In a recent judgement, the ECJ has ruled on the application of GTC provisions to training contracts with junior athletes. The decision paves the way for stronger legal protection in youth sports and clarifies some interesting questions regarding the content control of main performance obligations under GTC law.
A. GTC law and Union law
General terms and conditions are subject to detailed legal scrutiny for reasons of consumer protection. So detailed that lawyers like to respond to the typical “I’m not going to read all that” with a placatory “it’s not necessary, there’s nothing wrong with it anyway”.
However, German law on general terms and conditions actually had very different beginnings: when it was codified in 1976 by the General Terms and Conditions Act (AGBG), the general aim was to react to the changes in legal transactions with mass transactions, in which the classic, negotiated contract has been completely pushed into the background.
It was not until 1993, when Directive 93/13/EEC was implemented, that the law on general terms and conditions also became consumer protection law. However, the German legislator did not feel compelled to modernise the existing regulations, but instead added consumer protection to the general law on general terms and conditions via a few special regulations (today § 310 Para. 3 BGB). This has resulted in a complex set of regulations, some of which are characterised by EU law and others purely by German law, which regularly require clarification.
Thus, the ECJ could almost be glad that the original dispute did not come from Germany, but from Latvia, where the directive was transposed much more directly into national law. The article therefore also takes a look at the German legal situation to clarify the question of transferability.
B. Initial legal dispute: Sports promotion between business and gambling
The starting point for the legal dispute is a contract concluded in Latvia between a 17-year-old junior basketball player, represented by his parents, and a sports sponsorship organisation. The contract stipulates that the sports sponsorship will initially be provided free of charge (this should include education, training, sports medicine, sports psychology support and agency services). The consideration is then to be dependent on the success of the sponsorship, in that it was agreed that the athlete owes 10% of all net income for the next 15 years if his profit exceeds EUR 1,500 per month.
In this case, the sponsorship was indeed successful, as the contractual partner embarked on a successful professional career and has since earned EUR 16,637,779, of which the sports sponsorship organisation is now claiming EUR 1,663,777 in accordance with the contract. The athlete now considers this consideration clause to be invalid under general terms and conditions law, the highest Latvian court decided to refer a number of questions to the ECJ to clarify the EU legal framework in consumer protection law, which has now ruled on the matter. In particular, it concerns the scope of application of the directive and the verifiability of the clause.
C. Young athletes are also consumers
The Directive only covers legal transactions between traders and consumers (in Germany §§ 13, 14 BGB). The question therefore arises as to whether a junior athlete who is not yet professionally active at the time the contract is concluded, but who becomes a professional athlete in the course of the contract, is to be regarded as a consumer within the meaning of Union law. In contrast, the Sportförderung argues that, in contrast to the usual consumer, who is particularly worthy of protection due to the special economic and informational power asymmetry, young athletes regularly know their way around the market and are not in a comparable role.
However, the ECJ does not follow this reasoning. It consistently points out that consumer status is an objective one that must be determined independently of actual knowledge. Taking this standard into account, junior athletes must also be consumers, because: the time at which the contract is concluded is decisive and junior athletes are not yet active in the context of their commercial activity, but are initially “only” athletes. This means that the law on general terms and conditions, which protects consumers, also applies comprehensively to continuing obligations with junior athletes.
D. Verifiability of the clause
The controllability of the 10% clause is more problematic. Whether a clause is reviewable concerns the question of whether the law authorises the courts to review whether the content of the parties’ agreement is objectionable because it is unfair for a material reason.
In principle, clauses on “the main subject matter of the contract” and “the reasonableness between the price […] and the services” are not subject to review. In this case, however, it is about the main subject matter, namely the athlete’s main performance obligation. However, this can still be checked by way of exception if it is not “clearly and comprehensibly drafted”. The ECJ gives the Latvian court the indication that it sees indications that this might not be the case here, because it was not at all foreseeable for the athlete what financial burden this could mean in the future and how this burden relates to the services provided.
E. Ineffectiveness: what if?
What if the Latvian court finds the clause invalid? In the law on general terms and conditions, the prohibition of reduction to preserve validity applies. Users of general terms and conditions should not rely on the court somehow weakening their unlawful clause. An invalid clause is therefore automatically void, the statutory provision takes its place and the rest of the contract remains valid (Section 306 BGB). However, there is no statutory regulation for the amount of remuneration for sports promotion programmes that could replace the agreement. The consequence: the claim to the almost EUR 1.7 million is cancelled without replacement.
When asked by the Latvian court, the ECJ also reiterated: Yes, even a “fair compensation”, according to which the athlete would only have to reimburse the costs actually incurred by the sports promotion programme, would be a reduction that would preserve the validity of the agreement and would therefore be inadmissible.
F. What is the situation in Germany?
In Germany, the law on general terms and conditions is considerably more complex, as mentioned above, but would probably produce the same result, as it is a requirement under EU law. It is interesting to note in this respect that German civil law stipulates special asset protection for minors in Section 1629a of the German Civil Code, according to which minors are only liable for liabilities established by their parents before they reach the age of majority with the assets they had on the cut-off date of their 18th birthday. A corresponding regulation would therefore be subject to considerable legal hurdles in Germany anyway (except for a very wealthy minor). The decisive factor here is not that the athlete has quickly come of age, but the time at which the contract was concluded.