It has now been almost two months since the Court of Justice for the European Union (the “CJEU”) issued Diarra.[1] The decision held that portions of FIFA’s Regulations on the Status and Transfer of Players (the “RSTP”) were inconsistent with the Treaty on the Functioning of the European Union (the “EU Treaty”). In effect, the offending regulations (the “Contract Rules”) barred clubs from acquiring players who (1) were under contract with another club or (2) had terminated their contracts without cause. As I explained here and here, most likely, Diarra will eliminate market-based transfer fees – a move that will end the current transfer system.
Now comes the interesting part. The actors who define the market – clubs, players, agents, statisticians, accountants, etc. – will have to adjust. So let’s examine the new reality they will have to confront, the new questions they will have to answer, and the solutions that could guide their way.
What happens immediately – as in the upcoming winter transfer window?
Probably nothing. The ruling does not take effect until confirmed by the Belgian court where the case originated.[2] Neither that court nor the CJEU has provided a timetable for this. As a frame of reference, the CJEU’s recent European SuperLeague decision was confirmed roughly five months after it was issued.[3] If Diarra proceeded on a similar timeline, the Belgian court would confirm around February or March 2025 – after the upcoming window closes. So confirmation prior to the window seems doubtful.
Until confirmation, do the pre-Diarra regulations still apply?
Yes, and maybe. Again, technically, because nothing changes until confirmation, the Contract Rules still apply. This will block any club’s attempt to sign a player under contract with another club.[4] It will also subject the club and player involved to severe penalties, including breach of contract liability, FIFA’s limitless damages formula, and sporting sanctions.[5] So for now, clubs and players must continue following the Contract Rules.
That said, Diarra’s practical effect might be immediate. For example, once the Belgian court confirms the decision, transfer fees could be replaced by a more rigid and limited compensation structure. So clubs may only pay low transfer fees, knowing the same players could be available for much less in six months.
Why would Diarra force the market to replace transfer fees?
Right now, a player under contract at one club cannot unilaterally decide to sign with another. This is because the Contract Rules, in effect, bar him from playing in games for the new club until the current one approves. Often, the approval comes at a cost – i.e., a transfer fee. In other words, the Contract Rules create the leverage clubs need to demand a transfer fee.
By eliminating the Contract Rules, Diarra eliminated this leverage. So now, a player who leaves his club during his contract term can register with a new club and appear in games. The old club’s only remedy is a breach of contract action, which can be resolved while the player competes for his new club.
But is there any difference between the amount buying clubs pay in transfer fees and the amount they will have to pay in breach of contract damages?
In most cases, probably. The amount of a transfer fee derives from market forces – the law of supply and demand. (To be fair, this may not apply to some of Chelsea’s recent spending barrages.) The price can escalate, as buying clubs try to outbid each other and selling clubs push fees higher for their players.
While this depends on the legal authority, usually, breach of contract damages are constrained by the law. Specifically, national laws, expressed through statutes, code provisions, and case law, establish boundaries for damage figures in breach of contract cases.
At least in the interim, national laws are likely to control because the Contract Rules’ guidelines will not survive Diarra. As the CJEU observed, these standards are so vague that they grant FIFA’s Dispute Resolution Chamber almost unrestrained discretion to calculate damages.[6] In the Court’s view, this plays a central role in scaring clubs away from the recruitment of contracted players.[7] So unless FIFA amends the Contract Rules, the existing damage criteria will fall away, leaving only national laws to govern contractual breaches.
In fact, the CJEU noted the difference between FIFA’s open-ended criteria and Belgian law, which limits damages to the residual value of the player’s contract.[8] Adopting this approach, this could lower players’ transfer values significantly. Jude Bellingham is a stark example. When he moved from Borussia Dortmund to Real Madrid, he had two years remaining on a contract that, reportedly, paid him around €6M per season. Under Belgian law, Real Madrid would owe Dortmund €12M – not the €100M plus they paid for his transfer fee.
Admittedly, a universal drop in transfer prices is not pre-ordained. In some instances, breach of contract damages may be higher than the player would otherwise command on the free market. And of course, this comparison exists in a hypothetical world anyway, since the transfer market will never operate under both systems at once. But after Diarra takes root, transfer prices should be lower generally. Further, relying on contract damages should put at least a feint ceiling on the market, preventing the gigantic fees clubs have paid in recent years.
With transfer fees unavailable, would clubs benefit from release clauses?
Yes. As most football fans know, release clauses are clauses in a player’s contract whereby his club agrees to let him terminate the contract in return for a fixed sum. Often, another club pays the release amount and then signs the player.
Sometimes, a release clause is called a “penalty” or “liquidated damages” clause – because, essentially, that is how it functions. If a player wants to abandon his contract, this qualifies as a termination without cause, or a breach. As such, he owes the club damages. A release clause allows him to pay those damages upfront, without the hassle of a legal claim or negotiations. But regardless of the name, the release amount is a penalty against the player for breaching his contract. It is also a liquidated damages figure because, ahead of time, the contracting parties have fixed the damages for a breach.
Typically, liquidated damages have priority over other methods of valuing a breach. So clubs could use release clauses to set their players’ values higher than whatever they might take from a breach of contract claim. And even if those clauses got too high, the selling club could always negotiate a lower fee with a new club to buy out the player’s contract.
So could clubs set absurdly high release clauses for all their players, and then negotiate lower fees, if necessary?
Theoretically, yes. And this might not look much different than the current system of market-based transfer fees. But keep in mind that a buying club could still sign one of these players immediately and then later attempt to get the liquidated damages reduced.
What grounds might a buying club have to get a player’s liquidated damages reduced?
Generally, liquidated damage clauses are most appropriate when the actual damage resulting from a breach would be difficult to estimate. An example might be a real estate contract where a breach would cause a party to lose the value of a house. This value is inherently subjective and multi-factored. So rather than trying to appraise the house after a breach, the parties agree beforehand on a value. This figure becomes the contract’s liquidated damages.
These circumstances fit most player contracts. If the player leaves before his contract ends, his club loses the player’s value on the field. This is difficult to reduce to a number. Further, like the value of a house, it defies an objective calculation. So a liquidated damages (or release) clause provides a solution.
That said, in most instances, a liquidated damages clause must represent an honest attempt to estimate the damage that would result from a breach. In other words, even though finding the precise amount may be difficult, at the very least, any liquidated damages figure must be justifiable as actual damages.
So if a club insists on “absurdly” high release clauses, a court might consider striking them. The issue would be whether this “absurdly” high clause is a fair estimate of the player’s value. And that would depend on the specific facts of each case.
Thus, a club could sign a player despite his high liquidated damages clause if they are confident a court will reduce the number or the player’s current club will agree to settle the matter at a lower price.
But if the player’s release clause is absurdly high, might signing him now and fighting damages later be a significant gamble?
Yes. There is always the risk a judicial authority will deem the release amount justifiable. So if a club cannot safely pay a player’s full release clause, they should not sign him unless they are pretty darn convinced the amount will not withstand legal scrutiny.
Might Diarra make some players less likely to agree to release clauses?
It might. With the new transfer landscape, release clauses may be less attractive to players. Under the Contract Rules, release clauses make player movement easier. If the player’s clause is below his likely market value, demand for him increases – and with it, his employment options. On the flip side, if the player’s value is lower than the release clause, he is no worse off than any other player on the market. The clubs wanting to sign him have to negotiate a transfer fee. In short, the release clause can act as a bonus and cannot be a detriment.
But post-Diarra, the player will have less need for the release clause because, even without it, interested clubs only have to sign him now and pay breach of contract damages later. Plus, an expensive clause could increase those damages to a level suitors are unwilling to pay. So players may push back against high release clauses to an extent they have not before Diarra.
Some transfer agreements include payments that are not due immediately. For example, some allow the buyer to pay the transfer fee in yearly installments or provide bonus payments if the player hits certain benchmarks. Does Diarra relieve clubs from existing obligations under these agreements?
As long as the obligations are contractually valid, they should remain enforceable.
While no legal authority has spoken on this question, negating private contracts does not flow logically from Diarra. The Contract Rules do not require transfer fees. Rather, the fees are clubs’ response to market conditions the rules created. Diarra only condemned the rules, not any private agreements executed, in part, because of them. So any obligations under the agreements should outlive the Contract Rules.
That said, some lingering portions of transfer agreements may fall for different reasons. For example, clubs do not necessarily have to trigger options to buy in loan agreements because, unless exercised, the option may not be supported by consideration. As such, the option is not a contractual obligation.
Still, indirectly, Diarra may make a club less willing to trigger a player’s option because they could get him for less after he returns to his parent club. This opportunity would arise if the buy option were more than any breach of contract liability the player might suffer.
What effect might Diarra have on the secondary market – bonuses, sell-ons, solidarity, etc.?
Indirectly, replacing transfer fees with breach of contract damages may water down the secondary market.
Beginning with solidarity, Diarra will not eliminate FIFA rules establishing those payments. Nor will the end of transfer fees doom them. According to the RSTP, solidarity shall be calculated off “any compensation paid within the scope of [the] transfer, not including training compensation.”[9] And as the RSTP Commentary adds, compensation stands within the transfer’s scope “regardless of whether it is described as part of the transfer fee or not.”[10]
But to the extent Diarra lowers transfer fees, it will mean clubs earn less from solidarity. Remember that solidarity is a percentage taken from the compensation a club receives from a transfer. This percentage is then distributed, pro rata to the clubs that trained the player between ages 12 and 23 (the player’s “training clubs”). Thus, as transfer compensation for a player increases, his training clubs get higher solidarity payments.
The problem is that post-Diarra, the fees may not be as high. Consider again the example of Jude Bellingham. If breach of contract law, rather than the market, controlled, his transfer fee would have dropped from €100M plus to €12M. As such, his one training club, Birmingham City, would have seen their solidarity payment fall from €1.8M to around €215k.
Sell-on fees may also become less attractive. Clubs acquiring a player will have little reason to agree to them, unless the incentive is a lower transfer price. For example, if a club wants to sign a player whose breach would result in a €4M damage award, they would not agree to pay that plus bonuses to the seller. So to make the sell-on work, the selling club would have to package it with a discount on the transfer cost.
Still, even in that scenario, the seller may not gain much from the sell-on as the player has a lower chance of commanding a big fee in the future.
Will FIFA amend the Contract Rules to comply with the EU Treaty?
Most likely, FIFA will amend the RSTP, as it does on roughly an annual basis. In addition, it has asked for suggestions from “stakeholders” on amendments to the Contract Rules. Thus, some kind of adjustment to Diarra is likely.
But otherwise, FIFA has given no indication as to how any revisions might look.
In fact, it has not even articulated the objectives it wants the new transfer system to promote. Does FIFA want to ensure smaller clubs can still generate precious revenue from the player market? Does it want to the market offer benefits that will incentivize youth development? Does it want to weaponize the revisions to harm the interests of a particular group – agents, the media, Saudi dissidents, etc.? Without knowing these objectives, it is tough to predict FIFA’s course of action.
C’mon, can’t you at least speculate?
Ok. I will do my best.
Making no prediction on whether FIFA will implement these changes, here are two that might promote a fair and universal system of valuing transferred players.
First, FIFA could adopt objective criteria for breach of contract damages. This would remove any confusion and uncertainty that may result from sorting through different national laws.
Second, FIFA could reform the transfer market along the lines of England’s domestic training compensation system. This applies when a player under age 24 rejects his club’s offer of a new contract and leaves on a free transfer.[11] If an English club signs the departing player, they must negotiate transfer compensation with the original club.[12] If the clubs cannot reach an agreement, they go before a neutral tribunal, which determines fair compensation for the player.[13]
Rather than leaving compensation to breach of contract laws, this system might produce more accurate player valuations. And if the fees more closely match a player’s performance, it could allow for some higher fees, where justified. In turn, this might preserve the value of the secondary rewards that help smaller clubs, like solidarity and sell-ons.
Will Diarra spark transfer chaos, where players leave clubs whenever the mood hits them?
No. The Diarra Court singled out transfer windows as acceptable because they promote a legitimate sporting objective: maintaining the regularity of football competitions.[14] So players will not be able to leave their clubs at any possible moment. They will probably continue to change teams during the same periods they already do.
[1] Technically, the case’s title is FIFA v. BZ. “BZ” is a pseudonym for Lassana Diarra, a relatively well-known footballer. So because “BZ” protects no one’s anonymity and using the real person, Diarra, gives the case more personality, this article will refer to it as Diarra.
[2] Case C-650/22, FIFA v. BZ, ECLI:EU:C:2024:824, ¶¶97, 103-104, 135
[3] See “Spanish Court confirms the CJEU’s conclusions in European Super League Case,” Bird & Bird, June 19, 2024, (Spanish Court confirms the CJEU conclusions in the European Super League case, Dr Saskia King, Candela Sotes)
[4] FIFA Regulations on the Status and Transfer of Players, Article 9(1), Annex 3, Section 8(2)(7)
[5] Id. at Art. 17(1), (2), (4)
[6] Case C-650/22, FIFA v. BZ, ECLI:EU:C:2024:824, ¶¶106-107, 136-138
[7] Id. at ¶¶136-138
[8] Id. at ¶135
[9] RSTP (2024) Annex 5(1); See also Makoun Reyes, FIFA Dispute Resolution Chamber, Ref. TMS 11871 (17 May 2023) at p. 6, ¶8; See also Artur, FIFA Dispute Resolution Chamber, Ref. TMS 12286 (17 May 2023) at p. 5, ¶7
[10] RSTP Commentary Annex 5(2)(a); See also Makoun Reyes at p. 6, ¶8; See also Artur at p. 5, ¶7
[11] The Football Association, Rules of Association, Rule C69
[12] Id. at Rules C69-C75
[13] Id. at Rules C69-C86
[14] Case C-650/22, FIFA v. BZ, ECLI:EU:C:2024:824, ¶100
Terry Brennan Law 
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