[Author: Adamay Malik, Law Student at NLSIU, Bengaluru, India]
Introduction
FIFA’s transfer policies and their compliance with EU law were fundamentally questioned in the historic Lassana Diarra case, which was heard by the Court of Justice of the European Union (“CJEU”) in October 2024. Fundamentally, the case looks at the intricate relationship between EU competition law’s principles, focusing on the free movement of workers and bringing certain key provisions of the FIFA Regulations on the Status and Transfer of Players (“FIFA RSTP”) under EU law scrutiny.
The delicate balance between preserving football’s integrity and guaranteeing adherence to EU legal frameworks is examined in this landmark decision. The case raises concerns about how closely core EU values can coexist with FIFA’s regulatory autonomy in running the sport. The CJEU’s ruling, which examines the current transfer system, compels a re-examination of how certain elements of the football transfer system must change to comply with legal requirements while maintaining the fundamental traits and competitive nature of the game.
Case Origins and Development
On 24 August 2014, Lokomotiv Moscow unilaterally terminated Lassana Diarra’s employment agreement, alleging serious contractual breaches by the player. Consequently, the club initiated proceedings before the Dispute Resolution Chamber of the FIFA Football Tribunal, seeking compensation amounting to EUR 20 million. In response, Diarra lodged a counter-claim, challenging the legitimacy of the termination and asserting that Lokomotiv had failed to fulfil its financial obligations under the contract.
In February 2015, Diarra received an offer for a new contract from the Belgian club Charleroi, which was expressly subject to a guarantee from FIFA and the Royal Belgian Football Association (“URBSFA”) that neither entity would be held jointly and severally liable for any potential financial obligations arising from Diarra’s dispute with Lokomotiv Moscow. Since neither FIFA nor URBSFA provided the requisite assurance, Charleroi refrained from finalizing the agreement, causing the proposed transfer to collapse. Moreover, the Russian Football Union (Lokomotiv’s national association) declined to issue the Player’s International Transfer Certificate (“ITC”), citing the ongoing dispute before the FIFA DRC. This refusal was in accordance with the FIFA RSTP, specifically Article 9(1) and Article 8(2)(7) of Annex 3.
In May 2025, the DRC decided that Diarra needed to pay €10.5 million in compensation; an appeal was filed before the CAS but to no avail.
In July 2015, Diarra entered into a new employment relationship with the French club Olympique de Marseille. By December 2015, he initiated legal proceedings against FIFA and URBSFA before the Commercial Court of Hainaut (Charleroi Division, Wallonia Region), seeking EUR 6 million in compensation for lost earnings attributed to his enforced period of inactivity.
On 19 January 2017, the Belgian Court ruled that FIFA’s interpretation of Article 17(2) of the RSTP as enforced by the URBSFA, was legally flawed, deeming it incompatible with the principle of free movement of workers enshrined under Article 45 of the Treaty on the Functioning of the European Union (“TFEU”). The Court characterized the provisions as “pre-Bosmanian” in nature and consequently ordered FIFA and the URBSFA to pay EUR 6 million in damages to Diarra.
Subsequently, on 19 September 2022, FIFA appealed the decision before the Mons Court of Appeal, which referred the matter to the CJEU for a preliminary ruling. On 30 April 2024, the First Advocate General of the CJEU, Maciej Szpunar, delivered his Opinion, asserting that the impugned provisions of the FIFA RSTP imposed an unlawful restriction on competition under EU law. Finally, on 4 October 2024, the CJEU rendered its definitive judgment in the matter, which shall be analysed hereunder.
Contested Regulatory Framework
This was a challenge that concentrated on some of the very elements of the FIFA RSTP. These elements of compensation and joint liability insisted that a player who terminated the contract without just cause ought to pay compensation to the previous clubs; and the new club would be jointly liable, with such liability being automatic and presumed in nature. The outstanding duration of contract, the remuneration of the player, and the costs incurred by the former club were some of the factors used for calculating these criteria.
To wit – in cases of early termination without just cause, Article 17(1) of the FIFA RSTP rendered the breaching party liable for compensation, calculated based on specific criteria. Article 17(2) further stipulated that if a player is liable for compensation, the obligation extends jointly and severally to the player’s new club. In addition to financial liability, Article 17(3) imposes sporting sanctions during the “protected period” – defined as three seasons or years (whichever is shorter) for players under 28 and two seasons or years for players over 28. A player breaching a contract within this period faces a four-month suspension, extendable to six months in aggravating circumstances. The new club, presumed to have induced the breach, faces a two-window registration ban under Article 17(4).
Regarding transfers, Article 9 of the 2014 FIFA RSTP required an ITC from the former association for registering a player with a new association. Under Annexe 3, Article 8(7) of the 2014 RSTP, an association may withhold the ITC in the event of a contractual dispute. These were essentially the disputed provisions that were analysed vis-à-vis EU law in casu.
Freedom of Movement Analysis
A challenge under Article 45 TFEU exposed several such important limitations on workers’ freedom of movement. As determined by the Court, clubs are discouraged from hiring players who have terminated prior contracts by the combination of financial penalties, registration restrictions, and the ITC withholding mechanism.
The ruling clarified the precise ways in which these regulations discriminated against professionals who wanted to work in other Member States. It was determined that the combination of ambiguous compensation amounts, and sporting sanctions significantly discourages players from moving across international borders.
Other Competition Law Implications
The CJEU’s interpretation of Article 101 TFEU dealt a serious blow to FIFA’s regulatory structure, which has far-reaching ramifications for the football transfer system as a whole. The Court determined that FIFA’s rules effectively created de facto non-poaching agreements between clubs, leading to artificial market segmentation. This classification of FIFA’s rules as a “restriction by object” highlighted their fundamentally anti-competitive nature.
This generalized and drastic manner in which these regulations had an effect on competition across the EU was, therefore, at the core of the Court’s reasoning. Competition law considerations made this permanent restriction on player mobility and club recruitment particularly problematic.
The Court ruled that the rules of FIFA effectively prevented clubs from allocating players to one another and only allowed negotiated transfers. This system, by eliminating free market competition in the acquisition of players, basically erected artificial barriers to club growth and player mobility. It exposed how such a framework compromised the essence of competition law in the EU single market by unduly curtailing the natural play of market dynamics, curtailing the clubs’ ability to compete for talent, and freedom of players in looking for job opportunities. While this kind of market restraint analysis constituted the basis for the Court’s criticism, it looked whether the regulatory approach pursued by FIFA was capable of being justified on grounds of objective of competitive balance and stability of contracts.
Building on the competition law analysis, the Court applied a proportionality test to determine whether FIFA’s regulatory framework, although having anti-competitive effects, could be justified by its legitimate objectives of contractual stability and fair competition. The CJEU found that FIFA’s implementation was woefully lacking in several key aspects.
The Court had its main criticism of FIFA’s calculation mechanism for compensation, that it was fundamentally flawed, arbitrary and discretionary. There were elements that it was considering in this calculation and which bore no direct relation to the employment relationship itself. This disconnect between the factors considered and the actual employment relationship typically resulted in disproportionate financial penalties that far exceeded what could be justified by the termination of the employment contract.
Another major issue of contention was the automatic assumption of violations (precisely an inducement to breach) by new clubs. The Court found this approach particularly problematic in that it imposed severe penalties without consideration of actual conduct or intent. This one-size-fits-all approach failed to account for the specific contexts and circumstances of each case, running counter to basic principles of proportional justice and fair regulation in the employment context.
Economic and Regulatory Implications
The Diarra ruling presents a challenging task for the economic ecosystem and regulatory framework of football. Although the decision fundamentally challenges the FIFA RSTP, it need not necessarily result in a complete collapse of the transfer system. However, the ruling does have implications for smaller clubs, who are heavily reliant on transfer fees as an important source of revenue.
The historical function of the transfer system as a redistribution mechanism that benefits smaller leagues is a critical consideration. This economic reality creates a complex regulatory challenge: to maintain this beneficial economic equilibrium while ensuring compliance with EU legal requirements. The solution appears to require a fundamental reimagining of transfer regulations.
An overall decline in transfer fees from potentially increased unilateral terminations could significantly impact FIFA’s Solidarity Mechanism and the revenues of smaller clubs reliant on developing young players for future transfers to bigger clubs.
Facing the various pressures, FIFA starts conducting stakeholder consultation. So far, the proposals of emerging stakeholders suggest a transformation into even more complicated contractual mechanisms as more adequate buyout clauses could reflect reality, loyalty-based payments and more detailed protection clauses regarding club and players.
Regulations must balance up different sometimes conflicting objectives;
- Small club sustainability
- National labour legislation and local specifics
- Flexibility to address specific case circumstances
- Standards for fair and consistent compensation
This developing framework is a departure from the traditional one-size-fits-all approach. It instead promotes a more flexible structure that can accommodate specific circumstances but still retain enough predictability to sustain market stability. Anchoring these regulations in national employment laws will help the system be more aligned with local legal contexts but still preserve the basic economic functions.
This approach would mostly depend on establishing sanctions in proportion to real behaviour and away from uniform application of penalties. In compensation and sanctions, such a shift towards proportionality could help to protect the redistributive functions of the transfer system against its inherent legal demands for equity and flexibility. It would remain a challenge in drawing out the regulations in the course of achieving the said objectives, without undermining the core functions that make the system viable to sustain football’s more complex economic environment.
Protection of Youth Development
Significant worries regarding the future of youth development in professional football have been raised by the Diarra ruling. The financial incentives that currently motivate clubs to invest in youth academies and talent development programs may be significantly changed by the ruling’s possible effects on the conventional transfer system.
The possibility of future financial gains through transfer fees when they sell developed talent encourages clubs, especially smaller ones, to make large investments in youth development under the current system. In the past, this model has been an essential source of funding, allowing clubs to continue their function as talent incubators for the sport and to run extensive youth programs.
However, there is a genuine chance that clubs will significantly cut back on their investment in youth development infrastructure if the financial incentives connected to the transfer system are removed (or reduced at the very least) as a result of the Diarra ruling.
For smaller clubs, which frequently rely significantly on their academy systems as a source of both sporting and financial sustainability, this issue is especially pressing. Furthermore, there are increasing concerns that clubs may be more likely to terminate the contracts of young athletes, which could leave these athletes without proper protection or opportunities for growth. Any new regulatory framework resulting from the Diarra ruling must include strong and targeted protections for minors in light of these risks. The future of football’s talent pipeline and sustained investment in youth development depend on these safeguards.
Follow-through
In order to keep such a market from being disrupted, FIFA has reached a significant transition point in its acceptance of the new transfer regulations that were implemented in compliance with the CJEU’s Diarra ruling. Because clubs and stakeholders are left in a state of uncertainty by the ongoing changes in the legal environment, the issue here is the “paralysis” of the entire transfer market’s activity.
The importance of this uncertainty was dramatically shown on November 25, 2024, when FIFA’s Disciplinary Committee Chairman, Mr. Jorge Iván Palacio, issued an official correspondence announcing the immediate suspension of all pending cases related to Article 17 of the FIFA RSTP and associated provisions. This landmark decision, effectively suspended all disciplinary proceedings related to contract terminations without just cause, including measures against both players and clubs under joint liability principles. The global scope of the decision reflects the recognition by FIFA of the potentially far-reaching implications of the CJEU’s decision, which goes beyond the EU jurisdiction where the Diarra ruling originated. This unprecedented move, coming weeks before the European winter transfer window, has added further uncertainty to the transfer market while showing that FIFA is committed to tackling the fundamental issues raised by the Diarra case.
In this case, paralysis may result from clubs’ unwillingness to make certain transfers until the financial and legal risks associated with them under the new framework are sufficiently clarified. Here, it is necessary to balance the need for immediate compliance with the sustainability of regulations over the long run. This is what FIFA must do: create a legal framework that gives players freedom of movement while also giving clubs stability. In this era of significant regulatory change, striking a careful balance between professional football’s financial sustainability and competitive integrity will be essential.
Role of National Laws
The CJEU’s ruling in the Diarra case demonstrates a significant change toward a broader acceptance of national employment laws in football transfers. Maintaining cohesive international transfer systems while adhering to various national legal frameworks is likely to be a significant challenge for FIFA as a result of this development. The challenge is to develop efficient regulations that can be applied in several jurisdictions while maintaining the fundamental consistency needed for international transfers to go smoothly.
FIFA must now strike a balance between maintaining the unified transfer framework for international movements and adhering to local employment laws specific to each nation in certain contexts. The procedure requires that the legal requirements of two different jurisdictions be reconciled while remaining realistic and feasible. The rules governing contract termination, compensation calculations, and the club’s legal protections under national law appear to be the most challenging of these matters.
The organization must develop a flexible yet uniform regulatory framework in this respect. A functional system of international transfer necessitates that this framework maintains fundamental principles and be able to adapt the process to local legal requirements.
Impact on Domestic Transfers
Implications of the Diarra ruling on domestic transfers are that a careful analysis of Article 17 of the FIFA RSTP is necessary.
The recent case of Indian defender Anwar Ali provides very instructive examples of domestic transfer systems operating in totally independent ways from the internationally established framework of FIFA. In September 2024, Ali was banned by the All India Football Federation’s (AIFF) Players’ Status Committee for four months and his previous club Mohun Bagan Super Giant was awarded with a record compensation of ₹12.9 crore. The case, which had Ali relocating to East Bengal, ensured that East Bengal and Delhi FC would not sign in any new players till 31st August 2025. Though the case may superficially appear identical to others covered under Article 17 of FIFA, it was decided on purely domestic AIFF regulation lines, as one finds national associations possessing their transfer system.
The Ali case highlights how domestic transfer systems can impose significant financial penalties and sporting sanctions without direct reference to FIFA RSTP. The AIFF’s Players’ Status Committee calculated compensation based on factors specific to the Indian football market, including the player’s market value derived from both his previous and new contracts, along with considerations of “damage” suffered by the former club. This shows how national associations develop their own methodologies for handling contract breaches, though at times influenced by international practices, for instance compensation regulations under national laws which are identical to Article 17 of the FIFA RSTP for most member associations.
In essence, national associations typically maintain their own transfer regulations for domestic movements, although these are often modelled on FIFA’s framework. While Article 17 principles regarding compensation and sporting sanctions have influenced domestic regulations, national associations retain significant autonomy in structuring their internal transfer systems. This autonomy means that the Diarra ruling’s impact on domestic transfers will likely depend on how national associations choose to respond to the CJEU’s interpretation of EU law principles.
The challenge of the ruling primarily focuses on the interaction with EU free movement and competition law in cross-border situations. This does not, however, automatically invalidate similar restrictions at the national level, where different legal considerations apply. National associations may be able to justify more stringent transfer regulations for movements within their national context in terms of legitimate sporting objectives, particularly competitive balance and club stability.
The national associations must review their domestic regulations in order to make them stronger enough to pass similar legal tests in national courts, especially within the EU where national courts would apply comparable legal principles to domestic cases.
All in all, it is important to underscore that while the FIFA RSTP predominantly regulates cases with an international element, and FIFA’s suspension notice directly references the CJEU’s ruling in Diarra, its immediate impact may appear limited to matters involving EU law. Nevertheless, any amendments to FIFA’s regulations could potentially influence analogous national rules through a trickle-down effect. The scope of such changes will hinge on FIFA’s revisions and the extent to which member associations are required to harmonize their regulations. Only time will reveal the full implications of these developments.
Interim Regulatory Framework and Amendments
To address the issues raised by the Diarra judgment, FIFA put in place an interim regulatory framework effective from January 1, 2025. The framework formally defines “just cause” as that situation where a party cannot reasonably and in good faith continue with a contractual relationship. Codification of this understanding was done through established jurisprudence of the Football Tribunal, making it easier for stakeholders to predict their outlook with legal certainty, keeping the fact-specific approach intact.
The compensation mechanism was substantially revised, adopting the ‘positive interest’ principle for calculating breach of contract payments. Under this approach, compensation is determined by considering the actual damage suffered by the non-breaching party, the specific facts and circumstances of the case, and applicable national laws when their relevance and content are substantiated by the claimant.
A significant overhaul of the process occurred in the ITC with stringent timelines, which eliminated a series of roadblocks. The former associations must return the ITCs within 72 hours from the request and cannot refuse ITCs anymore. Registration will be automatically given if former associations do not reply within that period. Even now, exceptional circumstances can involve FIFA but the most importantly, contractual issues cannot stop ITCs.
The burden of proof for joint and several liability has been reversed, requiring claiming clubs to prove that new clubs induced contract breaches. This change emphasizes the need for concrete evidence and case-by-case evaluation, moving away from automatic assumptions of liability. New procedural requirements mandate parties to collaborate in establishing facts, with enhanced evidentiary standards. The Football Tribunal was further empowered to draw adverse inferences due to non-compliance. In other words, it becomes even more powerful in ensuring fair proceedings. All of these measures apply retroactively to cases pending as of January 1, 2025, and the parties involved have a right to be heard regarding the framework’s implications for their cases.
During this interim framework, FIFA will continue to consult with all stakeholders in the most extensive manner possible and work towards developing a new, long-term regulatory approach. The organization is looking to establish a framework that balances competitive integrity, contractual stability, and compliance with EU legal requirements through an objective, transparent, and non-discriminatory process.
Conclusion
FIFA had to completely rethink its transfer policy as a result of the Lassana Diarra case, which marked a sea change in football regulations. The CJEU’s ruling would necessitate challenging concessions between competitive football markets and the requirements of EU law. As it embarks on this regulatory reform journey, FIFA must contend with a number of issues, such as player mobility, national employment laws, youth development protection, and smaller clubs’ financial stability.
This judgment signals a potential recalibration of bargaining dynamics, favouring players over clubs, and compels stakeholders to realign the transfer system with individual freedoms protected under EU law, without undermining the core objectives of competitive balance and contractual stability. Furthermore, it could open the door to future legal challenges against other aspects of FIFA’s regulatory framework.
[One may reach out to the Author for feedback or queries at adamay.malik@nls.ac.in]
*NOTE- The opinions and views expressed in this article are that of the Author(s) and not of SLRI- the expressed opinions do not, in any way whatsoever, reflect the views of any third party, including any institution/organisation that the Author(s) is/are currently associated to or was/were associated to in the past. Furthermore, the expressions are solely for informational and educational purposes, and must not be deemed to constitute any kind of advice. The hyperlinks in this blog might take you to webpages operated by third parties- SLRI does not guarantee or endorse the accuracy or reliability of any information, data, opinions, advice, statements, etc. on these webpages.
Preferred Citation: Adamay Malik, ‘Diarra’s Legacy: Reshaping Football’s Transfer System’, SPORTS LAW REVIEW INDIA, available at: https://sportslawreviewindia.blog/2025/01/11/diarras-legacy-reshaping-footballs-transfer-system/↗ 11 January 2025.
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