Sporting Rules/Regulations Part 6

A response to the question that critically considers the self-regulatory sporting rules and the impact of the same on the UK Domestic Laws, The ECJ jurisprudence and the inpact of the EC White Paper on Sport: written by Football Agents and Sports Lawyers:

3. Directors Test (formerly "the fit and proper person" test)

The self-regulatory rules of the Domestic Regulators discussed above are clearly ,a package of measures designed to discourage administration. However a further set of self-regulatory rules has recently been implemented and updated by the Domestic Regulators to ensure that the personnel who run club football are competent and professional.

The All Party Parliamentary Football Group (APFG) report° inquiry recommend the fit and proper persons test (a test they formulated in 2004) be revised to take into account the suitability of Owners/Directors which should be, unlike the previous test, prospective taking into account anyone with a pending criminal charge, as well as a robust business plan which must be sanctioned and approved.

The Directors Test is found at Appendix 4 to the Football League Regulations68 (the "Regulations") which is stringent providing for an extended definition of a company director including a de facto director (a person who acts as if he is a director, although not registered and treated as such by the board) and a host of potential disqualifying conditions from fraud, "ticket touting"69 or being subject to a ban from other Governing.

Bodies.70 The Regulations place emphasis on 'control' that is, where directors have power to exercise or acquire direct or indirect control over the affairs of the management of the Club, such as the ability to remove or appoint directors. This extended definition also covers individuals with a 30% shareholding interest who have a direct negative power of veto on any special resolutions.

The Directors Test is not a rubber stamping exercise which Stephen Vaughan found to his cost having the unenviable reputation as the first person to fail the test.71 It is mooted72 that the Regulations may be challenged as the rule has an impact on a specific individual under EU Competition Law. A director who may fail under the Regulations may submit that he/she is prevented entry to, or restricting the market for a directorship in football in breach of Art 81 and 82 of the EU Treaty and under the Competition Act 1998. Winnie cites in support Section 2 of Chapter 1 of the Act that provides:

'...decisions by associations of undertakings which may effect trade within the UK; and which have as their object or effect the prevention, restriction or distortion of competition within the UK'.

In addition Section 18 in Chapter II prohibits:

'any conduct on the part of one or more undertakings that amount to the abuse of a dominant position in a UK market that may effect trade in the UK'.

Where multi-club ownership is concerned there is an ability to influence other directors/shareholders and thus the Directors Test cannot work in isolation. Whilst the integrity of the game and true competition must prevail this does not fit easily with multi-club ownership. Its wrongdoings are typified within the Spanish League where a Spanish Club was able to 'buy' another in a higher division and morph its way up the league.73 Geey74 argues that buying preferential positions in the league cannot happen under the PL due to more stringent rules on ownership and perhaps elsewhere.75

Of note is the ENIC76 case, ENIC held a minority and majority shareholding in two competing clubs in UEFA Cup competition in the same season. CAS ruled that a shareholding of 50.1% or more in two competing clubs in the same competition breaches Art. 2 of the UEFA Rules on Integrity of Competitions. Interesting UEFA have adopted a higher threshold of shareholding (50.1%) than that of the Directors Test (30%) leading to possible criticism and legal challenges." However UEFA does have a catch all provision when determining control or influence adopting the words "decisive influence" over another club's affairs. UEFA concludes that it has no problem with minor stakeholding in multiple clubs, it is the 'control issue' that will be monitored.78

It is apparent that ownership of clubs is a 'hot topic' and with the added foreign ownership dimension highlighted by Blackshaw79 illustrates the substantial difficulty of self-regulation where it is perhaps best to do nothing at all and adopt the 'laissez-faire' approach.

However to do nothing is unacceptable as the White Paper is clear concerning the importance of sport in the community. Club failures such as Rangers, Leeds and Portsmouth cannot persist. Self-regulatory rules against the evil of debt, fraud and financial mis-management are required. It is clear that the PL / FL hold a dominant position80 and thus whilst they must legislate, the decisions by them if construed as an economic activity and restrict competition will come under the scrutiny of the ECJ.81

Certainly David Winnie,82 argues that the Directors Test is more onerous than the requirement placed in other industries outside of football and could be open to legal challenged. The restrictions on multi-club ownership equally may be challenged as a restraint of trade and breach of EU Competition Law.

Impact of the White Paper

The EU Commission in the White Paper on Sport have not helped create any certainty or guidance to Governing Bodies, indeed the Commission has moved away from its 1998 concept of a comprehensive 'European model of sport' to simply suggesting that the 'specificity of sport' will be respected but will not justify a general exemption from the application of EU Law. That each rule will be considered on a case-by-case basis
indicating the ECJ's ethos of EU Law echoed by the seminal cases such as Walgrave r& Koch83, Bosman84, Meca-Medina85 and MOTE86 that any sporting rule must be fair anicl proportionate to the legitimate sporting objectives and shall not conflict with the fundamental pillars of the EU Treaty particularly concerning the free movement of workers and anti-competition.

This case-by case approach as Anderson observes" creates unpredictability making it difficult for Governing Bodies to plan ahead without fearing Bosman 11;88 that EU Law is a process of default rather than planned design that is reactionary. Indeed Weatherill89 highlights the change of emphasis since 1998 of the Commission's attitude towards homogenization and approximation of sporting policies becoming self-aware and indeed 'humble' of its lack of direct competence in sport and 'not tainted by inflated claims about the EU's regulatory competence.' Defining a single model of sport in Europe is now perceived to be 'unrealistic'. The Commission's reluctance to interfere is, according to Garcia, based on three fundamental platforms8° (1) the transformation of governance structures of sport in the last decade, (2) the Commission's desire to avoid ove ­regulation and (3) the politicisation of the concept.

This shift in attitude has mirrored the timeline and emergence of new powerful stakeholders in the game, such as the Professional Players Trade Union (FIFPro) and the European Club Association (ECA) that must be consulted on important sporting rules91. The historical multi-layered pyramidal and hierarchical structure of monopolistic governance from international federations down to national governance and clubs are no longer a valid characterisation of the likes of UEFA and FIFA. Instead power has shifted to the new stakeholders from the vertical to the horizontal which, as Garcia describes, has created further step in its evolutionary progress.92 Thus It could be argued93 that it is precisely due to the rise of the new powerful stakeholders in sport that has created a greater internal balance of power ensuring a more informed and fairer policing of sport by various stakeholders without the requirement for the Commission to over-legislate.

66"FAPL to defend challenge to Football Creditors rule" (Headline) (2010)8(6) WSLR1

67 Alan Keen MP, "Report: "English Football and its Governance " (2009) 7 (7) WSLR6

68 Regulations found at: http://vvww.football-league.co.uk/regulations/20110629/appendix­4_2293633_2128219

69 Ibid (Vii) Interpretation preamble.

70 Winnie, 'Briatore, competition law and the Fit and Proper Persons Test' (2010) 8 (30 WSLR6 implications of Flavio Briatore's life time ban from Formula 1.

71 http://en.wikipedia.org/wiki/Stephen_Vaughan,_Sr.

72 Ibid

73 Case Granada 74, The Claim, C.A.S. Press Release Sept. 7 2007

74 Gee & others, Multiple Club Ownership: disparities between rules, Vol 6 Issue 1 WSLR 2

75 See the German Rules on ownership: Kupfer, Club Ownership: the '50+1' rule and European Law (2008)6((11) WSLR 6: The French Position: Peltier, Multiple club ownership rules-legal analysis, Vol 6 Issue 5 WSLR, 15

76 Case COMP/37 806: ENIC/UEFA CAS decision

77 Gee & others, Multiple Club Ownership: disparities between rules, Vol 6 Issue 1 WSLR 2

78 http://www.sportbusiness.com/news/135967/enic-aims-to-satisfy-uefa-concerns

79 Blackshaw, Opinion Restrictions on Foreign Ownership of Football Clubs, Vol 6, Issue 1

80See Motosykletistiki Omospondia Ellados NPID v Elliniko Dimosio (2008), European Court of Justice (hereinafter "MOTOE)

81 Case 519/04P Meca Medina v Commission of European Community [2006] 5 CMLR 18

82 Winnie, 'Briatore, competition law and the Fit and Proper Persons Test' (2010) 8 (30 WSLR6.

83 Walgrave & Koch v Union Cycliste Internationale Case C-36/74, [1974] ECR 1405

84 Union Royale des Societies de Football v Bosman Case C-415/93 [1995] ECR 1-4192

85 Case 519/04P Meca Medina v Commission of European Community [2006] 5 CMLR 18

86 Motosykletistiki Omospondia Ellados NPID v Elliniko Dimosio (2008).

87 Anderson: Modern Sports Law 2010: para 8.54

88 Perhaps a rational why SGBs may be perceived to be slow when making decisions.

89 Weatherill, "The White Paper on Sport as an Exercise in 'Better Regulation' ISLJ 2008/1-2,3

9° Garcia, 2009. Sport governance after the White Paper: the demise of the European model? International Journal of Sport Policy, 1 (3), pp. 267-284. Page 30

91 Garcia, ibid.

92 Anderson: Modern Sports Law 2010:

93 Author's own view

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An original essay written by Football Agents and Sports Lawyers