The 2015 MLS CBA, Bosman, and how European Law Affects Free Agency in American Soccer

Major League Soccer and the MLS Players Association are on the precipice of a break down in Collective Bargaining Agreement negotiations. One of the major sticking points in the negotiation is the issue of free agency in Major League Soccer. Soccer in the European Union faced similar restrictions over movement of players after the expiration of their contract, which was resolved in the Bosman ruling two decades ago. Through CAS Jurisprudence, the decision in Bosman may render the free agency debate in Major League Soccer moot.

The Bosman Ruling:

In the landmark Bosman ruling, the European Court of Justice held that that rules requiring a payment of a negotiated transfer fee for the transfer of a player after the expiration of his employment agreement was an illegal restriction on a Player’s fundamental right to freedom of movement. [1] Specifically, the ECJ found that said rules “are likely to restrict the freedom of movement of players who wish to pursue their activity in another Member State by preventing or deterring them from leaving the clubs to which they belong even after the expiry of their contracts of employment with those clubs. “[2]

Additionally the court held that “since [the rules] provide that a professional footballer may not pursue his activity with a new club established in another Member State unless it has paid his former club a transfer fee agreed upon between the two clubs or determined in accordance with the regulations of the sporting associations, the . . . rules constitute an obstacle to freedom of movement for workers.”[3] The Court also found that even if the restriction involved movement within a single member state, it would still constitute an illegal restriction on free movement.[4]

As a result, no European club, or national association, can require the payment of a negotiated fee for, or create any other bar against, a player moving to a new club upon the expiry of his employment contract. This thus establishes free agency for all European sports.

The Peñarol Decision

The Principle of free movement was then applied by CAS to cases involving players and club outside of the EU in Club Atlético Peñarol v. Suarez et al.[5] While not citing directly to Bosman, the CAS panel in Peñarol ruled that because FIFA and CAS are entities governed by Article 187 of the Swiss Public International Law Act (the “PILA”), they are required to seek guidance from Swiss public policy.[6] Specifically, the Panel in Peñarol observed that while a choice of law determines the applicable laws, Article 187 states that organizations incorporated under Swiss law cannot preempt Swiss legal norms if said preemption would contravene Swiss public policy, or violate a fundamental right under Swiss Law.[7]

Peñarol thus holds that CAS and the FIFA DRC are bound by basic human rights as recognized by Swiss Law and Public Policy.

Effects of Bosman and Peñarol

Switzerland and the European Union signed the Agreement on the Free Movement of Persons, which became effective on 1 June 2002.[8] That agreement, states that both Switzerland and the European Union Member states recognize the “right of free movement.”[9] This agreement occurred after Bosman.[10] Therefore, the panel in Peñarol essentially found that the Bosman decision applied to cases involving any dispute that fell under Art. 187 of the PILA. Both FIFA and CAS are organizations Established under the PILA, and therefore are bound by Art. 187. Therefore, Peñarol establishes jurisprudence where CAS and DRC panels should apply the Bosman ruling to any contract dispute, regardless where the dispute takes place because those bodies are subject to Art. 187 of the PILA.

 

Application of Bosman & Peñarol to Major League Soccer’s CBA Negotiations

A. Lack of a European Connection

The CBA between the MLS PA and Major League Soccer applies only to employment within the singular league. Because the freedom of movement issue applies only to that league, if a freedom of movement issue made its way to the FIFA DRC or CAS Major League Soccer may argue that there are no bars to freedom of movement. However, Major League Soccer operates three franchises in Canada, and therefore it has the potential to challenge the freedom of movement of players between those countries. Likewise, as Bosman stated, restrictions of movement of players within one “member state” may affect his freedom of movement to another “member state” “by preventing or deterring them from leaving the clubs to which they belong even after the expiry of their contracts of employment with those clubs.”[11]

In Peñarol, there was some connection to the European Economic Area, as a French Club (PSG) was pursuing the player in question. Therefore, Major League Soccer can argue that since the player movement here does not touch the EU or Switzerland, Peñarol should not apply. However, given the above referenced portions of Bosman[12] and the fact that Peñarol applied Swiss public policy to a Uruguayan Football Association rule, the fact that the rule does not affect movement to or within Europe or Switzerland may not matter.

B. Single Entity and Free Movement

There are three possible scenarios for a player when his contract expires. He can a) sign a new contract with his current club; b) join a new club competing under a different national association (an international transfer); or c) join a new club competing under the same national association his current club (a domestic transfer).

If a player signs a new contract with his current so long as the player agrees to an extended term, and that term follows FIFA’s (lose) 5 year contract term rule under Article 18(2) of the FIFA RTSP[13] there are, obviously no legal issues. The player is happy, the club is happy.

If a player decides to transfer to a new club at the end of his contract then the question becomes, does the standard set by Peñarol and Bosman overtake potential provisions in an MLS CBA?

For International Transfers, and transfers to other domestic leagues (NASL, USL Pro), the answer is an obvious yes. The CBA only covers terms of employment within the league itself. If a player signs with a new club in a league in a new country, or even a different league in the US, the CBA should not apply.

The more interesting question is: does Peñarol (and therefore Bosman) invalidate any MLS CBA restrictions regarding out-of-contract transfers between MLS franchises. As stated before Major League Soccer contract disputes may be subject to the FIFA DRC and therefore CAS jurisdiction. If the case went to the DRC, or later appealed to CAS, the player or the new club would most likely request the panels to apply Peñarol and Bosman. However, because of Major League Soccer’s single entity composition the arguments more difficult to apply. [14]

Each MLS franchise is technically a subsidiary of Major League Soccer. Therefore, the league would most likely argue[15] that a free agency dispute is not a freedom of movement issue so much as a freedom of association issue. Specifically, as a single entity, Major League Soccer has the right to negotiate new employment terms with employees, including where in the organization an employee can work, or a method by which the employee is selected to work at its various branches.

Although, because of the nature of the “business” franchises do compete for employees. It is not a stretch to argue that if a player is wanted by a franchise, if the league rules get in the way of the player moving to that franchise, it could still be found to violate the principles of freedom of movement.

If the dispute were between franchises in regards to the signing of a player, it would be very difficult to argue that those franchises are two branches of the same tree. If the league, or another club came between the signing of an out-of-contract player and a franchise, and the franchise brought suit before the DRC, a panel may find that the provisions for player movement after their contract has expired violates basic Swiss public policy. Therefore, like in Peñarol, the provisions regulating player movement after their employment contract has expired are invalid, and MLS players have the right to move freely to any new MLS franchise that will have him.

However, if the dispute arises from a player challenging, for example, a re-entry draft, and all of the franchises in MLS tow the same line, the league’s argument may carry some weight.[16] Freedom association, by all accounts, allows companies to condition terms of employment to working at specific branches of the organization.

 

Final Thoughts

Many have pointed to the fact that free agency is a major sticking point for MLS CBA negotiations. However give nature of the international transfer market, free agency will definitely exist for players moving on free transfers to different leagues, regardless of CBA terms. Likewise given the composition of US Soccer and MLS contract dispute resolution, the possibility of applying Swiss public policy also leaves enforcement of any current or future CBA terms inhibiting free agency in question.

This may hurt the bargaining power of the MLS Players Association. If players can already freely move to new leagues removing restrictions on Free Agency may not be a primary issue for a number of players.

Alternatively, because of the current employment market, FIFA DRC and CAS jurisprudence, and US Soccer and MLS dispute resolution procedures, any provision inhibiting free agency in the CBA could be circumvented depending on how the player goes about challenging the dispute, or where he decides to pursue his career. Therefore, free agency restrictions in the CBA may lose their teeth, depending on how they are challenged.

 

 

[1] Union Royale Belge des Sociétés de Football Association ASBL v Jean-Marc Bosman, (1995) C-415/93

[2] Id. at ¶ 99.

[3] Id. at ¶ 100.

[4] Id. at ¶

[5] TAS 2005/A/983 & 984, Club Atlético Peñarol v. Suarez et al

[6] Id.

[7] Id.

[8] See, Free Movement of Persons Switzerland – EU/EFTA, Swiss State Secretariat for Migration, https://www.bfm.admin.ch/bfm/en/home/themen/fza_schweiz-eu-efta.html.

[9] See, Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons [OJ L 114 of 30.4.2002].

[10] Id.; See also Bosman, (1995) C-415/93.

[11] Bosman, (1995) C-415/93 at ¶ 99.

[12] See Supra.

[13] See FIFA Regulations on the Status and Transfer of Players Art. 18(2) “while the maximum length of a contract shall be five years. Contracts of any other length shall only be permitted if consistent with national laws.”

[14] Although, this single entity composition creates other possible problems for the league.

[15] Aside from the fact that Swiss and EU labor law principles should not apply.

[16] Although a re-entry draft may violate art. 18 bis of the FIFA RTSP.

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FIFA Dispute Resolution Chamber Jurisdiction Over MLS Contract Disputes

There is a possibility that FIFA has competence to hear contract disputes between certain players and Major League Soccer, over and above the MLS Collective Bargaining Agreement’s provided arbitration procedure for contract disputes. This could effect not only who makes decisions regarding contract disputes North America’s top tier soccer league, but also what laws and regulations control players’ contracts, the league, and governance of the sport.

Jurisdiction of FIFA:

The FIFA Regulations on the Status and Transfer of Players (FIFA RSTP) Article 22(b) gives The FIFA Dispute Resolution Chamber (FIFA DRC) competence to hear “employment-related disputes between a club and a player of an international dimension, unless an independent arbitration tribunal guaranteeing fair proceedings and respecting the principle of equal representation of players and clubs has been established at national level within the framework of the association and/or a collective bargaining agreement.”^[1] The Official commentary to the FIFA regulations states “if the association where both the player and club are registered has established an arbitration tribunal composed of members chosen in equal number by players and clubs with an independent chairman, this tribunal is competent to decide on such disputes.”^[2]

Therefore, for FIFA to have competence to hear a dispute between a player and a club, there needs to be 1) an international dimension, and 2) fail to meet the “fair proceeding” requirements outlined in Article 22(b).

International Dimension

An international dimension, according to FIFA is “represented by the fact that the player concerned is a foreigner in the country concerned.”[3] Essentially, Article 22 gives FIFA competence to hear disputes involving “foreign” players, e.g. players that hold a different nationality of the federation where they compete professionally, or if dual nationals, registered with a different national federation team under Article 15 of the Regulations Governing the Application of the FIFA Statutes, and Article 1 of Annex 2 of the FIFA RTSP.

Purpose of the Employment-Related Disputes Competence

FIFA established the DRC and the above provision in Article 22(b) to allow players a fair procedure for dealing with employment related disputes. In numerous national associations, composition of dispute resolution bodies was stacked in favor of the national association and clubs. In those situations, players had little to no input on the compositions of these bodies, or those deciding their case. Arguably, then, only the interest of the association, and member clubs were represented in those dispute resolution bodies, and therefore were not fair arbitrators of disputes.

 

MLS Arbitration:

The MLS CBA provides for contract dispute arbitration after a “Grievance Procedure.”^[4] The Grievance Procedure functions as a mediation/settlement negotiation, with two negotiators, one appointed by the MLS Player’s Association and one appointed by the league. If no settlement is reached at the Grievance Procedure, the parties go arbitration. This arbitration is heard by a single, impartial arbitrator, appointed “jointly by the parties.”^[5]

Fair Proceedings by National Dispute Resolution Bodies

The test for “fair proceedings” generally falls on whether the decision maker in the procedure represents the interests of both the association and the player. The FIFA commentary on the RTSP states that an association or a collective bargaining agreement must crate the arbitration and it must involve “an arbitration tribunal composed of members chosen in equal number by players and clubs with an independent chairman” to be competent to decide on such disputes.

The MLS Arbitration procedure is established by the professional league (Here, the MLS, not the national association, although it is established via collective bargaining. As well, the arbitration involves a single arbitrator, not a panel consisting of equal numbers of arbitrators selected by the players and clubs with an independent chairperson.

Without a doubt, Major League Soccer’s contract dispute resolution procedure “respect[s] the principle of equal representation” and fairness. It involves not only an arbitrator agreed upon by both parties, but also a mediation procedure involving two mediators one selected by the players, and one selected by the league. These procedures were established through an extensive negotiation process between the Players’ Association and the league.

However, the procedure does not conform to FIFA’s official commentary of what a “fair” proceeding should be. First, a single arbitrator, not a panel of arbitrators, hears the dispute. Second, the league, not the national federation is organizing the contract dispute process.

It’s a toss-up. On the one hand, the MLS procedure includes a neutral arbitrator, and the players and the league, through collective bargaining, agreed upon the procedure. On the other hand, the language of the FIFA RTSP commentary outlines a much different arbitration composition from what Major League Soccer has established.

The real test will be whether a FIFA DRC panel, or eventually a CAS panel, will follow the spirit of Article 22(b), or the letter of the official commentary.

Accepting Jurisdiction of MLS Contract Dispute Resolution Procedures

 

Once a player begins a dispute resolution process via Major League Soccer’s CBA Article 21, they have accepted the jurisdiction of that procedure, and are therefore bound by its rules and its final decision. At that point a binding arbitration process will have commenced, and therefore, The FIFA DRC runs the risk of having conflicting binding arbitration awards, which would lead to legal headaches for the league, FIFA, the Player and, in this case Major League Soccer.

While that is fairly straight forward, it is not clear at what point the FIFA DRC would say the player accepted the jurisdiction of the MLS dispute resolution process. Is it when the player begins the “Grievance Procedure,” or is it when the player initiates the arbitration? It could go either way.

On the one hand, the grievance procedure is a non-binding mediation process, which may not resolve the issue. Likewise, if it does, both parties have agreed, so neither (hopefully) would challenge it. On the other hand, as the “Grievance Procedure” is in integral part to the MLS contract dispute resolution procedure, so The DRC might find that entering into a “Grievance Procedure” mediation is a de facto acceptance of the Major League Soccer Contract Dispute Arbitration’s jurisdiction, and therefore the player is bound by its result.

 

Moving Forward

 

Major League Soccer and the MLSPA are currently in negotiations for their new CBA. It will be interesting to see if Article 21 is amended to meet the exact language of the national dispute resolution standards required by the official commentary of FIFA RTSP Article 22. If so, the league can avoid having to try disputes with international players before the FIFA DRC, which could have dramatic effects on certain disputes (to be discussed later).

^[1] See, FIFA RTSP Art.22(b).

^[2] See, Official Commentary to the FIFA RTSP Art. 22(b).

[3] Ibid.

^[4] See MLS CBA 2004-2010 Art. 21. Note that the current MLS CBA made available by the MLS Players’ Association is only the CBA effective until January 2010. Major League Soccer and the MLSPA distributed press releases outlining the changes. See, Major League Soccer, “MLS releases details of the new CBA,” http://www.mlssoccer.com/news/article/mls-releases-details-new-cba. As well, the 2014 roster rules are available on the MLS website. See, Major League Soccer, “Roster Rules and regulations,” http://pressbox.mlssoccer.com/content/roster-rules-and-regulations. However, no mention is made of changes to the contract dispute portion of the CBA. Therefore, it is assumed that no changes have been made.

^[5] See MLS CBA 2004-2010 Art. 21