Introduction: FIFA’s TPO ban and its compatibility with EU competition law.
Day 1: FIFA must regulate TPO, not ban it.
Day 2: Third-party entitlement to shares of transfer fees: problems and solutions
Day 3: The Impact of the TPO Ban on South American Football.
Day 5: Why FIFA's TPO ban is justified.

Editor's note: In this fourth part of our blog symposium on FIFA's TPO ban Daniel Geey shares his 'UK perspective' on the ban. The English Premier League being one of the first leagues to have outlawed TPO in 2010, Daniel will outline the regulatory steps taken to do so and critically assess them. Daniel is an associate in Field Fisher Waterhouse LLP's Competition and EU Regulatory Law Group. As well as being a famous 'football law' twitterer, he has also published numerous articles and blogs on the subject.

What is Third Party Investment?
In brief Third Party Investment (TPI) in the football industry, is where a football club does not own, or is not entitled to, 100% of the future transfer value of a player that is registered to play for that team. There are numerous models for third party player agreements but the basic premise is that companies, businesses and/or individuals provide football clubs or players with money in return for owning a percentage of a player’s future transfer value. This transfer value is also commonly referred to as a player’s economic rights. There are instances where entities will act as speculators by purchasing a percentage share in a player directly from a club in return for a lump sum that the club can then use as it wishes.

Why did the Premier League ban the practice?
The Premier League, Football League, Football Association, the Polish and French leagues have all brought in TPI bans. The original ban in the Premier League came as a result of the Tévez affair where a third party owner had the contractual right to force West Ham to sell the player if a suitable bid was received. This was against the 'material influence' regulations that were in place at the time. Previously, there was no express clause prohibiting TPI; only the act of influencing a club’s policies or performance was forbidden. Tévez’s third party contract contained a clause giving exclusive power to the third party owners, MSI and Just Sports, to facilitate the transfer of the player. West Ham did not have a veto over this right and such a stipulation breached the above Premier League rule as it meant that outside parties had material influence over the decision making of West Ham.
A common misconception throughout and after the Tévez case was that any third party player owner would have been in breach of the Premier League rules. This was not the case. It was the clause giving the owners of Tévez influence over West Ham which incurred the Premier League’s wrath (plus the non-disclosure of the agreement itself). It was for this reason that West Ham was judged to have breached the old Premier League rule Rule U18 and fined £5.5 million by the Premier League.
Subsequently, the Premier League significantly strengthened its regulations to prohibit any type of TPI. Other leagues followed as a result. The Premier League decided that from the beginning of the 2008/9 season an absolute ban on TPI was required. A spokesman stated:
“The clubs decided that third-party ownership was something they did not want to see. It raises too many issues over the integrity of competition, the development of young players and the potential impact on the football pyramid. It was felt the Premier League was in a position to take a stand on this. No one wants to see what has happened to club football in South America repeated over here”.

There are also Football League and Football Association rules prohibiting TPI but the below analysis takes the Premier League rules by way of example. Current Premier League Rules U39-40 (which at the time were rules L34-35) govern the actual prohibition and buy-out mechanism.
Premier League Rule U39 is the exemption rule which covers scenarios where clubs are allowed to receive money or incur a liability, for example, for the player registration or transfer of a player registration. Such instances include payments or receipts of transfer fees, loan fees and sell-on fees, payments for image rights contracts, payments for agency/intermediary work and payment of training compensation and solidarity contributions as set out in the FIFA regulations.
Premier League rule U40 is the mechanism to enable a third party owned player to transfer to a Premier League club. This can occur so long as the Premier League club purchases the third party’s economic interest in the player. It states:
"In respect of a player whom it applies to register as a Contract Player, a Club is permitted to make a payment to buy out the interest of a person or entity who, not being a Club or club, nevertheless has an agreement either with the club with which the player is registered, or with the player, granting it the right to receive money from a new Club or club for which that player becomes registered. Any such payment which is not dependent on the happening of a contingent event may be made either in one lump sum or in instalments provided that all such instalments are paid on or before the expiry date of the initial contract between the Club and the player. Any such payment which is payable upon the happening of a contingent event shall be payable within 7 days of the happening of that event".
This ensures that any future transfer sums, should the player be subsequently sold, would be kept by the selling Premier League club and eliminates any third party element to any future sale transaction. Interestingly, the Premier League club who 'buys-out' the third party interest may still be paying the third party investor through installments during the period that the player is playing for his new Premier League club. Whilst the player is owned by the club and no third party interest is possible, there is still the eventuality that a club could default on the installment plan and then the third party investor could sue based on the buy-out obligations in the contract. It would be unlikely yet is unclear from the regulations whether the investment stake could be transferred back to third party investor if default occurred or what other alternative recourse that an investor may have.
Nonetheless, any player registered to play in the Premier League cannot be third party owned by a TPI company. It means that the buying Premier League club has to satisfy the football authorities that all other economic interests have been extinguished. This occurred over the summer when TPI players Markovic and Mangala were transferred to Liverpool and Manchester City respectively. Premier League clubs undertake to the football authorities that it is the only entity that owns the player’s economic rights and only then can the transfer can be completed. It is likely that Falcao had a TPI contract whilst he was at Porto but as the French league also prohibits TPI, when Monaco bought him, there may well have been a requirement in place to extinguish any third party rights. As such, when he was then loaned to Manchester United this summer, his TPI rights would certainly have been extinguished to ensure there were no major complications with his Premier League registration.

Why is it such a problem?
As the Premier League spokesman explained above, their major concerns related to integrity, youth player development and money flowing out of the game. An internal FIFA report recently concluded that TPI trapped clubs in a “vicious cycle of debt and dependence” and “posed risks to players and to the integrity of the game”.
The main concerns about TPI include:
1. Conflicts of interests can potentially occur between investors, club owners, agents and coaches. For example, what if the owner of Club A also owns an economic stake in Player B playing against his club? What if an agent of a manager who buys TPI players is also an advisor of a TPI fund? Regardless of any actual conflict, there is certainly a perceived conflict which may damage the image of the game, public confidence in integrity of competitions and even lead to potential match-fixing or insider trading concerns. Questions continue to be asked over the transparency of the TPI funds and what role they have, if any, in influencing clubs.
2. Clubs become reliant on such funding which in turn leads to dependence on external owners to continue to assist in such financing arrangements. As such, TPI encourages short-term profit making with economic owners looking to the club to sell its players to realise their ‘asset’ ahead of purely on-field sporting concerns. The consequence is that the rapid turnover of TPI players at certain clubs means fans become less loyal to the players who know they will be transferred when the right offer is received. Clubs are seen as a short term ‘speculation tools’ with the result that money leaves the football family.

Why is the practice necessary?
To counter the arguments set out above, the following points demonstrate are why TPI is so vital for many clubs around the world.
1. A growing number of clubs cannot compete with the larger commercial and broadcasting deals of the bigger European leagues. Clubs in so-called smaller European leagues, for example, need to leverage their assets and find innovative ways to find competitive advantage for playing against teams in the Champions League.
2. Purchasing players is an inherently risky business. Clubs with less money to spend would therefore usually be more risk-averse when having to invest heavily in transfers. One way of limiting such risk, is to share the financial burden. Therefore contracts are entered into between economic owners and clubs to either help the club with the purchase price for a talented individual or free up capital and ‘monetise’ a current players value whilst he still remains at the club. In either event, the club benefits from external finance that cushions the club’s position if the player is not a world beater. Both the club and the fund then benefit if the player is a success through a large transfer fee received that is shared according to the contract.
3. There are various ways to alleviate conflict of interest, integrity and transparency issues. Instead of banning TPI, many believe regulation through a transparent approach to TPI by disclosing a register of interests would alleviate a number of concerns as well as making TPI contracts available to FIFA/UEFA to ensure ‘material influence’ issues are correctly dealt with in the TPI contracts.
With FIFA regulating to ban players who are third party owned, many are questioning whether regulation of the practice rather than an outright ban would be preferable. In addition, some believe that it is not a ban but total transparency of the arrangements that is required. This could even be expanded to include a list of the owners of such transfer rights. Such transparency could allow the football family to scrutinise any potential conflicts of interest between, for example, those who own the economic rights of a player and those who also own a stake in a football club. With FIFA’s regulation governing the TPI prohibition, UEFA and FIFPro have backed such a position too.

What is the current state of play?
The current FIFA Rule Article 18bis of FIFA’s Rules on the Status and Transfer of Players states that:
“No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer related matters its independence, its policies or the performance of its teams.”
This was not a specific ban on TPI but a ban on a third party owner from influencing a club’s employment or transfer related matters.
Throughout 2014, UEFA and FIFA made a number of public statements concerning their aim to outlaw TPI. In September FIFA’s President Sepp Blatter explained that:
“We took a firm decision that [TPI] should be banned but it cannot be banned immediately there will be a transitional period”.
FIFA then set up a working group to address the topic of TPI. At the time, in their press release there was no explicit mention of a ban but “to analyse all possible regulatory options in relation to this complex practice and to make preliminary suggestions”. It was to the surprise of many that in late December, whilst the working group was still debating several possibilities that FIFA announced that they were to ban TPI globally. It is important to set out the exact wording of the FIFA circular to grasp the wide scope of the prohibition. Specifically, a third party is defined as "a party other than the two clubs transferring a player from one to the other, or any previous club, with which the player has been registered".
"Article 18ter Third-party ownership of players' economic rights
1. No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation.
2. The interdiction as per paragraph 1 comes into force on 1 May 2015.
3. Agreements covered by paragraph 1 which predate 1 May 2015 may continue to be in place until their contractual expiration. However, their duration may not be extended.
4. The validity of any agreement covered by paragraph 1 signed between 1 January 2015 and 30 April 2015 may not have a contractual duration of more than 1 year beyond the effective date.
5. By the end of April 2015, all existing agreements covered by paragraph 1 need to be recorded within the Transfer Matching System (TMS). All clubs that have signed such agreements are required to upload them in their entirety, including possible annexes or amendments, in TMS, specifying the details of the third party concerned, the full name of the player as well as the duration of the agreement.
6. The FIFA Disciplinary Committee may impose disciplinary measures on clubs or players that do not observe the obligations set out in this article".
Article 18ter imposes a blanket global ban for TPI specifically forbidding any entity that is not a club from being entitled to future economic rights and/or transfer compensation. Whilst it has been explicitly considered that the prohibition only comes into force in May 2015, agreements entered into from 1 January can only be one year in length. This effectively reduces the possibility of new TPI contracts being entered into. Interestingly, Sporting Lisbon for example, recently announced that they had bought back a number of economic rights contracts from third party investors. They presumably considered that their position may well have been strengthened as a result of the new regulations.
Nonetheless, existing third party contracts will continue until expiry meaning that some players may still be subject to third party investment contracts for a number of seasons to come.  Such contracts will however be monitored through FIFA's TMS system as any club will be required to disclose a valid third party contract due to the mandatory disclosure obligations set out in paragraph 5 above. Such obligations are required to be adhered to in a relatively short time period (by the end of April 2015). The result of such disclosure may be that the contracts submitted to FIFA may themselves breach Article 18bis, for example, regarding TPI material influence clauses. Clubs will be faced with the obligation to provide all continuing TPI contracts to FIFA and will be subject to disciplinary measures if they do not. There is now an added compliance factor for clubs to adhere to under the new regulations and a variety of disciplinary cases against clubs should not be ruled out.
Lastly, the Portuguese and Spanish leagues are reported to have made a formal complaint to the European Commission, presumably assessing that Article 18ter is contrary to the free movement and competition rules. They will no doubt be arguing that the absolute ban that FIFA has imposed, is disproportionate i.e. that there are less restrictive ways of achieving the same objective.
Many have suggested that regulating TPI through transparency and disclosure obligations is a better alternative than an outright ban. It will be for the European Commission to decide whether to take the complaint forward and make a more substantive assessment or to reject the complaint. It should be noted that when the Premier League banned TPI, although there were some that argued that the prohibition breached competition law, no one actually came forward to challenge the regulation. A mere two months after FIFA announced the ban did the two Iberian associations challenge Article 18ter. That suggests, as many believe, that TPI has played an integral part in the way that clubs in those leagues use finance to 'de-risk' transfers and compete against clubs in associations with higher revenue generating capabilities. TPI has been an essential financing option.

Conclusion

Whilst the Premier League, as a reaction to the Tévez affair, made a strong policy decision to ban the practice in its league, a more fundamental shift is occurring on the global stage. Football specifically is very much in the European Commission's view with current Intermediary and TPI complaints and a previous Financial Fair Play complaint that was rejected but is now before the Belgian national courts. The TPI complaint will not be a quick process and in the meantime, unless interim relief is sought, existing TPI contracts will soon have to be lodged with FIFA and from 1 May, no new contracts can be entered into. Whether the practice is banned for good is now in the hands of the European Commission

Editor’s note: Tomáš Grell holds an LL.M. in Public International Law from Leiden University. He contributes to the work of the ASSER International Sports Law Centre as a research intern.

It has been more than seven years since the FIFA Executive Committee awarded the 2022 World Cup to Qatar. And yet only in November 2017 did the Qatari government finally agree to dismantle the controversial kafala system, described by many as modern-day slavery. Meanwhile, hundreds of World Cup-related migrant workers have reportedly been exposed to a wide range of abusive practices such as false promises about the pay, passport confiscation, or appalling working and living conditions.[1] On top of that, some workers have paid the highest price – their life. To a certain extent, all this could have been avoided if human rights had been taken into account when evaluating the Qatari bid to host the tournament. In such a case, Qatar would not have won the bidding contest without providing a convincing explanation of how it intends to ensure that the country's poor human rights record will not affect individuals, including migrant workers, contributing to the delivery of the World Cup. An explicit commitment to abolish the kafala system could have formed an integral part of the bid.

Urged by Professor John Ruggie and his authoritative recommendations,[2] in October 2017 FIFA decided to include human rights within the criteria for evaluating bids to host the 2026 World Cup, following similar steps taken earlier this year by the International Olympic Committee (IOC) and UEFA in the context of the Olympic Winter Games 2026 and the Euro 2024 respectively. This two-part blog critically examines the role human rights play in the new bidding regulations adopted by the IOC, UEFA, and FIFA. The first part sheds light on the IOC and UEFA. The second part then takes a closer look at FIFA and aims to use a comparative analysis to determine whether the new bidding regulations are robust enough to ensure that selected candidates abide by international human rights standards.

IOC: Olympic Winter Games 2026

About the host selection process

Compared to the past, cities bidding to host the 2026 Games could expect lower costs, simplified procedures, and more assistance provided by the IOC.[3] All interested cities[4] might enter a Dialogue Stage[5] and engage with the IOC to learn more about the benefits and responsibilities associated with the hosting and staging of the Games. Although the Dialogue Stage is non-committal, cities that join are supposed to present their consolidated Games concepts,[6] outlining their vision, long-term plan alignment, or initial financial strategy, as well as providing information with regard to a potential referendum.[7] These consolidated concepts, together with the IOC's own research, will serve as a basis for a preliminary report exploring the capacity of interested cities to deliver successful Games.[8] The IOC Executive Board will review this report and recommend to the IOC Session which cities should be invited to the Candidature Stage.[9] The IOC Session will designate Candidate Cities in October 2018 during its meeting in Buenos Aires.[10]

Candidate Cities will then have until 11 January 2019 to prepare and submit their Candidature Files together with an initial set of core guarantees.[11] In their Candidature Files, Candidate Cities shall provide answers to a variety of questions as set out in the Candidature Questionnaire, covering areas such as sustainability and legacy, transport, accommodation, safety and security, finance, or marketing. Thereafter, Candidate Cities will be visited by the IOC Evaluation Commission that is tasked with conducting an in-depth assessment of each bid and producing a report to help the IOC Session elect the most suitable candidate. The Host City of the 2026 Games will be elected in September 2019.[12]

Human rights as selection criteria

Little attention is paid to human rights in the Candidature Questionnaire. Candidate Cities are only required to provide a guarantee whereby the national government and relevant local authorities undertake to respect and protect human rights and ensure that any violation of human rights is remedied ''in a manner consistent with international agreements, laws and regulations applicable in the Host Country and in a manner consistent with all internationally-recognised human rights standards and principles, including the United Nations Guiding Principles on Business and Human Rights, applicable in the Host Country''.[13] This language is somewhat ambiguous because when defining human rights that should be respected and protected in connection with the hosting and staging of the Games, the guarantee first refers to human rights applicable in the Host Country and only then to the United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles).[14] The latter make clear that the responsibility of business enterprises to respect human rights extends to specific international treaties and other instruments.[15] However, some of these treaties could be inapplicable in the Host Country if not ratified. This would make the guarantee to some extent self-contradictory. Apart from the guarantee, the IOC does not ask for any other human rights-related information from Candidate Cities. In the absence of such information, it is difficult to see how the Evaluation Commission[16] will assess the Candidate Cities' capacity to respect and protect human rights.

UEFA: Euro 2024

About the host selection process

While the Euro 2020 will be a bit of an experiment with games scheduled to take place in 12 different cities across the continent, the Euro 2024 returns to its classic format as only one member association will host the tournament. In March 2017, UEFA confirmed that it would be either Germany or Turkey. The next step for both member associations is to submit their Bid Dossiers to UEFA by no later than 27 April 2018.[17] In principle, the bidders must demonstrate in their Bid Dossiers that they meet all Tournament Requirements. Importantly, UEFA reserves the right to appoint independent consultants when evaluating bids.[18] A written evaluation report on each bid will be circulated in September 2018 before the UEFA Executive Committee finally decides which member association will host the Euro 2024.[19]

Human rights as selection criteria

UEFA requires that the bidders and then the Host Association respect, protect, and fulfil human rights and fundamental freedoms, including the rights of workers and children, in line with international treaties and other instruments such as the Universal Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, the Convention on the Elimination of All Forms of Discrimination against Women, or the Convention on the Rights of the Child.[20] In order to meet this obligation, the bidders should in particular seek to culturally embed human rights, proactively address human rights risks, engage with relevant stakeholders, and implement means of reporting and accountability.[21] The bidders' capacity to respect, protect, and fulfil human rights will be evaluated based on their human rights strategy that must be included in their Bid Dossiers.[22] As part of this strategy, the member associations bidding to host the Euro 2024 should explain how they are going to integrate the UN Guiding Principles in their activities related to the organisation of the tournament.[23] While no further details are given about the required content of this strategy, UEFA suggests that a successful bid should not fail to: (i) outline proposed measures aimed at preventing human rights abuses, in particular child labour in supply chains and violations of workers' rights; (ii) provide evidence of meaningful consultation with vulnerable groups; or (iii) describe grievance mechanisms that will be available for victims of human rights abuses.[24]

Conclusion

Unlike UEFA, the IOC has attracted widespread criticism for being involved with negative human rights impacts.[25] Nevertheless, it is the former who gives more weight to human rights in its new bidding regulations. This is even more surprising given that the IOC introduced its bidding regulations later than UEFA. It seems that the IOC deliberately avoids including human rights within the criteria for evaluating bids to host the Olympic Games, hoping that this would encourage more cities to participate in the host selection process. Further reflections on human rights as selection criteria in bidding regulations for mega-sporting events will be presented in the second part of this blog that will focus on FIFA and provide some comparative perspectives.

[1]    Amnesty International, The Ugly Side of the Beautiful Game: Exploitation of Migrant Workers on a Qatar 2022 World Cup Site, 30 March 2016. See also Human Rights Watch, Qatar: Take Urgent Action to Protect Construction Workers, 27 September 2017.

[2]    John G. Ruggie, For the Game. For the World. FIFA and Human Rights, p. 32.

[3]    IOC, IOC Approves New Candidature Process for Olympic Winter Games 2026, 11 July 2017.

[4]    To the best of my knowledge, Calgary (Canada), Salt Lake City (United States), Sapporo (Japan), Sion (Switzerland), and Telemark (Norway) consider bidding.

[5]    The Dialogue Stage runs from September 2017 to October 2018. Interested cities can join until 31 March 2018. See IOC, Candidature Process for the Olympic Winter Games 2026, pp. 11-17.

[6]    Ibid.

[7]    On 15 October 2017, a referendum was held in the Austrian province of Tirol. A negative outcome prevented the city of Innsbruck from launching a bid to host the 2026 Games.

[8]    This report is to be drawn up by the Olympic Winter Games 2026 Working Group overseen by an IOC member and consisting of individuals representing the International Paralympic Committee, the IOC's Athletes Commission, International Winter Sports Federations, and National Olympic Committees. See Candidature Process for the Olympic Winter Games 2026, p. 16.

[9]    Ibid.

[10]   The capital of Argentina will host the 2018 Youth Olympic Games.

[11]   IOC, Candidature Process for the Olympic Winter Games 2026, p. 18.

[12]   Ibid. p. 22.

[13]   IOC, Candidature Questionnaire for the Olympic Winter Games 2026, pp. 86, 88.

[14]   Ibid.

[15]   These include, at a minimum, the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights, and the principles concerning fundamental rights in the eight ILO core conventions as set out in the Declaration on Fundamental Principles and Rights at Work. See UN Guiding Principles, Principle 12.

[16]   The Evaluation Commission may be assisted by experts. See IOC, Olympic Charter, Bye-Law to Rule 33.

[17]   UEFA, Bid Regulations for the UEFA Euro 2024, Article 5.05.

[18]   Ibid. Article 14.

[19]   Ibid. Articles 6.02 and 6.04.

[20]   UEFA, Tournament Requirements for the UEFA Euro 2024, Sector 03 – Political, Social and Environmental Aspects, p. 5.

[21]   Ibid. pp. 5-6.

[22]   UEFA, Bid Dossier Template for the UEFA Euro 2024, Sector 03 – Political, Social and Environmental Aspects, p. 5.

[23]   Ibid.

[24]   UEFA, Tournament Requirements for the UEFA Euro 2024, Sector 03 – Political, Social and Environmental Aspects, p. 6.

[25]   Jonathan Watts, Rio Olympics linked to widespread human rights violations, report reveals, 8 December 2015. See also Human Rights Watch, Race to the Bottom: Exploitation of Migrant Workers Ahead of Russia's 2014 Winter Olympic Games in Sochi, 6 February 2013. See also Human Rights Watch, 'One Year of My Blood': Exploitation of Migrant Construction Workers in Beijing, 11 March 2008.