The verdict relates to a case involving 29-year old French player Olivier Bernard, who signed professional terms with English club Newcastle United in 1997 despite having undergone a three-year youth training scheme with French team Olympique Lyonnais beforehand.
French rules at the time required players on such training contracts to sign for the club that trained them if offered a permanent deal. But Bernard decided not to take up Lyon's offer of a professional contract and joined Newcastle instead.
Lyon sued Bernard and his English employers for damages in the French courts. French judges referred the case to the European Court of Justice (ECJ), asking whether the requirement that players trained by a particular club sign their first professional contract there constituted a restriction on the free movement of workers.
The European Court of Justice agreed that "Bernard's gainful employment constitutes an economic activity, and as such is subject to European Union law".
But it ruled that "a scheme providing for the payment of compensation for training where a young player, at the end of his training, signs a professional contract with a club other than the one which trained him can, in principle, be justified by the objective of encouraging the recruitment and training of young players".
Despite deciding that obliging players to stay would infringe their right to free movement, the judges were keen to stress that given the "considerable social importance" of football in the EU, "the objective of encouraging the recruitment and training of young players must be accepted as legitimate".
Therefore "in the court's view, the prospect of receiving training fees is likely to encourage football clubs to seek new talent and train young players," read a statement from the Luxembourg-based institution.
The court's decision, which applies to players aged 16-22, will ensure that clubs are adequately compensated for their investment in training youngsters and should help prevent disputes like the Bernard case from arising again.
The amount of compensation is to be determined "by taking account of the costs borne by the clubs in training both future professional players and those who will never play professionally," the court ruled.
Yesterday's judgement means Lyon will seek compensation from Newcastle.
