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AusLaw lessons to be learnt from the European Super League debacle
It came, it saw and, most certainly, it did not conquer. The reference is arguably the biggest fiasco in football history that was known as the European Super League (ESL), writes Tim Fuller.
Tim Fuller
In one of the most brazen sporting coups ever, the ESL attempted to set up a breakaway competition to the Union of European Football Association (UEFA) Champions League.
The swift and decisive intervention of UEFA, the Football Association (FA) of England, the British government and even the royal family, along with the ferocious reaction from loyal football fans, thwarted the rebel clubs in their audacious bid.
Of course, breakaway competitions are not historically a new thing.
Kerry Packer and World Series Cricket changed cricket forever, and the Australian Rugby League (ARL) and Super League went to rugby league war before the National Rugby league (NRL) was created out of the settlement.
As a general rule, there is nothing to prevent new or rival competitions from being formulated to existing competitions or leagues in sport.
The ESL debacle is still continuing to be unpacked and what will be interesting is to see what legal action follows suit. The UK clubs that pulled out of the ESL are in breach of participating agreements that were signed with the ESL and have already been threatened with legal action.
UEFA called for players from the ESL clubs to be banned from club competitions and future events such as the World Cup and playing for their national teams.
Whilst the players were not the architects of the ESL, UEFA had no hesitation in calling for such bans.
Such a ban would almost certainly have resulted in legal action as banning athletes from participating in non-authorised competitions has been previously and successfully) contested at the European Commission.
Freedom of movement for workers is a strictly protected principle under EU law and Bosman was a landmark football case in 1995 that established precedent for football rules and contractual principles for European players.
The governance of a sporting competition and the regulatory framework it operates in are of great importance.
The FA has moved quickly to propose a clause in their rules that any member club that attempts future breakaways will face automatic and permanent expulsion. The UK government is considering an independent regulator to protect English football with legislation.
The UK government took an aggressive approach to player movement and stated that visas with working rights for foreign players would be revoked.
Currently, a significant number of the breakaway clubs are owned privately by foreign interests. One of the measures being proposed to address foreign ownership is the 50+1 rule that operates in Germany.
German Football League (DFL) statutes stipulate that the members of German clubs retain 50 per cent of the voting shares in the limited companies that operate their professional teams – plus one share. This prevents outside investors from obtaining a majority stake and taking complete control.
There are implications from the ESL for Australian sport. Private ownership of professional clubs in Australia is not common and the majority of clubs have membership bases made up of loyal supporters.
Governance is generally well maintained through various agreements between sports and their member clubs.
In sport, private equity’s reputation as short-term investors who use debt funding to load up targets with debt and then strip out as much value as they can for themselves creates wariness and uncertainty for fans and other stakeholders.
Rugby Australia has been the frontrunner for the 2027 Rugby World Cup. Private equity is actively engaging with World Rugby for the rights to the 2027 World Cup.
The All Blacks recently rejected a buyout offer from private equity for one of the most iconic sporting brands in the world.
Under Australia’s foreign investment rules, the Treasurer has the power to make orders in relation to certain transactions if they are considered to be contrary to the national interest.
Whilst most professional sports operate privately and by contract, recent events highlighted in this article may well result in future and increased government intervention around the world and in Australia to protect the integrity of sport.
Tim Fuller is a special counsel at Gadens.
