Potential new restrictions and requirements on foreign State investment into European football clubs

In a sector where competitiveness goes hand in hand with deep pockets, financial backing can bridge the gap between a sports club’s potential and its realisation. The European Commission (Commission) has however made clear that the EU rules on State aid made no exception for the sports sector[1]. Wherever public authorities/bodies using public resources grant an advantage to an undertaking on a market that is open to competition, the issue of State aid arises. Various cases on the Spanish[2] or the Dutch football clubs have illustrated that sports organisations need to be aware of the State aid rules and the possibility that their financing (from financial transactions to share acquisition through bank loans or taxes) may be reviewed by the European Commission.

Until now, due diligence did not extend to funding from non-European Union countries, as the Commission’s scrutiny was limited to financing from Member States of the European Union (EU). The situation is about to change. On 5 May 2021, the Commission published a proposal for a regulation on foreign subsidies distorting the internal market (Proposal)[3]. Interested parties had until 22 July 2021 to provide comments in the context of a public consultation.

The proposal seeks to address distortions in the internal market of the European Union caused by financing from countries outside of the European Union. It is a new tool to address a regulatory gap and ensure a level playing field as currently the Member States of the European Union are subject to strict and limiting rules to provide financial assistance to football clubs in the EU. However, the EU has no regulations in place to control the in-flow of funds to football clubs and other entities in the EU from third countries (who are not Member States of the EU). For example, while the Spanish Government was prevented from providing support to football clubs such as Barcelona, the takeover of Paris Saint Germain by Qatar Sports Investment (subsidiary of Qatar Investment Authority[4] which is Qatar’s sovereign wealth fund[5]) and subsequent funding of operations of the club was not.

If this regulation is passed, it would essentially impose restrictions on foreign investments in sports.

This article explores:

• What is a foreign subsidy?
• What does a distortive nature of a subsidy mean?
• What are the areas targeted by the Proposal?
• What are the Commission´s powers of investigation and the possible remedies?
• What will be the potential impact of this regulation if passed?
• What next?