Sporting succession refers to the issue of whether or not a “new club” is liable for the debts and obligations of a “former club” because they are deemed in effect to be the same club, albeit under a different structure. It has been a longstanding issue in football, with FIFA now taking steps in its regulations to address this issue.
An important point about sporting succession was whether the concept was compatible with Swiss public policy; a point which has been resolved by recent decisions by the Swiss Federal Tribunal confirming its compatibility.
However, sporting succession is not just limited to football. In a recent basketball case, four American players (“Players”) filed a case before General Secretariat of FIBA (the international federation for basketball). The players used to play for a Greek club, A.O. lonikos 1965 K.A.E. ("Old Club") and had filed a request for arbitration against the Old Club before the Basketball Arbitral Tribunal (“BAT”) in relation to overdue salaries and the BAT had issued a decision in their favour the BAT Award 1549/20 ("BAT Award"). However, with the ‘deregistration’ of the Old Club by Helenic Basketball Federation, the players filed before the General Secretariat of FIBA to extend the sanctions under the BAT Award against another Greek club lonikos Basket K.A.E.[Diagoras Dryopideon KAE] ("New Club") arguing that the New Club was the ‘sporting successor’ of the Old Club given its potential direct or indirect links to the Old Club.
FIBA Regulations on Sporting Succession
The rules regarding the extension of sanction to succession clubs in basketball can be found in Article 344 of the Book 3 of FIBA Internal Regulations ("Regulations"2):
"in the event that a national member federation, club, player, coach or agent participating in a BAT Arbitration (the "first party") fails to honour a final award, order or any provisional or conservatory measures (collectively, the ,,decision") of BAT or GAS, the party seeking the honouring of such decision award (the "second party") shall have the right to request that FIBA sanctions the first party.
The sanctions that FIBA may impose are the following:
a. A monetary fine of up to CHF 150,000. This fine can be applied more than once; and/or
b. Withdrawal of the FIBA license if the first party is a player's agent or of the WABC membership if the first party is a coach; and/or
c. A ban on international transfers if the first party is a player; and/or
d A ban on participation in international competitions with his national team and/or club if the first party is a player; and/or
e. A ban on registration of new players and/or a ban on participation in international club competitions if the first party is a club.
The above sanctions can be extended, in FIBA's sole discretion, to natural or legal persons which are directly or indirectly linked to the first party, either from a legal or a sporting perspective (e.g. different entity under a similar name etc.}."
(emphasis added)
The recent jurisprudence of the Court of Arbitration for Sport and FIBA's judicial bodies indicates various criteria that can be considered when deciding to extend a sanction. This entitles FIBA to a "great flexibility" in applying such criteria for to link two clubs, which "can be direct or indirect, can be natural or legal persons and can be from a legal or a sporting perspective".
The crucial factor for a sanction to be imposed is "the impression in the basketball community" or the "public impression" or "brand" or "look and feel" under which a new club holds itself out.
It should be underlined that Article 3-344 of the Regulations allows FIBA to extend the sanctions initially imposed on a specific club/entity for non-observance or noncompliance with an enforceable BAT Award. Such extension of sanctions may be imposed upon "natural or legal persons which are directly or indirectly linked to the initial club/entity, either from a legal or a sporting perspective".
The sanctions' extension is therefore not restricted to newly formed entities after the original club or entity has stopped operating. It can also be imposed on any organization that has significant connections with the sanctioned club. This enables FIBA to ensure that BAT Awards are honoured and prevent indebted clubs from evading their responsibilities by taking over another club's legal entity and continuing their operations.
Background of the Case
The Players were engaged by A.O. lonikos 1965 K.A.E. for play in the Greek A1 Basketball league for the 2019/2020 season. At the end of the season, following many overdue and pending payments, they signed a settlement agreement.
The Club did not respect such agreements and the Players filed for a request for arbitration before the Basketball Arbitral Tribunal (“BAT”). In December 2020, BAT issued its award ordering A.O. lonikos 1965 K.A.E to pay the Players as established in the respective settlement agreement.
Even after this decision, A.O. lonikos 1965 K.A.E did not fulfill its obligation and the Players were left with no option but to seek enforcement of it before FIBA.
In the meantime, a newly promoted basketball Club from the Greek A2 Basketball League changed its name to lonikos Basket K.A.E., while the Old Club was relegated to the 4th division and considered an amateur club.
Following the deregistration of A.O. lonikos 1965 K.A.E. by the Helenic Basketbal Federation as a professional club, the Players approached FIBA to open proceedings to determine whether the sanctions imposed on the Old Club following its failure to honour the BAT Award, should extend against lonikos Basket K.A.E. [Diagoras Dryopideon KAE], pursuant to art. 344 of Book 3 of FIBA Internal Regulations ("Regulations") given its potential direct or indirect links to the Old Club.
FIBA found that in the present case both clubs (New and Old) did not co-exist "at the same time as separate legal entities" until the end of the 2019/2020. On the contrary, as the New Club admits in its submission, "KAE AS Diagoras Dryopideon Aigaleo was founded in August 2020" after the promotion of the club Diagoras Dryopideon to the top tier league of Greek basketball. It is however true that, before the New Club's promotion in Greek 1st division, the Old Club and the New Club co-existed in different leagues. Having said this FIBA notes that, at such period (i.e. before the New Club's promotion), the New Club had externally nothing in common with its current appearance.
Indeed, since the very beginning of the establishment of its legal entity and operations the New Club actively sought to appear in the eyes of the basketball community in Greece as one and the same entity as the Old Club, completely changing its commercial name into a name almost identical to the Old Club's commercial name, the only difference being the sponsor title attached to it.
Therefore, not only did the New Club not try to dissociate itself from the Old Club but, on the contrary, it took several concrete steps to ensure a perception of continuity of the Old Club's activities.
In reality, the decision observed that the New Club separated itself from its previous image and public image in order to profit and exploit the likeness, fame, and positive reputation of the Old Club. These steps included:
dropping the Diagoras Dryopideon club's traditional logo and green and white colours in favour of a logo featuring a 5-point star with a basketball in the centre, almost identical to the Old Club's logo, and blue and white colours, which were the colours used by the Old Club as well.
The conservation of some of the Old Club's (essential) administration members, such as Ms. Christina Skentziou, as well as the fact that the Mr. Vaggelis Tsapas who was the "owner" and financial supporter of the Old Club, assumed duties as president of the interim board of the New Club and still today appears as the "owner" of the New Club, while also being CEO of Hellenic Coin, the sponsor of the New Club
As a result, today the New Club looks like a clear continuity of the Old Club and does not have any of its previous characteristics preceding the New Club's promotion (logo, colour, fanbase, name, etc.).
The New Club claimed that it changed its name to include "lonikos" in order to attract fans from Nikaia, where the Old Club was based, and where the New Club planned to relocate its team to the Plato Indoor Hall. The purpose was to appeal to Nikaia citizens, including the fans of the Old Club. This decision was made even though the Diagoras Dryopideon club's seat and the New Club's registered seat were (and still are) located in Aigaleo, another municipality in Attica.
FIBA considers that such explanation is in fact confirming the New Club's desire to appear as the continuity of the Old Club who just disappeared, by benefitting from the Old Club's fanbase, history, popularity, some of the staff or management staff, but without inheriting its debts. Such behaviour clearly falls under the scope of application of Article 3-344 of the FIBA Internal Regulations.
Decision
In the present case, the aforementioned steps taken by the New Club, have, in FIBA's opinion, successfully created an impression on the basketball community that the New Club has taken over the Old Club or even that the Old Club never ceased to exist and simply resumed its professional operation, notwithstanding the change in legal entities (which is not an element that the public can easily notice in comparison with other elements such as the name, colours, logo etc.). The perfect example of such continuity is the New Club's commercial name, relocation to Nikaia and choice of logo uniforms and colours almost identical or at least sufficiently similar to the Old Club and totally different than the ones used by the club Diagoras Dryopideon until its promotion to the top tier league of Greek basketball in the end of the 2019/2020 season.
Therefore, FIBA extended the consequences of the BAT award to the new lonikos Basket K.A.E., considering this one the sporting successor of A.O. lonikos 1965 K.A.E. and thus responsible to pay the debts to the Players.
Conclusion
This "great flexibility” applied in the present case by FIBA based on Article 3-344 of the FIBA internal Regulations, and as stated above, by creating such impression of continuity, the New Club was de facto (existing in fact) attracting the Old Club's fanbase, history and reputation and benefitting from its goodwill. As a result, FIBA considered that one cannot benefit from all the valuable assets of a club and at the same time reject any sportive link with such club in the framework of the application of Article 3-344 of the Regulations.
When it comes to the establishment of a basketball successor club, it is crucial that the new entity takes responsibility for the debts and obligations of the old club, rather than attempting to circumvent the rules and evade financial liabilities. This principle is essential in upholding the integrity of the sport and ensuring fair play for all parties involved.
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