{"id":2178,"date":"2014-06-20T09:53:32","date_gmt":"2014-06-20T07:53:32","guid":{"rendered":"http:\/\/rechtsportlich.net\/?p=2178"},"modified":"2014-07-15T10:24:55","modified_gmt":"2014-07-15T08:24:55","slug":"the-so-called-501-rule-in-german-football-football-legal","status":"publish","type":"post","link":"http:\/\/rechtsportlich.net\/?p=2178","title":{"rendered":"The so-called \u201e50+1\u201c-Rule in German Football – Football Legal"},"content":{"rendered":"

Anl\u00e4sslich der zweiten Jahrestagung der AIAF (Association Internationale des Avocats du Football) in Buenos Aires am 11.\/12.06.2014 wurde die erste Ausgabe des neuen Fu\u00dfballrechtsmagazins \u201eFootball Legal\u201c publiziert. In diesem Magazin werden k\u00fcnftig zweimal j\u00e4hrlich Mitglieder der AIAF sowie externe Autoren Aufs\u00e4tze zu aktuellen fu\u00dfballrechtlichen Themen in ihren jeweiligen Staaten ver\u00f6ffentlichen, ebenso nationale und internationale Gerichtsentscheidungen aus der eigenen Praxis. Als\u00a0wissenschaftlicher Beirat\u00a0bin ich in diesem Magazin f\u00fcr die Darstellung der Rechtsermittlung in Deutschland verantwortlich und habe in der Erstausgabe vom Juni 2014 neben einigen Urteilsrezensionen die\u00a0folgende Bewertung der sogenannten 50+1 Regel im deutschen Fu\u00dfball publiziert.<\/span><\/span><\/strong><\/p>\n


\nThe so-called \u201e50+1\u201c-Rule in German Football<\/strong><\/strong><\/p>\n

1. Introduction<\/p>\n

Whereas TPO is usually linked with the engagement of third parties in players\/economical rights of players , German Football does not provide restrictions in holding or obtaining those rights (apart from FIFA Regulations, that are of course binding in Germany as well), but has a quite unique peculiarity in terms of restrictions for\u00a0 holding and obtaining rights in clubs.<\/p>\n

Clubs, \u00a0that are organized in the legal form of an association (contrary to a company such as a Ltd., corporation etc.) are by virtue not open for investments and\/or shareholders. Association are run by their boards, but all essential decision are reserved to the members\u2019 assembly that might be composed by ten thousands of people, which of course makes it difficult, if not to say impossible to reasonably run a football club. Beneath that reason, \u00a0the number of pure associations in German Football is decreasing year by year because of\u00a0 the growing interest of clubs to attract investors.<\/p>\n

Whereas in most \u201cbig\u201d football nations it is self-evident, that investors may hold 100% of the shares of a club that is organized as a company or at least the majority \u2013 as a minority shareholder, they hardly would have invested sums into clubs as \u2013 for example \u2013 the owners of Manchester City, Paris Saint Germain etc. did \u2013 the By-Laws and Regulations both of the German FA as well as the German Football League contain requirements regarding the \u201c50+1\u201d- Rule, that a club has to match to the satisfaction of the FA\/the League in order to receive a license to participate in their competitions.<\/p>\n

As a consequence arising from these restrictions, no investments that are comparable to the ones to be found in England, Spain, France and Italy, for example, can be observed in Germany.<\/p>\n

In this article, the contents, the ratio and the efforts to circumvent the \u201c50+1-Rule\u201d shall be examined a little closer.<\/p>\n

2. What does the \u201c50+1\u201d-Rule say and what is its ratio?<\/p>\n

As indicated above, until some decades ago, all German clubs were organized in the legal form of an association and such by virtue governed by their members respectively the members assembly, that by law could only delegate some competences to their executive bodies. This, until today, is the ideal how a football club should be run and work, which of course today, as football clubs are huge commercial enterprises, is no longer feasible.<\/p>\n

Whereas it is therefore accepted, that in order to ensure a professional governance of clubs, it is highly recommendable to choose a corporate legal form and thus make sure, that the members\u2019 assembly does not have to be involved in all major decision processes, the opening to other legal forms, especially corporate forms, shall not simultaneously give the floor to stakeholders from outside the football family who might pursue completely different approaches than the genuine football stakeholders.<\/p>\n

Therefore, and in order to keep away \u2013 as they are called in normal business life \u2013 \u201cgrasshoppers\u201d who only invest in a company for a few years and afterwards want to extract the maximum profit achievable out of this company \u2013 the \u201c50+1\u201d-Rule has been introduced, that \u2013 simply spoken \u2013 requires, that whenever a club (in the legal form of an association) decides to transform into a company and at the same time sell shares to third parties in order to raise funds, in any case the club must retain 50% of the voting shares plus one more vote with the effect, that no decision can be taken against the will of the club as majority stakeholder (in that regard, it is worth noting, that the \u201c50+1-Rule\u201d only prohibits to transfer 50% or more of the voting shares<\/strong><\/strong>, but not of the shares in profit, which obviously reduces the effect of this restriction, since it is a common principle and recognition, that at the end the economic power will most likely supercede the votes or \u2013 metaphorically spoken \u2013 \u201cbuy\u201d the votes.<\/p>\n

Yet, it has to be noted, that apart from very rare efforts and investor deals with smaller clubs, the system actually deterred foreign investors from getting engaged in German clubs and thus the effect pursued with such system, namely to avoid short time investments such as in the example of FC Malaga or clubs being affected by their investors\u2019 bankruptcy such as in some cases in England have been successfully avoided.<\/p>\n

3. Scope of the \u201c50+1-Rule\u201d beyond its pure wording<\/p>\n

It goes without saying that efforts how to circumvent the \u201c50+1-Rule\u201d were widely discussed. Whereas the \u201c50+1-Rule\u201d itself leaves no room for interpretation (there is nothing to interpret once an investor holds 50% or more of the votes), various ways of achieving at least similar effects as they go along with the majority of the votes are conceivable. That is why the German FA\/the German League have a close look upon all contracts with investors and all by-laws, that grant any rights to investors that seem to be in contradiction to the spirit of the \u201c50+1-Rule\u201d.<\/p>\n

For example, if the investor is furnished with a blocking minority with the consequence that he can obstruct any decision, the football governing bodies in Germany will not accept this, but refuse to license the club under those organizational circumstances.<\/p>\n

The same consequence will be taken, if the investor gets the right to appoint the CEO and thus \u2013 indirectly \u2013 has a degree of influence the spirit of the\u00a0 \u201c50+1-Rule\u201d doesn\u2019t permit him to have.<\/p>\n

In general, one can say, that whenever efforts are made, that allow the investor to take decisions also against the will of the association as majority shareholder, the FA\/League will intervene. This wide interpretation of the scope of the \u201c50+1-Rule\u201d made it different to allure especially foreign investors, who \u2013 of course comprehensively \u2013 want power and influence within the clubs in turn for the financial investment they are making. Once being advised about the strict limitations of rights that are legally transferable to them, they often prefer to invest their money in other countries and leagues, in which no comparable restrictions exist.<\/p>\n

4. Objections and concerns about the legal admissibility of the \u201c50+1-Rule\u201d<\/p>\n

One of the major objections against this principle is, that some German clubs, especially Wolfsburg (owned by \u201cVolkswagen\u201d) and Leverkusen (owned by \u201cBayer\u201d) are excluded from the scope of the \u201c50+1-Rule\u201d. The explanation therefore is quite simple: These clubs have been founded as a kind of \u201ccompany sport club\u201d at a time, when the \u201c50+1-Rule\u201d was not in place yet. Of course, as nearly every legal rule, it was not admissible to attribute retroactive effect to the \u201c50+1-Rule\u201d also regarding clubs, that were \u2013 permissibly – structured in contradiction to that rule before it entered into force. Just in order to clarify this once again, the corresponding clause in the by-laws stipulated that exceptions can be granted in cases of investors who \u2013 before 1.1.1999 \u2013 considerably supported football in the club (which obviously prepared the floor to still admit clubs such as Wolfsburg and Leverkusen who easily matched these criteria while at the same time it was avoided that any such case could occur again in the future).<\/p>\n

Moreover, doubts were raised whether or not the \u201c50+1-Rule\u201d is accordance both with national as well as EU antitrust law.<\/p>\n

On first view, no reasonable explanation can be given, why \u2013 completely different to what without doubt would be admissible in any other business branch \u2013 shares of football clubs shall not be freely tradable, unless one accepts the specifities of sport to be criteria that allow to particularly regulate this branch different from others. Of course, there is already no coherent view of the German football stake holders whether or not \u201c50+1-Rule\u201d is reasonable and favorable for German clubs or just the opposite, namely a competitive disadvantage compared to countries\/FA\u2019s who do not provide such extensive restrictions for TPO in clubs and thus provide more comfortable surroundings for investors.<\/p>\n

These objections and concerns have been object of a procedure before the Arbitration Court of the German League some years ago, that will be commented below. Yet, from a counsel\u2019s point of view, it already difficult and risky to advise a client to consciously act in violation of the \u201c50+1-Rule\u201d at all, having in mind the procedural impacts:<\/p>\n

Assuming, a club would sell for example 60% of its voting shares to an investor and\/or give him a degree of influence by other means that the German FA\/League would consider not to be in line with the spirit of the \u201c50+1-Rule\u201d, this club\u2019s application for a license for the next season would be rejected. If this club does not manage to get an injunction that provisionally grants him access to the league, this club will be excluded from all competitions, lose\u00a0 its players and sooner or later by subject to bankruptcy. Even if at the end of the day a (national) court should consider the \u201c50+1-Rule\u201d to be void, it might be too late for that club (and its investor) to ever profit from the outcome of this lawsuit. Since there are of course also arguments that allow to defend the \u201c50+1-Rule\u201d, it is hardly predictable how an arbitration or state court would deal with a request for provisional measures, since \u2013 as a general rule and similar to the factors CAS takes into account while considering an application to stay an appealed decision \u2013 the likelihood of what will be the final outcome of the lawsuit will have to be considered as well as the harm all parties involved would suffer in case of granting or denying provisional measures.<\/p>\n

Obviously, also third parties\u2019 rights are affected (such as the club that would replace the club that acted in violation of the \u201c50+1-Rule\u201d) which makes the decision about a request for provisional measures in a legal question with no prejudicial awards available even more complicated and likely to be appealed with the risk of time running out even in this provisional procedure, having in mind the approaching start of the next season and the planning certainty the clubs involved must have before the season actually starts.<\/p>\n

5. The case of Hannover 96<\/p>\n

Last but not least, because everybody is aware of how unsatisfactory the consequences of trying to fight against the rule might be even in case of success (after years), those procedural objections have not been raised (or at least not prevailed), when Hannover 96 filed a claim to the Arbitration Court of the German League some years ago, asking the court to assess that the rules in the by-laws the \u201c50+1-Rule\u201d is derived from are void, after unsuccessfully having tried to find a majority to abolish or at least modify the corresponding rules.<\/p>\n

The Arbitration stated in its decision from 2011, that the rule in its applicable wording violates\u00a0 the general legal principle of equality, since no justification can be seen to erase the opportunity to match the criteria after 1.1.1999, if all other criteria are perfectly matched.<\/p>\n

As usual, when regulations are declared void, the consequences of that decision was not that from then on investors were allowed to acquire more shares than 50% less one, but that it will be up to the German FA\/German League, to replace the void clause by a valid clause, that takes into account the observations of the Arbitration Court.<\/p>\n

Yet, at the same time, the Arbitration Court pointed out, that in principle, the \u201c50+1-Rule\u201dseems reasonable and \u2013 as far as it might be in conflict with national or EU antitrust Laws \u2013 also supported by acceptable approaches and drafted in a proportionate, not excessive way, left apart the cutoff date.<\/p>\n

As a consequence, the cutoff date \u00a0has been eliminated with the effect, that once an investor has uninterruptedly and considerably supported football in club\u00a0 for more than 20 years, an exception from the \u201c50+1-Rule\u201d may be granted to him. So far, no such case has occurred (respectively not been decided yet), but it is foreseeable, that sooner or later this will happen, maybe even along with a new attack against the \u201c50+1-Rule\u201d in general.<\/p>\n","protected":false},"excerpt":{"rendered":"

Anl\u00e4sslich der zweiten Jahrestagung der AIAF (Association Internationale des Avocats du Football) in Buenos Aires am 11.\/12.06.2014 wurde die erste Ausgabe des neuen Fu\u00dfballrechtsmagazins \u201eFootball Legal\u201c publiziert. In diesem Magazin werden k\u00fcnftig zweimal j\u00e4hrlich Mitglieder der AIAF sowie externe Autoren Aufs\u00e4tze zu aktuellen fu\u00dfballrechtlichen Themen in ihren jeweiligen Staaten ver\u00f6ffentlichen, ebenso nationale und internationale Gerichtsentscheidungen … <\/p>\n

\u201eThe so-called \u201e50+1\u201c-Rule in German Football – Football Legal\u201c<\/span> weiterlesen<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[817,818,816],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=\/wp\/v2\/posts\/2178"}],"collection":[{"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2178"}],"version-history":[{"count":9,"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=\/wp\/v2\/posts\/2178\/revisions"}],"predecessor-version":[{"id":2196,"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=\/wp\/v2\/posts\/2178\/revisions\/2196"}],"wp:attachment":[{"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2178"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2178"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rechtsportlich.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}