Editorial

It is with much pleasure that we welcome readers to the June 2018 edition (citation: GSLTR 2018/2) of our ground-breaking journal and on-line database (www.gsltr.com): Global Sports Law and Taxation Reports (GSLTR).

The FIFA World Cup takes place in Russia from 14 June till 15 July 2018. Apart from the controversy surrounding the bidding process and the awarding of this event, FIFA has confirmed, at a recent Council meeting in Bogota, that, for the first time, VAR (“Video Assistant Referee”) will be used. FIFA President, Gianni Infantino, has said that he is “extremely happy with that decision”.

The use of VAR will be limited to the following situations:

–  whether the ball has crossed the line for a goal;

–  whether a penalty should be awarded;

–  whether a red card should be shown; and

–  in cases of mistaken identity.

 

All 33 referees and their assistants will be trained by FIFA in the use of VAR in advance of the tournament.

FIFA has also announced that VAR decisions will be displayed on big screens within the stadia, but fans will only be able to see footage of the incident in question after the referee has made the final decision, to avoid any influence on the referee.

It will be interesting to see how much use of VAR is made during the tournament and how controversial it may prove to be.

Another important development, worth noting, is the review by CAS of decisions made by the IOC in relation to the 2018 PyeongChang Winter Olympics arising out of the ongoing saga of the alleged Russian systematic state-sponsored doping scandals at the 2014 Sochi Winter Olympics as revealed in the McLaren Reports. See later.

On the sports legal side, we publish a two-part major article by Dr. Jonathan Haynes, entitles “Reappraising the relationship between law and sport: contemporary questions and issues”. The first part is published in this issue and the second and concluding part will be published in the September 2018 issue of GSLTR.

The aim of Haynes’ article is to provide a critical reappraisal of the intimate relationship between law and sport in an age where juridification of private spaces is quickly becoming the order of the day. The article, in particular, aims to situate sport in its proper social and legal context, by examining the inescapable role played by sport in the maturation of societies. The article also explores whether there is a precise legal definition of “sport”, and argues that, on the basis of recent jurisprudence, it can no longer be assumed that sport is a measure of intellectual and physical well-being. The article then provides a brief, but critical, reappraisal of some of the main contemporary legal questions and issues which arise in the sporting context through a nuanced examination of the application of disparate areas of law in the resolution of sporting disputes.

He covers a wide range of legal issues relating to sport, including what is sport in law and will reach the following conclusions:

As illustrated in this article, perhaps the biggest conflict, if not travesty of justice, lies in the very definition of “sport”, which the jurisprudence has confirmed is non-negligible physical activity, effectively excluding the game of duplicate bridge, chess and presumably also dominoes.

Apart from the definition of “sport”, there appears to be an uneasy relationship between law and sport in respect of a number of thought-provoking questions, including, whether ordinary negligence or “reckless disregard” is the appropriate standard by which to judge players’ conduct which causes injury in so far as negligence claims are concerned; whether there should be a role for the “playing culture” in the determination of criminal liability in respect of sports related injuries; whether too much discretion has been afforded to sports bodies in the determination and sanctioning of “disreputable” conduct; whether we should continue to trust private sporting bodies to conduct their affairs, without governmental intervention, in light of increasing allegations of poor governance and administration; whether the anti-doping regime should be abolished and replaced by “soft paternalism”, wherein engagement in drug use is supervised by trained medical personnel; whether intellectual property law should protect actual sporting events; and, finally, what is the proper role of international law in the advancement of the rights of players.

 

Although, as the author points out, the article is not intended to be exhaustive, it is certainly a thought-provoking one!

The 2018 Winter Olympic Games were held in Pyeongchang in February and, despite being overshadowed by the alleged Russian systematic state-sponsored doping scandals, were hailed by the International Olympic Committee as being very successful.

On 23 April 2018, the Court of Arbitration for Sport (CAS) published two long-awaited reasoned awards regarding their landmark decisions from 1 February 2018 in the matter of 39 Russian athletes (the “Sochi appellants”) against the International Olympic Committee (IOC). These 39 athletes challenged the decisions taken by the Disciplinary Commission of the International Olympic Committee (IOC DC) finding that 43 Russian athletes had committed anti-doping rule violations (ADRV) during the Olympic Winter Games in Sochi 2014 and banning them from participating in the 2018 Pyeongchang Winter Games. On 1 February 2018, the CAS upheld 28 appeals and partly upheld 11. This decision came merely a week before the opening ceremony of the 2018 Pyeongchang Olympic Winter Games. However, the CAS did not decide on each athlete’s individual right to participate in the 2018 Winter Games on subsequent rulings on 9 February 2018.

The two now published extensively reasoned decisions by the CAS include “high-profile cases”; one being Aleksandr Zubkov, a now retired Russian bobsledder and flag bearer of Russia for the Opening Ceremony at the Sochi 2014 Winter Games, and the other Alexander Legkov, gold medal winner of the 50 km cross-country skiing freestyle competition in Sochi.

In the case of Aleksandr Zubkov, the appeal was partly upheld but an ADRV was established before the CAS; whilst in the case of Alexander Legkov no ADRV was established. Both of these awards contain around 160 pages and expose all facts and evidence presented before the CAS arbitration process in great detail. In both of these awards, the panel extensively deals with the applicable standard of proof.

These events and the CAS proceedings are charted and commented on in an article by Dr. Thilo Pachmann and Alexander Theiler, entitled “The CAS landmark decisions of 1 February 2018 and subsequent CAS rulings on the Russian winter sports “doping cases””.

We also include an article by Carlos Castro in which he takes a fresh look at the very valuable “Olympic Properties” and their commercial exploitation and legal protection. He concludes that, without the strict rules governing the use of the “Olympic Properties”, it would be impossible to fund the Olympic Movement and, thereby, allow the general public to enjoy the spectacular multi-sports extravaganza that is the Olympic Games!

We publish an article by Adam Aldred on the recent International Skating Union (ISU) EU Competition Law case, in which, following an investigation lasting over two years, the European Commission (EC) decided, on 8 December 2017, that the rules of the ISU, which impose severe penalties on athletes who participate in non-ISU tournaments, breach EU antitrust rules.

In its Decision, the EC held as follows:

According to the ISU’s Eligibility rules adopted in 2014 (the “2014 Eligibility rules”) – which clarified the Eligibility rules as they were already in place since 1998 – a speed skater became ineligible for a period up to a lifetime to participate in the ISU’s international speed skating events if he or she participated in any speed skating events not authorised by the ISU or one of its Members. Under the ISU’s Eligibility rules adopted in 2016 (the “2016 Eligibility rules”), a speed skater participating in events that are not authorised by the ISU or one of its Members is subject to sanctions ranging from a warning to periods of ineligibility from an unspecified minimum to a maximum of a lifetime ban. Until 2015, there were no pre-established criteria on the basis of which the ISU authorised third party events, and, although the ISU introduced authorisation criteria afterwards, those criteria are not objective, transparent and non-discriminatory, and go further than necessary to protect legitimate aims.

As the author points out, this is a decision that could have far-reaching implications for other international sports governing bodies that endeavour to protect their monopolies in their sporting events through anti-competitive (in a commercial and financial sense) restrictions imposed on their athletes that cannot be justified on sporting grounds.

Putting a value on a sports celebrity’s image is not only important, for a variety of reasons, but also quite problematic, in practice. In their article, Athena Constantinou and Ian Blackshaw shed some professional light and offer some expertise on this increasingly important subject. As they point out:

Measuring the sports celebrity’s image value provides both players and clubs with a framework for strategic management when it comes to licensing; business alliances or joint ventures involving a player’s image rights; collateral for debt; and other important applications.

And add:

Also, one very important reason for having an independent professional valuation of a sports celebrity’s image is in relation to disputes of various kinds that may arise, from time to time, especially with tax authorities. Taking the UK Tax Authorities (HMRC – Her Majesty’s Revenue and Customs), as an example, particularly in the case of the English Premier League clubs and their players, who, if not seeking to deny the existence of sports image rights, are, more often than not, challenging the value placed on them and seeking to tax them as income and not as capital assets and, as such, untaxable.

The article goes on to describe and explain various methodologies for valuing sports image rights, including the “APC Brand Evaluator”, and, amongst other things, concludes:

It is clear that measuring the sports celebrity image value provides us with a framework for strategically managing the sports celebrity on and off the pitch.

We also include an article by Dr. Harald Grams on the taxation in Germany of football referees who work internationally. After reviewing German case law on various refereeing situations, he ends with the following summary:

Referees generate income from trade business in Germany and must pay trade tax here. Trade tax is indeed allowable against income tax, but the amount of crediting is limited and, therefore, the total tax burden of the referee resident in Germany will be increased in many cases.

Within the international context, it can be presumed that he cannot pass on the higher burden to his remuneration entitlement.

The income to be taxed in Germany includes also foreign revenues, because the referee maintains only one place of management, and, accordingly, only one permanent establishment at his place of residence.

Regulations in double taxation conventions, based on art. 17 clause 1 OECD MA, do not prevent taxation of a referee’s foreign revenues in Germany, because a referee is not classified as a sportsman and, therefore, taxed in accordance with the relevant regulations based on art. 7 OECD MA.

    The taxable income includes also advertising revenues.”

We also publish a comparative review by Eduardo Montejo and Carlos Carnero

in several European countries of the tax treatment of residency of football players (including the former so-called “Beckham law” in Spain); the commercial exploitation of their image rights; and the payment of agents’ fees, especially by clubs on behalf of players. The authors reach the following main conclusions:

As we have tried to explain in this article, each country has taken his own path to try to find the equilibrium between establishing an attractive tax regime to attract talent/wealth individuals and a prominent level of tax collection.

Spain has opted clearly for removing the special tax regime that may be favorable for sportspeople. However, countries like the UK, Italy, France or Portugal keep trying to attract sporting talent through tax measures.

The fact that each country has its own tax regime makes it more important to know the main guidelines of each country, to be able to profit from the tax advantages that may be applicable.

We also include a highly topical article by Beate Erwin dealing with the U.S. tax consequences of the ending, with effect from 1 January 2018, of so-called “like-kind exchanges for U.S. sports trades” under the Tax Cuts and Jobs Act signed into law by President Trump on 22 December 2017. As the author points out:

As a result, in player-for-player trades, professional sports teams will recognize gain and pay tax on the appreciation in value of a traded player’s contract. The better the player performed since signing with the team – especially if that person signed at a relatively low salary – the higher the potential tax bill.

One of the tax issues arising under the new regime, which is discussed in the article, is the valuation of player contracts. In the absence of guidance by the IRS (the U.S. Internal Revenue Service) on this subject, the author recommends professional sports teams:

to agree on the value assigned to the player’s contracts upon exchange. This way the IRS’s room for contention could be significantly limited, in particular, if the agreed values are substantiated by expert valuation reports.

We also publish an interesting article on a complex French tax case involving the sponsorship and endorsement agreements of the international tennis player, Richard Gasquet, by Giorgio Vaselli and Phineas Hirsch.

Further, we include two other contributions in our comparative series on the taxation relating to the international transfer of professional football players. The first one deals with the position in Switzerland and is by Prof. Xavier Oberson; and the second one covers Belgium and is by Pieter Debaene and Daan Buylaert.

Finally, and as always, we would welcome and value your contributions in the form of articles and topical case notes and commentaries for our journal and also for posting on the GSLTR dedicated website www.gsltr.com. A number of you have already responded to this invitation, but, as they say, the more of you who do so, the merrier!

So, now read on and enjoy this latest edition of GSLTR.

 

Dr. Rijkele Betten (Managing Editor)

Prof. Dr. Ian S. Blackshaw (Consulting Editor)

 

June 2018