SII Focus 27 June 2016

Brexit: A sporting chance?

Last week a referendum in the United Kingdom saw a majority vote in favour of leaving the European Union. While the vote is only advisory – any legal implications will likely take at least two years to occur – the financial markets have already taken a severe hit and the political mood is one of uncertainty. So what does the vote mean for the sporting world? We have a look at some of the key areas of impact, with a sports law slant.

A few key points:

• the EU referendum was only advisory – there is no provision in the EU referendum legislation obliging the government to do anything at all in the event of a vote to leave.

• if the UK government decides that the UK should in fact leave the EU, they must invoke Article 50 of the Lisbon Treaty and notify the European Council of its intention to withdraw from the EU.

Once this is done, the UK will leave the EU within two years, maximum. The problem is that there is no clear process and no one currently willing to invoke Article 50. There is pressure from the EU to invoke it quickly, but it could be years before the two-year timer even starts.

∴ likely timeline (for the government to invoke Article 50): 3 months to 5+ years
∴ likely timeline (for the UK to then leave the EU): 2 years
∴ TOTAL time for UK to leave the EU: 2.5 to 7+ years

• under the European Communities Act 1972 (s2), UK courts must apply any Treaties or Regulations made by the EU, and any rulings on them made by the Court of Justice of the European Union (ECJ). In theory therefore, the UK could effectively ‘leave’ the EU by simply repealing the ECA, which they could do next week. This would however be very unlikely – it would be a breach of the UK’s treaty obligations under international law. The UK could also face infraction proceedings and even large fines.

So, if and when the UK leaves the EU, here’s what it means…

European sportsmen – the Bosman ruling

Main sports: football, cricket, rugby, polo

Notable sportsmen: Steve McManaman (football – Real Madrid & England), Timm van der Gugten (cricket – Glamorgan & The Netherlands), Paul Stirling & Tim Murtagh (cricket – Middlesex & Ireland), N’Golo Kante (football – Leicester City & France), David De Gea (football – Manchester United & Spain), Cesc Fabregas (football – Arsenal & Spain)

The law: In 1995 the ECJ made a ruling on three separate legal cases against Belgian football player Jean-Marc Bosman. There were two effects for UK sports clubs:

(i) foreign EU players were to have no restrictions on their ability to move to another club at the end of a contract, without a transfer fee being paid. This made moving between clubs within the EU easy for an EU player.

(ii) clubs could no longer cap the number of EU players as part of a foreign player quota; after the ruling clubs within the EU could now sign any number of players from EU countries. Any limits on this were considered a violation of Article 45 of the Treaty of the Functioning of the European Union (TFEU) – the free movement of workers.

Sporting ramifications: While the ruling impacted mainly football on (i) transfer fees, cricket and rugby were also affected by (ii) the overseas limitations.

Under the England & Wales Cricket Board (ECB) Regulations on the qualification of cricketers, nationals of a country within the European Economic Area (EEA, consisting mainly of EU states) are deemed Qualified Cricketers. In the County Championship and One-Day Cup, only one ‘Unqualified Cricketer’ can be fielded in a side, and in the T20 Blast just two.

The Bosman judgment of the ECJ in 1995
The Bosman judgment of the ECJ in 1995

What must happen: Regulations will have to be redrawn. Interestingly under the ECB’s current regulations, the United Kingdom is not distinguished from other countries in the EEA (it is simply referred to as one of the EEA countries). Therefore once it leaves the EEA, which it will by leaving the EU, the regulations will have to be rewritten anyway.

What might happen: Previously the ECB’s hands were tied with regards to having no restrictions on EU players, now the ball is in the ECB’s court. In the past the ECB has been keen to develop more home-grown English players (see Kolpak below), but they may see EU players as being of little threat, due to the fact that no major cricketing nation comes from the EU. The ICC may well lobby to continue to allow EU players to have protected status, in the interests of players from developing nations (e.g. Ireland, The Netherlands etc.).

That said, a number of other overseas players from South Africa and Australia etc. have qualified as EU players due to European heritage and their ability to obtain an EU passport e.g. Nic Pothas (Hampshire – South African of Greek heritage) and Matt Mason (Worcestershire – Australian of Irish heritage). A Brexit could provide the ECB with an opportunity to change this.

With football the ramifications could be more damaging, as many EU players play in the UK and vice versa. Were the Bosman ruling no longer to apply, EU players would be treated as non-EU players currently are – they would need a work permit. Since March 2015, work permits are only issued by The Football Association (FA) if a footballer secures a ‘Governing Body Endorsement’, and these are linked to a player playing a certain percentage of their national team’s matches over the two years prior to their application.

Football will further be affected by the number of teenage European players UK clubs can field. Under FIFA regulations, international transfers of players are only permitted if the player is over the age of 18, but if it takes place within the EU or EEA, the player can be 16. Premier League clubs must include eight home-grown players in a squad of 25. These must have played for three years in England or Wales before the age of 21. Leaving the EU and EEA will significantly lower the proportion of non-UK EU players that will qualify for this status.

Other overseas sportsmen – the Kolpak ruling

Main sports: football, cricket, rugby

Notable sportsmen: Andre Nel (Surrey & South Africa), Jacques Rudolph (Yorkshire & South Africa), Tino Best (Hampshire & Barbados), Brendan Taylor (Nottinghamshire & Zimbabwe)

The law: The ECJ made a landmark ruling in 2003 that went a step further than the Bosman ruling when it came to lifting restrictions on foreign players. In a case against Slovak handball player Maros Kolpak (back then Slovakia was not part of the EU, but had an Association Agreement), it ruled that clubs could not restrict the number of players from non-EU countries which were parties to an Association Agreement with the European Union.

Sporting ramifications: An Association Agreement is a treaty between the EU and a non-EU country, and currently exist with the likes of South Africa, Zimbabwe, Fiji and many of the nations that make up the West Indies cricket team. The Kolpak ruling, more so than the Bosman ruling, is extremely pertinent to cricket.

The 2003 Kolpak ruling
The 2003 Kolpak ruling

What must happen: Regulations will have to be redrawn. As above.

What might happen: As with the Bosman ruling, leaving the EU will not suddenly render Kolpak cricketers as ‘Unqualified Cricketers’ – this will be determined by the ECB. In fact, it could put the ECB in a tricky situation.

In 2009 the ECB successfully lobbied the UK Home Office to enforce new restrictions on ‘Kolpak players’; only players who have held a valid work permit for four years or who have played one Test during the previous two years, five in the past five, or in 15 white-ball internationals in two years can be considered ‘Qualified Cricketers’. The move was a sign of the ECB’s intent – that these players, who are often in the latter stages of their career (as under the Regulations they simultaneously can’t play international cricket for a nation outside the EEA), are preventing young, homegrown players from getting contracts.

Many counties however, argue that there are many benefits to having Kolpak players – they are experienced role models in an age where England internationals are scarcely at their counties, big names to attract a dwindling fan base and improving the level of competition in a diluted field.

This could be an opportunity for the ECB to clamp down, but with competition from many more domestic tournaments across the globe, it wouldn’t be surprising if nothing changed in practice with the status of “Qualified’ or ‘Unqualified’ players in cricket or rugby – the only difference is that it will now be in the hands of the governing body, not the law.

Transfer fees

Main sports: football (mainly)

Notable sportsmen: Michy Batshuayi (Marseille to West Ham), Paul Pogba (Manchester United)

The law: None. This is down to the financial markets.

Sporting ramifications: In football the Premier League transfer window opened on 9 June and will close on 31 August 2016, during which the results of the UK’s EU referendum were announced. Any legal status of a player won’t be affected until the UK formally leaves the EU. However any offers being negotiated with overseas clubs could significantly rise or fall in price depending on what currency they are being negotiated in.

Ten days before the referendum, on Tuesday 14th June, West Ham reportedly offered €35 million for Michy Batshuayi, a striker from Marseille. On that date this would have meant paying £27.8 million. On Saturday, following the referendum result and Prime Minister David Cameron’s resignation, and the day that the offer was publicly reported, it would have cost roughly £1 million more. Premier league clubs may have the capacity simply to pay up in Euros, but it’s a situation they’ve never been faced with before.

Belgian footballer Michy Batshuayi, who plays for Marseille and is a target for West Ham
Belgian footballer Michy Batshuayi, who plays for Marseille and is a target for West Ham

It’s likely the pound will steady over the next few weeks, but with the transfer window in the middle of the most volatile period, it could put some offers in jeopardy.

Total transfer fees aside, the cost of bonuses and any additional features will have to be carefully negotiated too. A European player getting paid bonuses in pound sterling will get a lot more bang for their buck while the Pound remains weak.

Travel, tours and overseas bases

Main sports: boxing, cycling, athletics

Notable sportsmen/teams: Team Sky (cycling – training base in Nice), Mo Farah & Paula Radcliffe (athletics – training base in the Pyrenees)

The law: Under EU Directive 2004/38/EC EU citizens can move and reside (for up to three months) freely in other EU member states with just a valid identity card or a passport. Once the UK leaves the EU, this will no longer be the case and visas and other conditions may be required.

Sporting ramifications: There is no reason why UK athletes who currently travel and train in the EU and vice versa should fail any new visa requirements, but it would add another layer of bureaucracy and cost. UK athletes may be deterred from training abroad, and EU athletes in return from competing and training in the UK to the extent they previously did.

Prize money – tax arrangements

Main sports: athletics, tennis

Notable sportsmen/teams: Usain Bolt (athletics – Jamaica), Rafael Nadal (tennis – Spain)

The law: Finance Act 2014 (s48). Major sporting events: power to provide for tax exemptions. Where a major sporting event is to be held in the United Kingdom, the Treasury may make regulations (e.g. in the annual Budget) providing for exemption from income tax and corporation tax in relation to the event.

Sporting ramifications: Not much. Prize money is paid in US dollars, so is immune to the current weakening of the pound. Major international tournaments are already exempt from UK tax under UK law for foreign sportmen and women competing in them, and doesn’t discriminate between foreign EU nationals and non-EU nationals.

Anything else?

Team GB – the Rio 2016 Olympics could be the last year that the United Kingdom competes as one team. Scottish First Minister Nicola Sturgeon has refused to rule out a second independence referendum after Scotland voted to stay in the EU. Andy Murray, swimmer Hannah Miley and hurdler Eilidh Doyle could all soon be competing for Team Scotland.

NFL – this could spell the end of showcase matches at Wembley, as NFL’s avenue to expansion into Europe no longer proves as useful as it once was.

boxing – the lesser-known ‘small hall’ boxing circuit, which uses a lot of European fighters at UK venues, could find it harder (and longer) to find visas to get boxers in and out of the UK at short notice.

So… will anything actually change?

Probably the biggest change in the sporting world is that anti-discrimination laws based on nationality will no longer class EU citizens as ‘home-grown’ nationals, and there will be nothing to stop governing bodies issuing restrictions. These governing bodies – the likes of the ECB and the FA – will have got used to government legislation dictating these terms. Now the ball’s in their court, they’ve got a lot of deciding to do, and could, quite possibly just decide to stay with the status quo. That is, of course, if Article 50 is triggered at all. It will be an interesting few years.

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