which represents a relevant proportion of that other club’s overall training costs.

53. Second, it may transpire that the training of a particular player has been provided by more than one club, so that any compensation due should, by some appropriate mechanism, be shared pro rata among the clubs in question.

54. Both of those concerns seem relevant when determining whether a particular scheme of compensation is appropriate and proportionate to the aim of encouraging the recruitment and training of young professional football players.

55. I am less convinced by a third concern which has been voiced, namely that the liability to pay the compensation should lie only on the new employer and not on the former trainee.

56. That, it seems to me, is not a proposition which can be upheld unconditionally. In general, the skills and knowledge which render an individual valuable on the employment market may be acquired at his own expense, at the public expense or at the expense of an employer who trains him in return for his services. If, on the expiry of the training period in the latter case, the ‘balance of the account’ between training costs and services rendered indicates that the cost of the training has not yet been compensated in full, then it does not seem unreasonable that the trainee should be required to ‘balance the account’, either by providing further services as an employee or (if he does not wish to do so) by paying equivalent compensation. Whilst the need to pay training compensation may discourage an employee from accepting a contract with a new employer, in either the same or another Member State, there seems no particular reason why he should be placed, at the training employer’s expense, in a better position to accept such a contract than another candidate who has trained at his own expense.

57. Such considerations will, however, vary according to the way in which training is generally organised in a particular sector. If, as appears to be the case, training of professional footballers is normally at the clubs’ expense, then a system of compensation between clubs, not involving the players themselves, seems appropriate. And I would stress that, if the player himself were to bear any liability to pay training compensation, the amount should be calculated only on the basis of the individual cost of training him, regardless of overall training costs. If it is necessary to train n players in order to produce one who will be successful professionally, then the cost to the training club (and the saving to the new club) is the cost of training those n players. It seems appropriate and proportionate for compensation between clubs to be based on that cost. For the individual player, however, only the individual cost seems relevant.

58. To sum up, the need to encourage the recruitment and training of young professional football players is capable of justifying a requirement to pay training compensation where an obligation to remain with the training club for a specified (and not over-lengthy) period ( ) after completion of training is not respected. However, that will be so only if the amount concerned is based on the actual training costs incurred by the training club and/or saved by the new club and, to the extent that the compensation is to be paid by the player himself, limited to the outstanding cost of the individual training.





The current French and FIFA rules

59. Many of the parties submitting observations have drawn the Court’s attention to the rules currently contained in Articles 20 and 21 of, and Annexes 4 and 5 to, the FIFA Regulations on the Status and Transfer of Players. Those rules now govern situations such as that of Mr Bernard but were not in force at the material time in the present case. They were adopted in 2001, with the Commission’s approval, and seek to ensure compliance with the Court’s case-law, in particular the judgment in Bosman. The French Government points out in addition that the French Professional Football Charter has followed suit and now contains comparable rules for domestic situations.

60. The United Kingdom Government in particular points out that, under the current FIFA rules, the club, not the player, pays compensation; the compensation is calculated on the cost of training a player, adjusted by the ratio of trainees needed to produce one professional player; various safeguards and limits render the compensation proportionate to the aim sought; and a solidarity mechanism apportions compensation between clubs when several have contributed to training.

61. Explicitly or implicitly, those parties also request that the Court should give its blessing to the rules currently in force.

62. It seems to me, however, that specific approval would not be appropriate in the context of the present case, which concerns a situation to which those rules did not apply. That said, some of the reasoning which I have set out above, and some of the reasoning which will be used by the Court in its judgment, may well be relevant if and when it may become necessary to examine the compatibility of those rules with Community law.

Conclusion

63. In the light of all of the foregoing, I am of the opinion that the Court should give the following answers to the questions raised by the Cour de cassation:

(1) A rule of national law pursuant to which a trainee football player who at the end of his training period signs a professional player’s contract with a club of another Member State may be ordered to pay damages is, in principle, precluded by the principle of freedom of movement for workers embodied in Article 39 EC.

(2) Such a rule may none the less be justified by the need to encourage the recruitment and training of young professional football players, provided that the amount concerned is based on the actual training costs incurred by the training club and/or saved by the new club and, to the extent that the compensation is to be paid by the player himself, limited to any outstanding cost of the individual training.