A TOPICAL NOTE ON STATE AID AND SPORT BY PROF DR IAN BLACKSHAW
A TOPICAL NOTE ON STATE AID AND SPORT
BY PROF DR IAN BLACKSHAW
Despite sport being big business nowadays worth more than 3% of world trade and 3.7% of the combined GNP of the twenty-eight Member Sates of the European Union (EU), a number of major sporting infra-structure projects, for example, the revamping of a football stadium, need financing, from time to time.
Such finance may come from the private sector, but also from the public sector. In many countries, Central and, indeed, Regional or Local Government, often have an interest in promoting sport and providing sports facilities for the good of the community, and, as such, they may well offer financial help, in one form or another, for realising such projects.
For example, one such kind of State subsidy may take the form of so-called ‘soft loans’ - that is, loans at subsidised rates of interest - below market rates – and also on other favourable terms and conditions which are not always available in the ordinary financial markets.
Such State-Aids, which have become more common since the economic down turn of recent years, raise a number of legal issues, including Competition Law issues, especially at the EU level under the provisions of Article 107 of the Treaty on the Functioning of the European Union (TFEU).
Article 107(1) of TFEU provides as follows:
“Save as otherwise provided in the Treaties, any aid granted by a Member State or through State Resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.”
Certain kinds of aid are considered to be compatible with the internal market and these are set out in Article 107(2) of TFEU; whilst other kinds of aid set out in Article 107(3) may (emphasis added) be considered to be compatible with the internal market.
Any form of State Aid must be notified to the EU Commission.
This is a complex field of Law and, apart from the deemed cases of compatibility, other cases falling under Article 107 (3) that may or may not pass muster under its provisions, need to be carefully considered and argued on their merits on a case-by-case basis.
Sport is not specifically mentioned in either the deemed or other cases.
A number of prima facie cases of State Aid to Sport, which, it is claimed, infringe the EU Rules, are currently under investigation. Mention may be made of the complex and ongoing cases of Real Madrid and Barcelona Football Clubs, which were ‘charged’ with alleged State Aid infringements on 18 December, 2013.
The case of Real Madrid involves a certain alleged favourable land deal with the Madrid City Council and, if this deal, which dates back to 1996, is ultimately found to constitute illegal State Aid, Real Madrid will required to pay back the money, that they received from the land deal, and which they intend to use to develop the area around their Bernabeu Stadium as a shopping mall and hotel complex.
In the case of Barcelona FC, it is alleged by the EU Commission that, as a result of being exempted in 1990 by the Spanish Government from Legislation requiring not-for-profit sports clubs to become Public Limited Companies, they gained unfair tax advantages and this amounted to illegal State Aid.
Real Madrid, Athletico Bilbao and Osasuna Football Clubs are also ‘charged’ with the same ‘offence’. All of these alleged illegal tax advantages/savings amount to billions of Euros!
The allegations of illegal State Aid are vehemently denied by the Spanish Authorities and the Clubs themselves, so it is expected that these cases will go the European Court of Justice.
If the Clubs are ultimately found ‘guilty’ of receiving illegal State Aid, they will be required to give up their status of member-owned clubs. As such a concession only applies to just four Football Clubs in Spain, it is alleged that this situation constitutes a “gross inequality”.
The increasingly important and controversial subject of State Aids to Sport will be covered in more detail in a timely article, written by football law expert John Wallace, Consultant Lawyer with McFaddens Law Firm, based in the City of London, and scheduled to be published in the September 2014 issue of our ground-breaking Journal ‘Global Sports Law and Taxation Reports’.