European Commission Targets Spanish Football Clubs including Real Madrid and Barcelona for State Aid Investigations

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The European Commission (Commission), on 18 December 2013, opened three formal State aid investigations into public support measures for major Spanish football clubs. The Commission alleges that the clubs under investigation have benefitted from State aid that cannot be authorised. The clubs, which include Real Madrid and Barcelona, are therefore exposed to the risk of the alleged benefit being recovered. Professional sports clubs in other EU Member States should also be aware that the Commission is starting to enforce the State aid rules in the sport sector.

The European Commission (Commission), on 18 December 2013, opened three formal State aid investigations into the public financing of some of the most well-known Spanish football clubs.

The first investigation concerns possible tax privileges for Real Madrid CF, Barcelona CF, Athletic Club Bilbao and Club Atlético Osasuna. These four clubs are exempted from the general obligation on professional football clubs to convert into sport limited companies. The effect of the exemption is that these clubs enjoy a preferential corporate tax rate of 25 per cent instead of the 30 per cent applicable to sport limited companies.

The second investigation will assess whether or not a land transfer between the City of Madrid and Real Madrid CF involved any State aid in favour of the club. In the third investigation, the Commission will examine the compliance with EU State aid rules of guarantees given by the State-owned Valencia Institute of Finance for loans that were used to finance the three Valencia clubs Valencia CF, Hercules CF and Elche CF, while those clubs were seemingly undergoing financial difficulties.

The Commission is empowered to investigate public support measures going back 10 years under general EU State aid rules. Should the Commission come to the conclusion that the measures in favour of the Spanish football clubs infringe EU State aid rules, it can order Spain to recover the State aid from the clubs and the relevant public support measures could no longer be applied.

Background

Unlike amateur sport, professional sport is an economic activity to which the general EU State aid rules apply. Although the economic nature of professional sport has been recognised in the past, the Commission has only recently picked up on potential EU State aid in the sport sector.

The Commission sent an information request to all EU Member States in October 2012, asking them to provide all relevant information regarding public financing of the professional football clubs in their country. The Commission subsequently launched an investigation in the Netherlands (see McDermott website here) (http://www.mwe.com/Commissions-Launches-First-State-Aid-Investigations-Into-Football-Clubs-04-02-2013/?PublicationTypes=d9093adb-e95d-4f19-819a-f0bb5170ab6d) in March 2013 concerning, amongst others, PSV Eindhoven.

Implications

Professional football clubs in other EU Member States should watch the Spanish and Dutch cases with interest as the Commission is starting to enforce the State aid rules in this sector and it is likely that professional football clubs in other Member States will also become subject to an investigation.

Since the underlying legal and economic concepts of the Commission’s probe into the financing of football clubs are not limited to football, other professional sports clubs such as ice hockey, basketball and handball, and the EU public authorities financing such clubs, should also follow developments closely.

In a separate decision, the Commission today authorised State aid amounting to EUR 1.052 billion for the construction and renovation of nine football stadiums for the UEFA EURO 2016 Championship in France. As the conditions for the further commercial exploitation and use of the stadiums are not yet fully defined, the Commission’s decision does not cover potential State aid for the users of the stadiums. France committed to notify the Commission of the outstanding conditions of exploitation and of use of the stadiums after the championship.

Katharina Dietz, a paralegal at McDermott Will & Emery’s Brussels office, also contributed to the article.  

Topics:  EU, European Commission, Investigations, Soccer

Published In: Art, Entertainment & Sports Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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