Football’s transfer market as we know it is at risk of collapse after the European Union‘s top court said on Friday that some of FIFA’s rules on player transfers are illegal in accordance with European Union legislation.

The European Court of Justice (ECJ) said on Friday that these rules, which pertain to the freedom of movement between football clubs, are contrary to European Union law on competition and freedom of movement.

The decision against FIFA’s rules is likely to seismically shift the bargaining power in favour of players and away from clubs, who could no longer be able to hold on to players with the hope of attracting significant transfer fees.

By contrast, players – and their agents – will potentially be able to break contracts without consequences, signing on with new clubs rather than feeling the need to run down their contracts. It is likely that clubs will soon gravitate towards offering shorter contracts in the near future.

The court’s ruling came after former France international Lassana Diarra legally challenged FIFA rules following a dispute with a club dating back to a decade ago. 

Diarra alleged FIFA regulations hampered his ability to find a new club after his contract with Lokomotiv Moscow was terminated in 2014

Diarra had signed a four-year contract with Lokomotiv Moscow in 2013. The deal was terminated a year later after Diarra was unhappy with alleged pay cuts.

Lokomotiv Moscow applied to the FIFA dispute resolution chamber for compensation and the player submitted a counterclaim seeking compensation for unpaid wages. 

The Court of Arbitration for Sport found the Russian club terminated the contract with Diarra ‘with just cause’ and the player was ordered to pay 10.5 million euros (£8.8million). 

Diarra claimed his search for a new club was hampered by FIFA rules stipulating that any new side would be jointly responsible with him for paying compensation to Lokomotiv.

‘The rules in question are such as to impede the free movement of professional footballers wishing to develop their activity by going to work for a new club,’ the court said in a statement.

The former Real Madrid player also argued that a potential deal with Belgian club Charleroi fell through because of the FIFA rules, and sued FIFA and the Belgian federation at a Belgian court for damages and loss of earnings of six million euros (£5million). 

With the lawsuit still going through Belgian courts, the case was referred to the European Court of Justice for a ruling.

The Diarra case, which is supported by the global players’ union FIFPro, went through FIFA judicial bodies before the 2016 election of FIFA president Gianni Infantino, who has made it a priority to modernise transfer market rules.

‘On behalf of professional football players worldwide, FIFPRO welcomes these findings,’ the organisation said in a statement.

Diarra sued FIFA for loss of earnings after the governing body’s rules prevented him from joining Belgian side Charleroi 

Diarra’s case has been compared to that of Jean-Marc Bosman who challenged footballer transfer rules through the ECJ in 1995

‘The ECJ has just handed down a major ruling on the regulation of the labour market in football (and, more generally, in sport), which will change the landscape of professional football.’

Law firm Norton Rose Fulbright has explained the effects the ruling could have on football’s transfer market.

Partner Ian Giles said: ‘This judgment has potentially very significant implications for FIFA’s transfer system. Although Belgium’s Cour d’appel de Mons – which referred the matter to the ECJ – must now apply the judgment, the decision essentially says the current system is too restrictive and so will have to change.

‘It’s entirely possible this means players will feel they can now break contracts and sign on with new clubs, without the selling club being able to hold them or demand significant transfer fees. 

‘This will likely result in reduced transfer fees and more economic power for players – but over time things will have to stabilise to allow clubs to remain economically viable. 

‘Smaller clubs who rely on transfer fees for talent they have developed may well be the losers in this context.

‘In terms of free movement, the ECJ recognises that there may be a justification on public interest grounds to maintain the stability of playing squads, but considers the current rules go beyond what is necessary.’

In a statement FIFA insisted that the ruling did not have wide-reaching implications and only pertained a specific aspect of the governing body’s transfer regulations.

It read: ‘FIFA is satisfied that the legality of key principles of the transfer system have been re-confirmed… 

‘The ruling only puts in question two paragraphs of two articles of the FIFA Regulations on the Status and Transfer of Players, which the national court is now invited to consider.’

The case has been compared to the landmark ruling involving Belgian midfielder Jean-Marc Bosman in 1995.

His judicial challenge of transfer rules had a transformative effect on the way in which footballers are employed, allowing players to move freely between clubs upon the expiry of their contracts.

The landmark case allowed players to move freely to another club at the end of their contract

After beginning his career in his native France with Le Havre, Diarra’s potential saw him scooped up by then Premier League champions Chelsea as a long-term successor to compatriot Claude Makelele for the Blues.

First team opportunities proved hard to come by however, and he spent time at Arsenal and Portsmouth before joining Real Madrid where he was later reunited with Jose Mourinho.

Diarra found himself on the periphery in the Spanish capital before joining Anzhi Makhachkala followed by his ill-fated move to Lokomotiv Moscow.

Diarra was handed a ban from FIFA at the end of his time at Lokomotiv and spent the entirety of the 2014-15 campaign on the sidelines before returning to football with Marseille. 

He retired from the game in 2019.