On 15 November 2005 SENSE, in cooperation with the ASSER International Sports Law Centre and Ernst & Young Bulgaria, organised a seminar on “Player’s Contracts in Professional Football – EU Law and the Challenge for Bulgaria” in Sofia. Speakers were Dr Robert Siekmann, the Centre’s Director, Roberto Branco Martins, lecturer on Labour and Sport at the Law Faculty of the University of Amsterdam and research fellow of the Centre, Milen Rusev, senior of PI Partners Dinova & Rusev Law Firm, Tzvetelin Simov, managing director of Bulwark Ltd., and Boris Kolev, associate in Djingov, Gouginski, Kyutchukov, and Velichkov Law Firm. The seminar’s chairman was Julian Mihov, international tax manager of Ernst & Young Bulgaria.
The practical purpose of the seminar was to respond to then popular idea in Bulgarian football for shift from labour law contracts of Bulgarian football players to civil law contracts. At that time Bulgarian football officials and the Association of Bulgarian Football Players were trying to find solution of the hardships of football clubs to pay their part of the social contributions of their players in due time, which threatened them with failure to obtain licenses and to participate in the championship, respectively.
At the end of the season 2004/2005 Bulgarian champion CSKA Sofia was threaten of loosing its license for the next championship due to unpaid debts to the National Social Security Institute (hereinafter “NSSI”). CSKA managed to solve the problem and kept its license, however, that happened not in result of transfer of the whole due amount to the national social security budget but due to execution of Repayment Agreement with NSSI. Thus, the debt was not considered due upon the launch of the licensing procedure for the next season. Another football club from Bulgarian Professional A group – Pirin Blagoevgrad tried to apply the same strategy, however, it turned out that the Repayment Agreement submitted to the Licensing Commission was counterfeited and the club was expelled from the professional football.
Replacement of labour law contracts with civil law contracts and making football profession equal to liberal profession and players equal to self-employed persons were deemed to be the appropriate measures for addressing the problem with the payment of social contributions. Trying to find legal ground for adoption of these measures Bulgarian football officials decided to try to avail themselves of the provision in Bulgarian Social Security Code authorising NSSI to propose to the Council of Ministers the procedure for social security of self-employed persons not working on employment basis. They relied to convince the Director of NSSI to propose football players as self-employed persons to be included in the list of persons pursuing liberal professions through amendment in the Ordinance of the Council of Ministers on Social Security of Self-employed Persons (hereinafter the “Ordinance”).
More specifically, the seminar on 15 November was called upon to provide, inter alia, answers to the following questions:
- Is football profession liberal in its substance notwithstanding the legal options for its treatment as such?
- Whether adoption of civil law contracts and grant of status of self-employed persons for Bulgarian players would be in harmony with Bulgarian law, FIFA Regulations and European acquis in the field of Sports with a view to forthcoming accession of Bulgaria in the EU scheduled for the beginning of 2007?
Distinguishing feature of each liberal profession is the fact that persons, who practice such profession, do that at their own risk and for their own account. On the other hand, employment is similarly defined in the EU case law and Bulgarian legal theory as relationship, whereby a person for a certain period of time performs services for and under the direction of another person, in return for which he receives remuneration. Persons pursuing liberal professions enter into civil law contracts and owe as consideration certain result agreed between the parties thereto unlike employees, whose main obligation is to provide their working force at employer’s disposal. For more clarity which of the two definitions mostly suite the relations in sport we would like to use the parallel between individual sports and collective sports.
Bulgarian sports life is full of examples of individual athletes who may be find eligible of being granted status of self-employed persons pursuing liberal profession. For instance, Bulgarian top sprinter in the light athletics Ivet Lalova prior to being severally injured participated in a competition in Greece representing the Greek athletics club Panionis. The engagement of Lalova towards the Greek club ended with the end of the competition or, roughly speaking, she fulfilled her duties through running virtually once or twice (dependent on the number of participants) the distance of 100 meters. That was the service and the result, which Lalova owed to the Greeks. Would it be justified to define Panionis as employer of Ivet Lalova, who may require from her performance of services for certain period of time, have disciplinary power over her and bear or share the risks associated with her activity including the social one?
Similar example could be provided with Bulgarian young tennis player Cecil Karatancheva who played in a tournament in France on the behalf of Tennis Club Cherno More Elit Varna and in the German Tennis Bundesliga for German tennis club Moerns 08 apart from her individual participations in tournaments of the World Tennis Association. Who among the aforementioned organizations could be reasonably assumed to be employer of Cecil Karatancheva?
These two examples come to demonstrate that the argument in favour of granting status of self-employed persons to individual sportsmen seems convincing and well grounded. Nevertheless, the individual athletes are certainly not prohibited of concluding labour law contracts, but this option for them does not arise out of the specifics of the contractual relations they establish.
Hardly could the same token apply to relations in collective sports and particularly in football, though. Such application should theoretically lead to situation, where a given football player is entitled to freely enter into numerous contracts with different clubs each with subject matter participation in one single match, series of matches or particular tournament. That would mean that one player from the Spanish Primmera Division, for instance, could play once for Barcelona and next round for Real Madrid, which under the current state of affairs in the World football is certainly absurd.
The activity of each sportsman from a collective sport is subordinated to the instructions of the coach or the manager of the respective club. A single player cannot perform the sport activity on his own but only as long as he is a member of a team. Further, players cannot prepare individually and attend only the official matches of the club, but comply with the schedule of a prior adopted training process. Players are obliged to provide their workforce whenever the coach requires that. The professional football players do not have a right to play for another club during the term of validity of their contracts and in practice there is only one professional contract they could sign and on the ground of it they should be socially secured accordingly. Therefore, definition of employment as developed in the EU case law 100% presents in the relations between players and clubs.
Although artificial in its substance the regime of tax and social security treatment of football players as self-employed persons might be attainable as far as the law in operation in Bulgaria allows it. Does Bulgarian law indeed allow it, though?
The Physical Education and Sports Act (hereinafter referred as “the Sports Act”) that is currently in force is lacking regulation of the player-club relations. Only in one article among the requirements to be met by the professional sport clubs it is stated that they have to have stipulated through contracts the rights and obligations of the professional athletes according to their status. Obviously, at legislative level, at least as regards the Sports Act, there are no obstacles that such contracts be of any kind.
However, the freedom to choose the type of the contract is not unlimited. Pursuant to the Bulgarian Labour Code each contract, which subject matter involves the provision of workforce must be concluded under the form of labour law contract. Consequently, regardless of the name of the contract chosen by the parties, it will be considered of employment law nature if has such subject matter or consisted of the necessary elements of the employment relationship. This rule is drafted to bar employers of circumventing their tough obligations under the Labour Code in detriment of employees. The application of the Labour Code cannot be denied even on the ground of the pretending to be supranational FIFA Regulations for the Status and Transfers of Players (hereinafter “FIFA Regulations”) since the latter explicitly requires that contracts shall observe the applicable laws. With the absence of “sport” exception in the Labour Code and a special detailed regulation of players-clubs relationship in the Sports Act to exclude the application of the general regulation, the Bulgarian labour law will generally apply to sportsmen.
Further, Bulgarian law provides legal definition of persons with liberal professions with the Individual Taxation Act wherein certain professions are expressly enumerated as liberal. A person pursuing liberal professions would be also any other person, whose activity is performed on his account. Football players are, of course, neither included among the enumerated professions, nor do they perform their activity on their account as discussed above. Therefore, any amendment of the Ordinance, which is not synchronized with corresponding and preceding amendments in the Individual Taxation Act would lead to contradiction between a sub-legislative act and the primary law. Such contradiction could be only avoided if legal basis for the amendment is provided for in a legal instrument situated in the hierarchy of legal instruments similarly to the Individual Taxation Act as is the Sports Act. However, it is obvious that such amendment in the Sports Act with respect to sportsmen in collective sports would lack any justification.
The idea of moving to civil law contracts as legal basis of clubs-players relations in Bulgarian football cannot find any support in the EU law and FIFA Regulations either. The Bosman case refers to football players as “workers” and the definition of employment as developed by the European Court of Justice clearly fits the relations in all collective sports. FIFA Regulations provide that every player designated as non-amateur by his national association shall have a written contract with the club employing him. At first glimpse FIFA Regulations does not mandatory indicate the type of the contract – civil law or labour law, however they certainly define the type of relations since the verb “employ” could hardly be used with respect to individual service providers. And employment relations inevitably trigger conclusion of labour law contract.
The confirmation of the labour law status of Bulgarian football players, however, does not resolve the problem with the payment of social security contributions and the compliance with UEFA licensing criteria. Regardless of the absence of good reasons in support of the change of the type of the player’s contracts in the EU law and FIFA Regulations, such reasons could be found in the practice of countries in Central and Eastern Europe with comparable to Bulgaria legal and economic background as well as comparable quality of domestic football championships. Countries like the Czech Republic, Poland, Slovakia and Slovenia, for instance, are still reluctant to introduce the labour law as a legal basis of the contracts of their professional football players, although they are already member states of the EU. In summary, the opinion shared by football representatives of these countries is that the avoidance of the strict and tough employment regime is a mandatory condition precedent for the employers (in this case clubs) to survive as profitable business entities in football business. A football official from the Czech Republic has even made a statement that if the Czech labour law should be applicable to football players, most of the Czech clubs would go bankrupt.
If the most economically powerful countries from Central and Eastern Europe are facing such problems, Bulgarian football reality cannot be radically different. The withdrawal of the wealthy and notorious president of one of the leading Bulgarian football clubs Levski Sofia Michael Chorney was one of the first symptoms that the practice for giving money only because of love to football without seeking return for the investment was close to its end. Without good performance of Bulgarian football clubs in the European club competitions like the Champions League and the UEFA tournament which are in fact the most serious sources of income, without significant in financial aspects transfers of Bulgarian players abroad, without support from the State, with gradually loosing value broadcasting rights for the local championship and gradually increasing standards for licensing of the clubs, the latter are experiencing more and more difficulties in their attempts to cover their current liabilities including the social and health contributions of the employed players.
Further, problems are obviously not stemming from the definition of the relations in football as such of employment nature but rather from the consecutive therewith reference to other provisions of labour law, which are to a very large extent inapplicable to the specifics of practicing football game as occupation.
First, Bulgarian Labour Code provides for termination of fixed-term contract, which contract players sign as a rule where their relations with the clubs are considered to be of employment nature, through unilateral three months prior notice on the part of the employee. That means that a given football player is entitled to leave his club at his own discretion without having completed a single full season with the team. In Lithuania, for instance there is a general principle in Lithuanian Law on Physical Culture and Sport saying that a professional player may not leave his present club until his contract expires and all his obligations towards the club are satisfied. In Bulgarian Sports Act such principle is not established and if Labour code applies the player will be free to leave before the end of the season.
Secondly, labour law does not provide for payment of compensation to the employer for the expenses the latter has made for the education and training of the player and for improving his qualification. Such provision is necessary for justification of the claims for payment of a transfer fee in case of change of clubs of a player until turning age of 23 as both FIFA and the respective Rules of Bulgarian Football Union provide for.
Thirdly, fine is the most popular sanction in football, but the Labour Code does not enumerate it among the sanctions applicable to employees.
Last but not least, the need for observing sport regime very often imposes interference of the club managers in the private life of the players. However, such interference is absolutely inadmissible for employer, which status the club would obtain under the Labour Code.
As a whole, the Labour Code is more friendly towards the employee and that is why it does not allow too much flexibility as far as provisions, which modification at employer’s discretion could worsen the position of the employees are concerned. No doubt that this friendly regime threatens the stability of the sport contracts.
In Bulgaria, one possible solution for neutralizing the discrepancies would be supplement of the Sports Act through a provision, which allows sportsmen to sign special sports contracts and stipulates for application of Labour Code only with respect to issues not specifically addressed by the Sports Act. The role of NSSI could be supervision over those contracts in a way to secure improvement or at least preservation of the basic social rights of sportsmen according to the national labour law.
The implementation of such solution, however, is far from easy and requires presence of a lobby in the Parliament. That is why leaders of Bulgarian football preferred to try to achieve similar result through amendments in the Ordinance, which was intended to put football players on equal footing as actors, notary officials, sole traders and other liberal professions acquiring entirely the tax and social security regime of the cultural workers and completely avoiding the labour law regime. While pursuing said goal they disregarded the other collective sports as basketball, volleyball, handball etc. which could have absolutely the same arguments to claim preferable status for the persons pursuing such sports.
Involvement of other sports organization was considered as unnecessary complication of the things. This conduct of Bulgarian football officials actually reflected the world trend for perceiving the law and law-making as an instrument for protection of the interest of small groups of people presented in the public authorities or having connections with such authorities. Bulgarian legislation has recently been enriched with acts like the Patronage Act, which clearly evidences the tendency for granting privileged regimes to certain classes and professions with respect to others. Drafts of other acts like In-house Legal Counsels Act, Veterinarian Medicinal Activity Act, Agricultural Academy Act, and Act on Independent Evaluators were submitted for discussions in the previous Bulgarian Parliament. In this context it would not be surprise if adoption of a special law on the status of football players will be suggested in the future. The trend of enactment of such laws is logical result of the fact that law is currently considered more as a mass of ad hoc decisions than as a concept, philosophy or spirit. Denial of the nature of law as corpus juris and meta-law inevitably invokes primitive pragmatism to justify individual decisions and rules. In this sense Bulgarian football leaders, although unconsciously, acted in compliance with the contemporary perceptions of law. And the failure of procurement of privileged status through amendments in the Ordinance is not likely to prevent them from future attempts on legislative level to attain this goal.
The contemplated change of the status of football players from employees to self-employed persons was relied to resolve the problem with the compliance with licensing rules since it should have affected the tax charges. Potential application of this change would have reduced the tax base with 50% statutory-determined expenses for exercising football profession. Consequently, football players would have paid less social and health contributions too. The final tax due in such cases shall be determined on the basis of the annual return in the end of the year. If the annual income of a given player had gone higher than BGN 50 000, he would have had to register himself under VAT.
However, the paradox of the whole plan for the change was that even if realized it would not have led to sensible reduction of the tax and social security burden for the clubs. The new UEFA licensing requirements oblige the clubs to keep their net assets at a positive value. For that end the money from the transfers of football players have to be capitalized and its value entered as a long-term intangible fixed asset in the annual financial statements of their clubs. This requirement could be met under the law currently in operation in Bulgaria without need for any amendments. Yet, the real incentive for amendment of the law might be found in the low rate of amortization of the group of assets, among which playing rights are supposed to be included.
The issue on the status of football players in Bulgaria and the type of their contracts has another aspect as well. With a view to the near membership of Bulgaria in the EU it is very important what legal framework the potential investors in Bulgarian football will face – familiar for them and synchronized with the EU law and practice or rules specific only for Bulgaria. Players are definitely the most precious assets of every football club and therefore, each investor should know the regime of their activity, be able to predict the costs associated with them as well as understand how these costs are reflected in the financial statements of the clubs. On the other hand, every player should be able to rely on a uniform framework of his rights and obligation on the common European labour market.