The rights ‘revolution’ for pro sports stars in Japan – Part 2

In this article Takuya Yamazaki, private practice lawyer and member of FIFA’s Dispute Resolution Chamber, provides a fascinating insight into the development of professional sports players’ rights in Japan focussing on baseball and football. Part 2 begins by concluding the analysis of the rights of Japanese baseball players by setting out the current regime for Japanese baseball players and how their image rights are treated. There will then be analysis of Japanese football players’ legal status and rights.

The rights of professional baseball players



Japanese baseball and player restrictions

Professional baseball in Japan as now established was based on the model adopted from America. Due to this, the reserve system (as in the MLB) has long been in effect to restrict the transfer of players. The reserve system is a system whereby NPB clubs can register certain players on a reserve list, and as long as they remain on it these players cannot transfer to other clubs. Put another way, this is a system where clubs can unilaterally renew a player’s contract. In fundamental terms once a player’s contractual term (typically this is for the ten months from February until November in Japanese baseball) with his club ends he should be free to transfer to other clubs. However, due to the reserve system this freedom is in effect prohibited.

In MLB, to breakdown the reserve system the players utilised various legal means such as litigation and arbitration. This led to the situation in 1976 where the players successfully gained the freedom to transfer (free agents) and thereby conquer the reserve system. Also in Japan, where the reserve system has long been established, in 1993 a free agency system was introduced and a partial freedom to transfer became recognised. However, in truth, free agency became hampered in two ways:

In order to be eligible for free agency it is necessary for a player to be registered in the major team roster for a long period; and The signing club must pay a huge compensation fee (the compensation fee can be wholly in money, or money plus a trade of one of the players who is not listed on the twenty eight man protected list of the transferee club).

Therefore, in practice the freedom to transfer through the free agency system is significantly restricted.

Since the establishment of the above structural reform committee in 2005, there were expectations that these transfer restrictions would be greatly relaxed. However, due to conflicts of opinion and interest within the NPB (i.e. conflicts between the popular/rich clubs and the rest) agreement could not be reached and the reform talks became derailed.

Therefore no structural reforms in relation to the transfer restrictions were carried out. This prompted the JPBPA to probe further ways to force reform. Consequently, the players’ association announced that in their view the reserve system was illegal1 as it was unilaterally devised by the clubs without any bargaining whatsoever with the players, and at its conference in July 2007 the JPBPA resolved to bring legal action against the clubs. The JPBPA delayed this plan because in 2008 the clubs proposed reforms to the JPBPA, including drastically reducing the amount of compensation that had to be paid to clubs.

In relation to the bargaining rights of rookies (i.e. new players to the professional ranks) intending to enter the NPB, the ‘rookie draft system’ imposes various restrictions, including that players can only negotiate with one of the twelve NPB clubs. This type of amateur draft is also operated in the American MLB. The purpose of this system is to guarantee the competitive balance between the clubs, and to prevent the runaway growth of signing bonuses that arise through teams fiercely competing to sign the best players. In connection with this, compensation for rookies is capped at 100 million yen (roughly around 1 million USD) for signing fees and at 50 million yen (roughly around 500,000 USD) for performance bonuses.

However, at the time of setting up the baseball structural reform committee (in 2005) the ‘free quota’ system had already been introduced in the NPB draft, whereby each team could Register to two exceptional, top class players regardless of the draft. Due to this, it has long been the case that violations of the maximum compensation caps are rife, in particular there have been many instances of bribery occurring (despite denials by the NPB). Based on this, the baseball structural reform committee discussed the reform of the rookie draft system, including abolishing the ‘free quota’ system because the JPBPA, and even some clubs, thought that such bribes had been aggravating the financial situations of the clubs.

Nevertheless, this led to the situation in 2007 where the Seibu Lions were discovered to have bribed amateur players (student players) in violation of the Japan Student Baseball Charter devised by the Japan Student Baseball Association. At the time, because the NPB continued to deny the existence of such bribery problems, the NPB was greatly derided by the public following the discovery of facts to the contrary in the above Seibu incident. In response to this incident, and public pressure, the ‘free quota’ system was abolished in the 2007 offseason.

Lawsuits concerning image rights

Furthermore, there has been litigation in relation to the professional baseball players’ image rights. Despite the fact that the image rights, especially for popular players, are highly valuable property rights, these are currently the exclusive property of the teams. The players have no control whatsoever over the value and management of these throughout the whole period they play for the NPB clubs.

Consequently litigation was brought by the players in relation to:

The exploitation of their images by the NPB clubs in a manner which the players do not like; The fact that the clubs continually reject the players’ requests regarding the ownership and exploitation of their own images; The payment to the NPB clubs of high image rights management commissions; and The distribution of unreasonably low image rights royalty payments, when compared to market standards, by the NPB clubs to the players.

The main issue in this litigation concerned the interpretation of Article 16 of the NPB Uniform Player’s Contract between the players and the clubs.2 In essence it was a question of construction as to whether this article could be interpreted as the players transferring or granting the clubs an exclusive licence to commercially exploit the players’ images, including for computer games for example.

The players’ view was that Article 16 merely stipulated that the clubs could use the players’ images for the advertising of the clubs, such as at matches, and that it did not amount to a licence for general commercial use. Furthermore, the players rebutted the NPB by stating that Article 16 was originally modelled on the MLB Uniform Player’s Contract, and that in America it was determined that the right to exploit the image rights commercially belonged to the players. However, the courts turned down the players’ claims and interpreted that the article gave the clubs the image rights, including the right to commercially exploit the players’ images.3



The rights of professional football players



Players’ rights at the international level

Even in Japanese football, since 2000 there has been significant developments as regards players’ rights. These developments are due to one principal issue: the progress towards the liberalisation of players’ freedom of movement based on the amendments to the FIFA regulations.

In 1995 Jean-Marc Bosman, a professional Belgian footballer, won his case concerning the issue that the system of imposing transfer compensation for transfers following the expiry of a player’s contract violated EC law (this is known as the “Bosman case”4). Bosman’s victory brought about the freedom for players to transfer within the EU.

Subsequent to this, based on negotiations between FIFA and FIFPro, the worldwide representative organisation for professional football players (the world players’ union), this freedom to transfer was extended worldwide. The major revisions to the 2001 FIFA transfer regulations (called “Bosman 2”) had a significant practical impact. In both 2005 and 2008 more revisions to the FIFA transfer regulations were implemented, and in each case these revisions were carried out based on the negotiations between FIFA and FIFPro.5



The evolving rights of football players

In Japan just over a decade ago, in 1998, the Yokohama Flügels J-League club was dissolved and merged with its cross-city rivals the Yokohama Marinos.6 Following this, as a means of prompting a turnaround in the management of professional football clubs, wide-ranging reforms were carried out to the system of J-League players’ contracts.

In essence these reforms divided the players’ contracts into three types: ‘A’ contracts, ‘B’ contracts and ‘C’ contracts. At the heart of these reforms were labour cost-cutting measures, which included limiting the number of ‘A’ contract players on annual salaries above 4.8 million yen (roughly around 48,000 USD) to twenty five players per team. Since the inception of the J-League in 1993, players’ salaries had continued to increase rapidly which prompted a massive change in the payroll.

In 1998 the first generation of agents, based on the FIFA certified agents test, began to emerge in Japan who provided Japanese players with a wider range of potential destinations with which to ply their trade. For instance, Hidetoshi Nakata transferred to AC Perugia in Italy’s Serie A where he was very successful. This led to an increase in Japanese players transferring to foreign clubs, and at the same time attentions focussed on the activities of players’ agents.

“Bosman 2” and its impact on Japan

According to “Bosman 2”, which came into effect worldwide from July 2001 for international transfers, when a player’s contract expired he could transfer without a fee. As a consequence, in relation to Japanese players transferring abroad, this reform was a massive blow for the J-League clubs that had collected large transfer compensations since Hidetoshi Nakata’s move. It was also an unwanted development for both the Japan Football Association (‘JFA’) and the J-League itself.

Even though the JFA liberalised matters concerning international transfers, it did not adopt the FIFA rules regarding domestic transfers. Thus, even after a player’s contract expired, domestic transfers still entailed a lot of transfer compensation being paid to the player’s previous club based on a prescribed system of calculation. As a result, for players whose contracts had expired, international transfers did not attract a fee, whereas domestically, the inequitable situation remained until the 2008 offseason that changes were made.7

Notwithstanding the FIFA rules about free international transfers, many Japanese players wanted to avoid conflicts with their clubs, and therefore chose to transfer during the term of their contracts in order to attract a transfer fee. In fact, even after the introduction of international free transfers in 2001, no regular first team players transferred abroad from Japanese teams on a free transfer before Koji Nakata in 2005.8

However, with the bursting of the ‘Japanese player bubble’ in the European player market, it became difficult for Japanese players to move when the transfer attracted a fee.9 Therefore more recently the number of players transferring abroad on free transfers has risen. Nevertheless since the good performance of the Japan national team in the 2010 South Africa World Cup, Japanese players have once again become a focus of frenzied transfer activity. Recently, the number of European clubs trying to sign Japanese players, even if it attracts a transfer fee, has increased, particularly in Germany.

The JPFA’s struggle towards reform of the domestic transfer system and subsequent unionisation

In order to remedy the inequitable situation regarding transfers, even after Bosman 2, the JPFA struggled for many years in negotiations with the JFA and the J-League but to no avail. This led in the autumn of 2008 for the JPFA to request FIFPro’s support to seek a breakthrough in the situation. In December 2008 FIFPro sent a warning letter to the JFA and the J-League containing the details of these parties’ violations of the FIFA Regulations on the Status and Transfer of Players (“RSTP”) in relation to the domestic transfer compensation system. Following this the J-League expressed reservations about scrapping domestic transfer fees, however with the continued support of FIFPro, in April 2009 the J-League finally determined the long-overdue abolition of the system, which had been in effect for 8 years since 2001.10

Nevertheless, despite the abolition of this system, the JFA has now introduced training compensation to domestic transfers instead, which is over twice that stipulated in the relevant FIFA circulars. This is even in the face of persistent stern opposition by the JPFA and FIFPro. The JPFA with FIFPro’s support is currently demanding that this training compensation amount, which is in contravention of the FIFA rules, be remedied. During these negotiations with Japan’s football governing bodies, the JPFA became aware of the necessity to guarantee equal bargaining power with the other side and therefore it resolved at its annual general meeting in February 2011 to form as a labour union, culminating in its subsequent application for labour union certification to the TLRC, which was granted in September 2011.

The inadequate dispute resolution mechanism and the Ganaha incident

As with professional baseball, in Japanese football problems with the inadequate dispute resolution mechanism have arisen. The prime example of this is the 2007 case concerning professional footballer, Kazuki Ganaha (the so-called “Ganaha Incident”).

In this dispute the J-League club Kawasaki Frontale’s player Ganaha demanded the revocation of a league imposed six match suspension for an alleged breach of doping rules. Initially Ganaha’s desire was to have the arbitration held at the Japan Sports Arbitration Agency (“JSAA”; established in 2003) but the J-League rejected this and announced that the case must be heard at CAS. Therefore the player had no other option but to file for CAS arbitration.

In the end Ganaha’s case was accepted by CAS, which ruled that the J-League imposed 6 match suspension should be revoked (CAS 2008/A/1452). Nevertheless, for the CAS arbitration Ganaha bore a total of 34 million yen (roughly around 340,000 USD) in costs, which included expenses for translation, interpretation and expert witness statements. Thus, had the J-League accepted arbitration at the JSAA such enormous costs would not have arisen. Moreover, the J-League drew stinging criticism from the mass media for its stubborn insistence on CAS being the forum for the arbitration.11

Even though at that time the J-League operated an internal dispute resolution chamber, just like in professional baseball, the problem was that the arbitrators for this body consisted of people chosen by the league itself. Thus for Ganaha, who demanded a fair trial, this chamber could not be relied upon.

Part 3, the final part of the article, gazes into the future and predicts the legal future for professional baseball and football players in Japan.

1 In Japan, there are various legal views espoused in relation to both the reserve and amateur draft systems. Firstly, it is believed that these systems along with the unreasonable players’ contracts are void as acts against public policy (Article 90 of the Civil Code) because they contravene a player’s freedom to choose his occupation. Secondly, it is said that these systems act as unreasonable restraints on trade and thereby violate the Anti-Monopoly Act. Thirdly, it is asserted that these systems are void as they violate the regulations on the maximum duration for fixed term employment contracts (according to Article 14 of the Labour Standards Act, generally employment contracts shall not be concluded for a period exceeding three years or five years for certain professions), and also because they go beyond the reasonably accepted period in imposing a ‘duty not to compete’.

2 Article 16 of the NPB Uniform Player’s Contract – Photographs and Public Appearances

Player agrees that his picture may be taken for still photographs, motion pictures or television at such times as Club may designate and agrees that all rights in such pictures shall belong to Club and may be used by Club for publicity purposes in any manner it desires. In relation to such use when Club makes a financial profit, Player shall be entitled to receive an appropriate payment.

Player further agrees that during the playing season he will not make public appearances, participate in radio or television programs or permit his picture to be taken or write or sponsor newspaper articles or sponsor commercial products without the written consent of Club.

3 Tokyo District Court judgment, 1 Aug. 2006, Decision Times (Hanrei Taimuzu), vol. 1265, 212; first appeal: Tokyo Intellectual Property High Court judgment, of 25 Feb. 2008; second appeal: Supreme Court of Japan judgment, 15 Jun. 2010 (please note, these image rights cases are also referred to in paras 352–354).

4 Union Royale Belge des Societes de Football Association ASBL v Jean-Marc Bosman (1995) C-415/93.

5 In relation to the content of the FIFA transfer regulations, please refer to: Regulations for the Status and Transfer of Players (2009) and other relevant FIFA Circulars.

6 This merger was in large part prompted by the withdrawal, in 1998, from football of one of the Flügels’ parent companies due to financial problems. Originally the Flügels had 2 parent companies, All Nippon Airways (“ANA”) and Sato Industries (“SI”), however as a consequence of economic constraints in 1998 SI pulled its financial support from the Flügels. Following this, ANA did not have the resources itself to operate the team, so it entered into talks with Nissan Motors, the Marinos’ parent company about a potential tie-up between the teams. This led to the sudden announcement on 29 October 1998 by Nissan and ANA that the Flugels would be dissolved and merged with the Marinos (the new team became known as the ‘Yokohama-F Marinos’, with the ‘F’ representing the Flügels). On the same day the J-League officially recognised the merger of the two teams.

7 Please note that as the J-League season runs from March to December, the main transfer window is in the winter and operates around December.

8 He transferred from the J-League’s Kashima Antlers to the French Ligue’s Olympique de Marseille

9 The ‘Japanese player bubble’ in the European market refers to the period from Hidetoshi Nakata‘s highly successful transfer in 1998 to the Italian Serie A club AC Perugia. Nakata’s great form brought about heightened interest in Japan in the European leagues, including a boom in the sale of broadcasting rights for these leagues. Subsequently this led to a phenomenon of European clubs signing other Japanese players as a way to tap into this ‘Japanese’ revenue (e.g. from broadcasting rights, merchandising and sponsors). Nevertheless, as the form of some of these later big money signings did not transpire into success on the field, the European teams’ interest in signing Japanese players gradually began to wane and the number of transfers dropped (leading to the bursting of the ‘Japanese player bubble’).

10 The JFA accepted this and formally determined to abolish the domestic transfer fee system in June 2009.

11 The first Japanese athlete to bring their case to CAS was the swimmer, Suzu Chiba, in a matter concerning her selection for the 2000 Sydney Olympics. Despite this being a purely domestic dispute, the lack of a Japanese sports arbitration body at that time forced Chiba to apply to CAS. As a consequence the athlete had to bear massive costs for the arbitration, including various translation expenses. This case triggered the eventual establishment of the aforementioned JSAA.

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