Liquidation in Football & Free Agents

There has been a lot of discussion regarding the status of Rangers FC's players in the event of the club's liquidation. At a first glance, the situation may appear straightforward, but further analysis may indicate exactly the opposite. Again, we may appear to have a collision between contractual/employment principles and those of self regulation that derive from the application of the sporting rules currently in place.

Although in the event of liquidation the situation may be less complicated, as all players' contracts may be terminated upon such development, it is arguable that in the event of administration, such contracts may continue to exist and, subject to the agreed contractual terms and the rules of the governing bodies, their performance may still be valid.

It is a well established principle of sports law [such principle emanating from European Union law and more specifically, the well known Bosman case] that once the original duration of a player's contract has come to an end, such player becomes a free agent. Such rule is not absolute and it may change in the situation where the club has given the player 'just cause' to terminate the contract of employment prior to its expiration. In this case and subject to the regulatory requirements of notification, the player's contract may also be terminated, granting such player the 'free agent' status.

This type of analysis may not be so clear, where the Anelka doctrine applies. Although the argument could be made that upon breach of an employment contract by a player, such contract may come to an end [particularly where the club has accepted the repudiation of the contract], it is hardly ever the case that a club would prefer to see its star player off the team or attempt to 'force' him to play for the team when the player has already indicated his unwillingness to play and has requested a transfer to another club. The undersigned has already advised [in the Carlos Tevez matter] that such development produces a lose/lose situation, as in the event where the player does not want to play for his current club and the club does not wish to sell the player, both parties would lose, as the player's value would diminish, along with his fitness levels and, consequently, his marketing potential.

Similarly, a liquidating event would, in theory, terminate a player's contract, as the employer would cease to exist. In this situation, the player becomes a free agent and he is, therefore, entitled to sign for another club [although particular attention must be paid to the so-called 'transfer windows' and whether a specific player has played for more than two clubs in the same season and in the same league, in the situation where liquidation occurs during the season as opposed to the end of such season]. Most of you, have already asked me whether this 'other' club, could, in fact, be the 'old' club prior to the event of liquidation. Again, in theory, the answer could be yes. This is because the creation of a new company does not prohibit the acquisition of particular assets, meaning that the players of the old company, being free agents, could move to the new company. Whether the regulators could 'block' such moves, would depend on their regulatory framework and not on the law of the land, which is clear on the point. The ability of governing bodies, however, to 'block' an employee, from moving freely to an employer of his choice, would be subject to strict requirements that could easily be submitted by reference to several decisions by the European Court of Justice. Rules that prohibit the free movement of workers, as well as those who restrict the ability of sports people to enter a specific competition [in the absence of a sporting rule violation], are subject to strict requirements and usually fall foul of European law.

In conclusion, the above analysis indicates that, upon the liquidating event of a football club, its players could seek employment to another club, although such employment may be subject to the regulatory restrictions we have already mentioned above. There would be no restriction as to who the new employer is, as long as the new employer has received the license to operate in the league and its registration has been confirmed by the regulator. It may be a newly formed company and as long as such company has been created according to the statutory requirements currently in place, it would be free to choose its employees and start trading immediately. As stated above, it is highly unlikely that governing bodies would seek to 'block' such acquisitions, particularly where they occur after the completion of the competition.

Consequently, it becomes apparent that any business decision making to liquidate or not, would be subject to serious considerations regarding the law of the land and the football regulatory framework. In the event of a conflict, sports law would seek to assist those who need assistance and further attempt to produce clarifications on these interesting and, sometimes, complicated issues.

Dr. Gregory Ioannidis

7 May 2012