On March 20, 2025, the Court of Justice of the European Union (“CJEU”) ruled on the fairness, under EU consumer protection law, of a contractual clause allocating a percentage of an athlete’s income to a professional services provider (Case C‑365/23 [Arce]).  This ruling sets an important precedent and strengthens the protection afforded by consumer protection law to minors who enter into professional service contracts, whether in sport or elsewhere.

Background

The case was referred to the CJEU by a Latvian court.  It concerns a contract whereby a company undertook to provide career support services – including coaching, training, sports medicine, sports psychology, career guidance, club contracts, marketing, legal services, and accounting – to a basketball player, who was a minor at the time and therefore represented by his parents.  In exchange for the company’s services, the athlete agreed to pay 10% of any net income (plus VAT) he would receive over a period of 15 years from the signing of the contract.  At the time of signing the contract, the athlete was not a professional.  Some years later, however, he became a professional athlete.  When the athlete refused to pay the percentage to the company, the company sued him to enforce the contract.  The Latvian courts asked the CJEU, whether it could assess the fairness of this long-term financial commitment under the Latvian legislation implementing Directive 93/13/EEC on unfair terms in consumer contracts (“UCTD”).

Application of the Unfair Contract Terms Directive

Under the UCTD, a contractual clause in a business-to-consumer contract (not negotiated by the consumer) is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer.  The CJEU ruled that the UCTD, as transposed into Latvian law, applies to the contract between the professional services provider and the athelete because the athlete was not yet engaged in professional sport at the time the contract was signed.  The status of “consumer” must be assessed at the time of the conclusion of the contract.  Consequently, the athlete was a “consumer” within the meaning of the UCTD.  The CJEU ruled that the UCTD applies even if the individual later embarks on a professional career.

Assessing the Unfairness of the Contractual Term

A key aspect of the ruling was whether the Latvian court could assess whether the clause requiring the athlete to pay 10% of his net income to the professional services provider was “unfair” under the UCTD as implemented in Latvia.  In principle, the UCTD does not allow courts to assess the fairness of clauses relating to the price and remuneration of products or services, unless such clauses are not in “plain intelligible language”.  However, the UCTD allows Member States to provide consumers with a higher level of protection than the UCTD.  Therefore, the Latvian law, which allows courts to assess the fairness of price and remuneration clauses regardless of whether they are written in “plain intelligible language”, is not in breach of the UCTD.

While it is for the Latvian court to assess the “fairness” of the clause, the CJEU concluded that the clause would not be unfair merely because it did not establish a link between the value of the service provided and its cost to the athlete.  In particular, the CJEU clarified that the existence of an imbalance between the rights and obligations of the parties must be assessed by taking into account the following elements: (i) the rules of national law that would apply in the absence of the contract; (ii) fair and equitable practices at the time of the conclusion of the contract; (iii) all the circumstances surrounding the conclusion of the contract (including whether the consumer received the information necessary to enable him or her to assess the financial consequences of any commitment undertaken); and (iv) the other terms of the contract and any other related contracts.  In particular, the CJEU emphasised that national courts must take into account the rights of the child under Article 24(2) of the EU Charter of Fundamental Rights when assessing unfairness.  The best interests of the child must also be a primary consideration in contractual matters.

Finally, the CJEU ruled that if the Latvian court finds that the clause is unfair, it must annul it as if it had never existed.  But it may not reduce the amount payable by the consumer to the costs actually incurred by the professional service provider.

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Covington & Burling regularly advises companies on all aspects of EU consumer protection law, as well as intersections with privacy, cybersecurity, and product safety laws.  We are happy to assist you with any inquiries related to compliance with EU consumer protection law.

This blog post was written with the contributions of Alberto Vogel.