A conversation with Étienne Rizk about sports and law

"The problem with the transfer market is that it has undergone an absolutely incredible inflation"

ESSEC Sports Chair postdoctoral fellow Amr Alem talks to Etienne Rizk, one of the most prominent lawyers of the sports ecosystem, about the evolution of the two drivers of his career: sports and law.

Amr: Your first experience in sports law was with the CNOSF at the European Commission, before joining the law firm Nataf Fajgenbaum & Associés as a lawyer specialized in sports and in particular commercial contracts and player transfers, then as director of the legal department of TSA Sports Asia in Malaysia. More recently, you moved back to Paris to resume activities as a lawyer specialized in sports. What do each of these areas of your career involve?

Étienne: I didn't start in sports right away. I have a background in competition law and European law. As sport is my passion, I then looked for internships in firms practicing in the sports sector. Two red lines have governed my reflections throughout my career: first, to work on issues at the crossroads of sport and competition law/European law, and second, not to remain confined to legal issues. As soon as I graduated as a lawyer, I joined ESSEC Business School and in particular the Sports Chair [at the time the Sports Marketing Chair, led by Professor Thierry Lardinoit].

I built up my career following this double logic before working for ten years at Nataf Fajgenbaum & Associés, where I was an associate in charge of sport and competition cases. I mainly worked on cycling and football issues, on commercial aspects as well as on transfers, employment contracts, image rights, exploitation of club/athlete brands. In 2018, for family reasons, I moved to Malaysia where I was working for Total Sports Asia which is a sports marketing agency working on sports rights in the South Asian region. I took the legal direction but I also created a business department which aimed to develop local sports sponsorship as well as player trading.

My experiences were different. In France, I got used to a rigor that I didn't necessarily find in Malaysia, where I had to do some “educating”, especially on the application of FIFA rules. Three years later, I returned to Paris where I have just launched a law firm with the former partner of the Nataf Fajgenbaum & Associés firm, Jacques Nataf. We worked together for a long time and our partnership has now been reactivated.

Amr: You have been a lawyer since 2011. You have chosen to specialize in sports law: How would you define sports law?

Étienne: For me, if you take the definition of what sport law is, it is very limited. It is a body of rules established by international federations, with its own jurisdictional order, including an internal arbitration chamber, and ultimately, the Court of Arbitration for Sport. Sports law, as such, is very circumscribed. But, as a practitioner, I know that two major pillars must be added to it: business law applied to sport, and public law.

As for the specificity of sport, its legal definition is enshrined in the European Union which states that the European Union's competences include the promotion of sport, taking into account its specificities. According to the White Paper published in 2008, there are two types: specificities linked to sports activities (distinction between gender and age categories, number of participants,...), and specificities linked to the construction of the European sports model which establishes a pyramidal structure where there is one federation per sport, a system of open promotion/relegation leagues, solidarity between professionals and amateurs...

Amr: What is the specificity of sport in law?

Étienne: The sports legal system is irrigated by general principles of either European or Swiss law, such as proportionality or the balance of interests. If we look at the only possible appeal to the CAS, it is to the Swiss Federal Court for very limited reasons. The principles of state law are irrigating sports law, which does not live in a vacuum. It should also be remembered that the Lex Sportiva is itself constrained and limited by the rules of national public order, such as release clauses, which are authorized in certain countries and not in others, such as France. Sports law exists but it is constrained and enclosed in a state and supra-state framework.

Amr: The confrontation between the sports legal system and the European legal system has historically been built around two points: eligibility criteria relating to nationality and competition law. Let's start with the first point, what is your analysis of the evolution of nationality issues in sports?

Étienne: In this respect, we have reached the end of the road with the freedom of movement and the abolition of quotas for foreign players in European teams. Today, there are perverse effects to this liberalization, such as the weakening of training at the national level, which has repercussions on the level of the various national teams. I think we have reached the end of this liberal process.

Amr: Could we see a general move, like in rugby, towards national teams where non-citizen players can play?

Étienne: Theoretically everything is possible but I think that it is a political question. It is difficult to conceive of having a national team where a player who is not a citizen can play. That said, there are a number of countries that passively naturalize foreign players to make up for their training deficit.

Amr: And concerning competition issues?

Étienne: We haven't reached the end of the road. The example of the SuperLeague is quite telling. If you look at UEFA's behavior from a legal point of view, you realize that it is an exclusionary behavior. Threatening to exclude clubs to protect your own commercial interests is crossing a dangerous line in terms of competition law. It will be very interesting to see what the outcome of the current procedure will be: Either there will be a new revolution with the possibility of creating competing competitions, or there will be a strengthening of the existing model. This second choice would be more political than legal and would consecrate the specificity of sport in terms of law.

Amr: What is the future of the link between the sports legal order and the public legal order?

Étienne: In general, I think that we will move towards solutions that are increasingly negotiated between sports institutions and European institutions, whether it is for the re-establishment of nationality quotas with general objectives of promoting training, or whether it is for the establishment of derogations in terms of competition law, such as the introduction of a salary cap or the introduction of mechanisms within the framework of financial fair play, which today remains a fairly significant brake on investment and the circulation of capital.

Amr: The monopoly of the international federations was designed for sporting reasons. But today they are using this status to develop their activity on the economic level, depriving private firms of access to this market. Isn't this an imbalance?

Étienne: Yes, it is. There are two famous rulings on this issue that concern federations that use their power as a regulatory body to favor their own economic interests by developing their own competitions and threatening to exclude any player or team taking part in any competition other than their own. The international federations are very afraid of this ambivalence, which weakens them in terms of competition law, hence the idea of negotiating with all stakeholders, but sometimes this does not work. The most telling example is that of the European Basketball competitions for clubs [which has been split up into FIBA and ULEB]. What must be kept in mind is that national/international federations have to apply a body of rules within a well-established framework, that of competition law, which often weakens them.

Amr: One of the major results of the "confrontation" between these two orders is the Bosman ruling: More than twenty-five years after it was pronounced, what is your analysis of its consequences?

Étienne: The main consequence of the Bosman ruling is the awareness of the perverse effects of the total liberalization of the market. There has been a flow of foreign players in several European leagues which have become training and resale leagues, hence their weakening in terms of sporting results on the continental level. UEFA's response with the quota of locally trained players has also had a perverse effect: the promotion of the circulation of foreign players from a young age. We must also keep in mind that the Bosman ruling is not the source of all evil. It has also benefited the economic models of the leagues even if some of them, like Italy or France, lack either creativity or commercial aggressiveness to be further developed. Bosman ruling does not explain why UK and German leagues have grown significantly to a sustainable business model in the past 20 years when Italian or, at a lesser level, Spanish leagues have faced significant financial challenges.

Amr: There are now importing nations, leagues, and clubs, and exporting nations, leagues, and clubs: Is this market structure definitely detrimental to the competitive balance on the field?

Étienne: There is a double typology: importing countries in Europe and to a lesser extent in Asia and North America, and exporting countries in South America and Africa. Has this led to a competitive imbalance? I don't think so. What has caused it is the law of the market, which unfortunately favors an oligopoly of clubs that are always the same ones that perform well. This makes it difficult for new entrants to penetrate the market, and their task has been further complicated by the rules of financial fair play, which prevent them from investing as they wish over the long term. This oligopoly can also lead to a closed league between the clubs that make it up. The competitive gap is not created by the liberalization of the market, but by the interdependence of the clubs, which influence decisions at the European level and dictate trends in transfers and wages.

Amr: The transfer market is now worth $4.8 billion in 2021 (with over 16,000 registered movements) after reaching $7.3 billion in 2019: What are the possible tools to regulate this market?

Étienne: The problem with the transfer market is that it has undergone an absolutely incredible inflation and that there is an invisible ceiling that has been largely exceeded with the transfer of Neymar. In the wake of this operation, a tendency to overvalue players has been noted. This leads to the following question: what is the real value of a player on the market today? The valuation of transfers in general is quite artificial. Should this market be regulated? My answer is yes.

It remains difficult to restrict the amount of the transfers themselves, but what must necessarily be regulated is the money flowing to the intermediaries: the value they capture does not always correspond to a real added value. The case of agents is the most emblematic: sometimes their commission is justified and sometimes totally unjustified. There is another regulation that is close to my heart and which is not sufficiently regulated today, namely the regulation of transfers of young players, particularly African players, who move countries, are uprooted, and find themselves in second-rate clubs to enter the Schengen area, and whose career path is often chaotic. In terms of the traceability of players' careers, it is necessary to ensure the transmission of information through the national federations to trace the movements of players to avoid the current abuses, some of which can be described as mafia-like.

Amr: Who are the stakeholders involved in a transfer, with what responsibilities?

Étienne: First, before a transfer, there is a discussion between the sporting director, a player/club and their agent (if any). The general, operational and commercial directors then decide whether or not to make the transfer. In the transfer process, there are the players, their agents (sports and commercial), and their families who often have a role to play, and not always a productive one.

Then there are the lawyers who formalize all the agreements reached on the duration of the contract and the amount of wages as well as the main marketing points. Once the contract is finalized, the transfer goes through the club's communication department.

Amr: This inflation of the transfer market has also led many investment funds to take an interest in European soccer. What is your analysis of this?

Étienne: This really started in the 1970s and 80s with the incorporation of clubs into commercial companies. What changed the situation was the arrival of the transfer of players in the sport. This made it possible for investment funds to acquire shares in the sports rights of a player in order to speculate on the transfer market. With the prohibition of this practice by FIFA, the investment funds have moved towards the acquisition of clubs as is the case, for example, with McCourt and Olympique de Marseille where the objective is to establish a strong brand for a better future valuation of this asset. The main positive consequence is the valorization of the League as a product, and the negative one is the short-term vision of the investors who are not always will to re-invest on to acquire players, accompanied by a great turnover.