Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Can Formula 1 drive to protect human rights? A case study of the Bahrain GP - By Pedro José Mercado Jaén

Editor's Note: Pedro is an intern at the Asser Institute and currently studying the Erasmus Mundus Master Degree in Sports Ethics and Integrity (KU Leuven et al.) He worked as a research fellow for the Centre for Sport and Human Rights, and his primary research interests lie in the fields of International Human Rights and sport. 


I.               Introduction

“I can’t do everything and I can’t do it alone. I need allies.” These are the words of the seven-time Formula 1 (F1) world champion, Lewis Hamilton. He was urging more support to advocate for the protection of human rights in the countries visited by Formula 1. During the last years, Hamilton together with Sebastian Vettel, have become the leaders of a movement demanding accountability and greater awareness of the impact of F1 on society.

The inclusion of the Bahrain GP on the F1 racing calendar for the first time in 2004 ignited concerns, which have grown with the inclusion of Abu Dhabi in 2007, Russia in 2014, Azerbaijan in 2017, and Saudi Arabia and Qatar in 2021. The inability and lack of commitment of state authorities to protect and respect human rights, the ineffectiveness of judicial procedures and the systematic repression of political opposition are some of the factors that make these countries prone to human rights violations. Academics and CSOs regularly argue that F1, by signing multi-million dollar contracts with these countries, is complicit in sportswashing. Those pulling the sport’s strings deny these accusations and claim that human rights are at the centre of their agenda when they visit these countries. They claim F1 can drive the improvement of human rights standards in a particular country. However, reality tells a different story. The Bahrain GP has been running for more than a decade and the situation in the country has only worsened, without any signs of F1 contributing to the improvement of the protection of human rights there.

This blog aims to provide an overview of the human rights challenges F1 is facing when hosting a Grand Prix. For this purpose, a case study of the Bahrain GP, one of the longest-running on the modern/current F1 calendar, will be carried out. This will allow us to examine in detail the historical evolution of the GP, the complaints from civil society organisations and the reaction of the Federation Internationale de l’Automobile (FIA) and other stakeholders to the ongoing allegations of human rights violations.

II.              The beginning of the story: 2011 Bahrain GP

The inclusion of the Bahrain GP on the Formula 1 calendar came years before the country ratified the International Covenant on Civil and Political Rights (ICCPR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR) in 2006 and 2007 respectively. Already before this, several international organisations such as Amnesty International and Human Rights Watch (HRW) were documenting the systematic human rights violations in Bahrain, at least since the 1990s. However, the turning point in the country was the protests in 2011, inspired by the demonstrations in Tunisia and Egypt, in what is known as the “Arab Spring”. As the Report of the Bahrain Independent Commission of Inquiry highlighted, people mostly belonging to the Shia community were killed, tortured, unlawfully imprisoned or arrested during the armed repression of the protests.

In the same year, the protests directly impacted the organisation of the Bahrain GP. Initially, the race was postponed because it was to be held during the weekend when the first uprisings began. This measure was applauded by the teams, drivers and the authorities as the priority at the time for the Bahraini royal family was to heal divisions and overcome the tragedy. Nevertheless, three months later, FIA decided to approve the return of the Bahrain GP to the F1 calendar and host the race in December. The decision was taken on the basis of a report drafted by Carlos Gracia, FIA Commissioner, who in May of the same year went to Bahrain to analyse the situation and meet with different stakeholders. The report concluded that there was “NO indication of any problems or reasons why Bahrain’s F1 Grand Prix should not return to the 2021 Calendar”. This report contrasts starkly with the situation that civil society organisations were reporting at that time. Five days after Mr Gracia’s visit, a letter from HRW to Jean Todt, Chair of FIA, and Martin Whitmarsh, Chair of F1 Teams Association, expressed concern about the possible rescheduling of the Bahrain GP. The letter reiterated that the human rights situation in the country had “worsened considerably since the cancellation decision in February”. It explicitly indicated that arrests, tortures and restrictions on the work of CSOs and the media continued to be a daily occurrence in the country.

The response to the decision of the FIA to reschedule the Grand Prix was not unanimous, with some of the drivers expressing their disagreement. Red Bull F1 driver Mark Webber stated, “like it or not, F1 and sport in general isn’t above having a social responsibility and conscience. I hope F1 is able to return to Bahrain eventually but now isn’t the right time.” CSOs also started to advocate for the complete suspension of the race, collecting more than 300,000 signatures on a petition hosted by the organisation Avvaz. Ultimately, following a letter from The Formula One Teams Association (FOTA) to FIA expressing their objections, the event was suspended from the 2011 F1 calendar.

At the beginning of 2012, the situation was still tense, and the successful staging of the Bahrain GP for the new season was still in the air. Some CSOs were putting pressure on the teams to boycott the race while pointing out that the situation concerning human rights violations was similar to or worse than the previous year. In the end, with the support of many of the teams, FIA decided that the Bahrain GP would go ahead as planned.

Obviously, the protests in 2011 had a direct impact on the organisation of the Bahrain Grand Prix, to the extent that they led to its cancellation. This set the bar high for what needs to happen in terms of humanitarian reasons or human rights violations for the cancellation of an event. However, despite the deteriorating human rights situation in the country, the Bahraini authorities, F1 and FIA did not hesitate to reschedule the event from 2012 onwards. These decisions echoed beyond the world of sport and triggered reactions from civil society.

III.            The Bahrain GP and the growing human rights expectations of civil society vis a vis F1

The events of 2011 and 2012 were the perfect breeding ground for CSOs to exert pressure in the years to come. Different organisations since then have been demanding more significant consideration of human rights by F1 and other commercial stakeholders.

In 2013, four Bahraini NGOs stressed, in a letter to F1 race organisers, drivers, sponsors and broadcasters, that the situation in the country did not differ much from previous years. For these organisations, the intention of the government and organisers in hosting the Grand Prix was clear: “to broadcast a false picture of normality to the outside world”. The letter also prompted a political backlash from some British MPs who called for the Bahrain GP to be cancelled. But for the F1 chief executive at that time, Bernie Ecclestone, the allegations had nothing to do with the race. He expressed that “We [F1] don’t go anywhere to judge how a country is run. I keep asking people, ‘What human rights?’ – I don’t know what they are”. Thus, during 2013 and 2014, the race was run despite clear opposition from a number of CSOs.

Given the limited impact of the various reports and letters sent by CSOs to different stakeholders involved in the Bahrain GP, one of these organisations decided to explore a new approach. In 2014, Americans for Democracy & Human Rights in Bahrain (ADHRB) submitted a complaint to the United Kingdom National Contact Point for the OECD Guidelines for Multinational Enterprises. ADHRB alleged that “companies in the Formula One Group [a company registered in the UK] had failed to address human rights impacts associated with the Bahrain Grand Prix.” After a mediation procedure, ADHRB and F1 reached a common ground. F1 issued a statement including a commitment to respect internationally recognised human rights in all of its operations and to develop and implement a due diligence policy. The statement also states that “where domestic laws and regulations conflict with internationally recognised human rights, the Formula 1 companies will seek ways to honour them to the fullest extent which does not place them in violation of domestic law.” At first, this step was welcomed by the CSOs, but as time passed, it proved to be merely a mirage and not a substantial change in F1 practices.

The consistent violation of human rights in Bahrain continued in the years following the publication of the statement, especially through political repression and the use of violence against demonstrators, media and workers of human rights organisations, and so did the racing in Bahrain. During different demonstrations in 2016 and 2017 against the Bahrain GP, the police used excessive force, resulting in several arrests and even the death of one teenager. This revived the criticisms of the CSOs, who again demanded with more forcefulness and support for the respect of the commitments that F1 itself had published years ago. In a letter by different CSOs, it was highlighted that “failing to exercise due diligence and thus abide by your own Statement of Commitment to Respect for Human Rights risks greater complicity in human rights abuses in Bahrain and the tarnishing of your brand’s [F1] reputation.” In response to the letter, F1 stated that

“We believe that Formula 1’s presence in every country on its calendar is positive and a force for good. Sport engages people from all walks of life and plays an important role in uniting communities and encouraging tolerance and acceptance. We believe too that Formula 1’s global profile shines a light and brings transparency to the internal affairs of every country that we visit.”

It was only at the end of 2018 that F1 publicly expressed its concerns about the human rights situation in Bahrain, more specifically about the imprisonment of the activist Najah Yusuf for protesting against the GP. The United Nations Working Group on Arbitrary Detention (WGAD) considered this detention arbitrary, unlawful, and in violation of her rights to free speech and to a fair trial. Nevertheless, F1 never took action in the investigation process or strongly condemned the imprisonment. This prompted a large number of CSOs, including HRW and Amnesty International, to call on F1 again in 2019 to cancel the Grand Prix in response to a lack of investigation into Yusuf’s claims and urged drivers to boycott the race.

The second turning point was the postponement of the Bahrain GP in March 2020 due to the Covid-19 pandemic. In November of the same year, seventeen CSOs, including World Players Association, HRW and Amnesty International, issued a statement on the worsening situation in the country and how the pandemic has increased the risk of human rights violations linked to F1. Moreover, the focus was no longer only on the violations directly linked to the GP, but also on the use of the sporting event to whitewash the image of the country, what has been called “sportswashing”. This latter line of argument was also followed by a letter delivered by thirty British MPs to F1 chief Chase Carey. It is at this point that CSOs begin to gain more support from public officials for their demands. For example, 90 parliamentarians from Britain, Spain, Ireland, France, Belgium, Italy and Germany sent a letter in 2022 to Mohammed ben Sulayem, president of FIA, accusing FIA and F1 of actively facilitating sportswashing in Gulf countries.

We have charted ten years of human rights advocacy and demands linked to the Bahrain Grand Prix and directed at the FIA. Initially, these human rights claims were related to the 2011 uprisings, when CSOs claimed that the Bahrain GP could not be held due to the fragile political situation in the country and the constant human rights violations linked to the protests. Subsequently, from 2014 onwards, the discourse focused mainly on the direct links of some human rights violations with the organisation of the GP, with CSOs reproaching F1 for not exercising due diligence and thus failing to comply with its own human rights commitments. The final phase, from 2020 onwards, is mainly characterised by the involvement of other actors, such as politicians and F1 drivers, who protested against the F1 being used as an instrument by authoritarian states to launder their reputations. What has been the impact of such public protests and mobilizations by CSOs and others? Have they triggered transformative changes in the way F1 tackles human rights risks linked to the Bharain GP?

IV.            What has F1 done to improve the human rights situation in Bahrain?

While the human rights expectations of civil society vis a vis F1 are clear and increasingly demanding, as exposed in the previous section, only a few of these expectations have had a practical impact to some degree. In order to analyse these actions, it is necessary first to identify the two organisations with the power to take appropriate measures. On the one hand, the Formula One Group (FOG) is composed of a diverse cluster of companies and, on the other hand, the actions taken by the governing body of F1, FIA.

The position of the FOG until 2015 was highly criticised by CSOs, as the previous section illustrates, not only because of its lack of action but also because of its official discourse, mainly led by Bernie Ecclestone, which belittled human rights. The exit of the British magnate from the FOG prompted a discursive change in the organisation, now recognising certain links between human rights violations and the organisation of the Bahrain GP. Nevertheless, the only real action taken was forced by the ADHRB when they submitted the complaint to the UK National Contact Point for the OECD Guidelines, resulting in the F1 Human Rights Commitment.

Now the FOG includes in its Code of Conduct (CoC) a section regarding human rights and modern slavery. Nevertheless, they only refer to what has already been stated in their Human Rights Commitment. In this CoC, they also add that if “you believe that an individual’s human rights may be adversely affected, you must report it to the Compliance Team as soon as possible”. This compliance team is led by two legal counsels, notably without experience in human rights topics that also deal with other areas such as compliance, brand protection, human resources and administration functions. In fact, Sacha Woodward, one of the members of the compliance team, when asked in 2019 about the impact of F1 on human rights, stated that “we [FOG] don’t see ourselves as a political organisation. We just want to bring a great entertainment spectacle to as big an audience as possible to as many countries as we can reach”. This comment clearly shows the priorities of the FOG, profit over human rights, and tries to reinforce the idea that F1 is a bubble free from human rights violations. A change in this dynamic seems unrealistic at this point since the FOG is a sport business entity that seeks primarily economic profit, which Bahrain brings to it in spades.

The passivity of the FOG is not beyond reproach, but the position of the FIA is even more flagrantly disregarding human rights. Since 2011, the sport governing body has not taken any initiative or seriously addressed the human rights issues in Bahrain that CSOs have brought to its attention year after year. Although in recent years, some SGBs are adopting human rights policies (e.g., FIFA) or recognising the importance of their protection (e.g., IOC), the organisation that safeguards motorsports seems unwilling to take that road. This unwillingness was clearly shown by the new FIA president, who recently stressed that drivers should devote more time to driving and less to advocating for human rights problems. Nevertheless, we could be witnessing the end of this passivity, as some signs of change can be glimpsed recently. At the end of 2021, the World Council for Automobile Mobility and Tourism (WCAMT), the body responsible for all FIA issues affecting the automobile in society, hold their Annual General Assembly. In this meeting, Prince Zeid Ra’ad Al Hussein, former UN High Commissioner for Human Rights, and Rachel Davis, Vice President of the non-profit organisation Shift, presented a set of recommendations “to take the authoritative international framework – the United Nations Guiding Principles on Business and Human Rights – and apply it to the FIA’s reality”. These recommendations are the result of a process that FIA, in the context of its Diversity, Inclusion and Human Rights Strategic Framework, started to develop in 2020. The group of experts took a look at three spheres of FIA’s activity: FIA “as an employer and procurer of goods and services; as the regulator of world motorsport, and as a major player in mobility”. Unfortunately, both the Framework and the recommendations are not public, which underlines how FIA is still far from achieving the standards of transparency and integrity in governance that society has been demanding of SGBs.

The highlighted actions, or rather inactions, show a clear lack of will from both organisations over the last ten years. Small shoots seem to flourish recently, but it is still necessary for both organisations to commit more human and financial resources to address this problem and improve their governance standards.

V.              Conclusion. What needs to change in Formula 1?

The blog has illustrated how FIA and F1 have come under increasing public pressure from CSOs (and beyond) over the human rights impacts of the Bahrain Grand Prix. Civil society and drivers are increasingly demanding more profound changes in both organisations. Therefore, to conclude this piece, some basic recommendations to FIA and F1 are presented as a point to start with, all of them inspired by the report “For the game. For the world. FIFA and human rights” prepared by John Ruggie at the request of FIFA.

First of all, FIA, like FIFA, has to adopt a Human Rights policy. As of today, the FIA statutes only refer to human rights in article 1.2, which states that “the FIA shall promote the protection of human rights and human dignity […]”. A future human rights policy shall specify and expand on the implications of this commitment. It should not only address the internal organisation of FIA but also consider its business relationship with the FOG. In this context, the United Nations Guiding Principles on Business and Human Rights and OECD Due Diligence Guidance seem to be the most appropriate frameworks through which to articulate and implement the policy.

Secondly, as Ruggie mentions in the report, “even the best human rights policy is no more than words on paper without the necessary actions and incentives to make it part of everyday practice”. The Human Rights commitment adopted by the FOG in 2015 is a clear example of this discrepancy between words and deeds. Instead, both organisations should embed their human rights policies and commitments in their daily operations. Decision-making, especially those concerning the decision to host a Grand Prix in a particular country, should be subjected to detailed human rights impact assessments.

Lastly, once these actions have been adopted, it is necessary to adopt mechanisms to monitor their effects and effectiveness. Without it, the policies will not cover the new challenges and will not adapt to the changing circumstances of the countries hosting a Grand Prix.

For all of the above reasons, both FIA and the FOG must stop ignoring the CSOs working in Bahrain and the rest of the community demanding a change. All stakeholders must work for the common good: the protection of human rights.

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Asser International Sports Law Blog | Blog Symposium: The Impact of the TPO Ban on South American Football. By Ariel N. Reck

Asser International Sports Law Blog

Our International Sports Law Diary
The Asser International Sports Law Centre is part of the T.M.C. Asser Instituut

Blog Symposium: The Impact of the TPO Ban on South American Football. By Ariel N. Reck

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 4: Third Party Investment from a UK Perspective.
Day 5: Why FIFA's TPO ban is justified.

Editor’s note: Ariel N. Reck is an Argentine lawyer specialized in the football industry. He is a guest professor at ISDE’s Global Executive Master in International Sports Law, at the FIFA CIES Sports law & Management course (Universidad Católica Argentina) and the Universidad Austral Sports Law diploma (Argentina) among other prestigious courses. He is a regular conference speaker and author in the field of sports law.

Being an Argentine lawyer, Ariel will focus on the impact FIFA’s TPO ban will have (and is already having) on South American football.


Introduction

Before discussing the impact of the TPO ban, it is important to highlight that the purposes of TPO in South America are somehow different than in Europe. Here “economic rights” (that’s how we call it) are basically assigned in four different moments and/or situations:

First, when a youth player is first registered for the club at amateur level. This is a recognition to the person or entity that brings the player to the club and is usually between 10% and 20% of a future transfer. This practice widens the club’s scouting net and attracts promising young players from the small clubs to the big ones. The percentage can be assigned to the former club of the player, a third person who brings the player (a scout / intermediary) or to the player’s family if he comes as a free or unregistered player. In these cases the position of the beneficiary is really passive and the assigned rights are fragile and dependent of many factors (the player is not even a professional yet).

A second stage in which rights are assigned to third parties is when the club needs money to cover other obligations, unrelated to that particular player. Every club has one or more starlets and investors are willing to take the risk and acquire a percentage of the player’s economic rights. For the club, the sale of portions of the economic rights helps to balance its books and provides an alternative source of credit. In this case there’s no “standard” percentage, it depends on the money the investor is willing to pay, the potential value of the player and the needs of the club. The influence, or the ability to “force” a transfer of the player, of the third party is also subject to each particular agreement, with a direct correlation between percentage owned and influence.[1]

The third situation is when a club wants to hire a player but does not have the financial resources to do it. The rights of such a player might be owned by a company or a company might be willing to acquire the player’s rights from the former club and bring him to the new club. Consequently, the new club is used as showcase only. Under this situation, the player is usually hired for a single season with an option for the purchase of a percentage in favor of the new club, triggering –if executed- a long term employment contract. Sometimes, even if the option is not executed the TP owner recognizes the club a small percentage (around 10%) as “showcase rights” in case the player is immediately hired with a long term contract by another club after the termination of his one season contract. Under these circumstances, the influence of the TP owner is clearly strong, irrespective of how the relevant documents are drafted. 

Clubs could also turn to selling economic rights to third parties in order to cancel debts or to seduce a player for a contractual renewal. A club accepts to assign a share to the player against previous salary debts or in order to convince him to renew the contract without a mayor salary raise. If the club cannot pay the amounts wanted by the player to renew, it offers to assign the player a percentage of his own transfer. In most South American countries, the law or a collective bargaining agreement grants players a minimum percentage of the proceeds of his own transfer (between 10% and 20% depending the country)[2], but this additional assignment is heavily used to satisfy a player’s demands at a renewal of the employment contract.

With so many purposes, and taking into account the financial needs of clubs, the lack of alternative sources of financing and the number of South American players transferred each year, it is obvious that the use of TPO in South America is definitively widespread. Therefore, the impact of the ban will be certainly important, especially in the first years when clubs have not yet found alternative forms of financing.  


The impact of the FIFA Ban

The situation is aggravated by the short transitional period established by FIFA. While previous statements of FIFA officials suggested a period of 3 to 4 seasons[3], the FIFA Circular letter 1264 reduced it to just four months.

It is hard to predict the effectiveness of the prohibition. The current scenario shows many parties looking for forms or mechanisms to circumvent the prohibition, while others are trying to challenge it before the courts. If we consider the experience of art.18bis of the FIFA Regulations on the Status and Transfer of Players (RSTP) (an article included in the FIFA rules right after the Tévez affair as an attempt to protect the independence of clubs in its transfers decisions limiting the power to force a transfer, third parties usually had in TPO agreements), the forecast for the effectiveness of art.18ter is not good. But, as we will show, in the case of art.18ter there’s a clear new impulse and moreover, UEFA stands strongly behind the prohibition. Therefore, in my opinion, we can expect a different outcome. I think the ban will be especially effective in cases of players involved in transfers from South America to the European leagues. Transfers to Portugal, Spain or Greece (countries that relied on TPO in the recent past) will be heavily scrutinized. Nonetheless, it is unclear whether at domestic level, especially in South America, the practice will be banned with similar efficiency or if it will continue secretly with limited or no control by the national Associations. Some federations already implemented their own form of TPO ban (even when art.18ter RSTP is mandatory at national level). Brazil was one of the pioneers[4] and in Argentina, the fiscal authorities, passed a regulation banning TPO agreements.[5]

As to the ways to try to circumvent the TPO ban, I think we will see a raise in the use of “bridge transfers”, which is basically the registration of a player in a club just to cover the TPO with a federative “shell”. With this maneuver, the TP owner artificially enjoys all the benefits of being a club, like retaining a percentage of the player’s future transfer or controlling the player’s career by signing a long term contract with a huge buyout clause loaning the player to different clubs each year.[6] According to the FIFA regulations any club that had ever registered the player is not a “third party” (see definition 14[7]). There is no further requirement, no “sporting interest” in the registration or playing time, the simple act of registration allows a club to have a share of the player’s future transfers. To this regard, while it is true that FIFA already sanctioned clubs for “bridge transfers”[8], it was only an isolated case (still pending at CAS) and we can see examples of patent “bridge transfers” in every transfer window and in the top-5 leagues, not just in minor competitions. 

Another way to deceive TPO is to assign a share to the player and a further (hidden) assignment from the player to a third party. At this point, a big question arises: is the player a third party according to the FIFA regulations? Can a club assign a percentage of the player’s future transfers to the player himself?
As said, the opportunity for a player to profit from his own transfer is a labour right in many South American countries. While South American employment laws, statutes and/or CBAs tend to fix a minimum percentage of the transfer fee for the player, there is no cap and in theory a player can receive up to 100% of the transfer price. 

The FIFA regulations only exclude the two clubs involved in a transfer and the previous clubs where the player was registered from being a third party. Hence, in principle, the player seems to be a “third party” too.

But art.18ter provides that no club or player shall enter into an agreement with a third party, based on the wording of this provision it is clear that a player should not be considered a “third party”. Moreover, the player is a necessary party in every transfer agreement and he is also subject to sanctions if he violates the aforementioned FIFA prohibition on TPO according to paragraph 6 of art.18ter.

In addition, the fact that in many South American countries the player’s entitlement to a share of his own transfer is a labour right, a systematic interpretation of art.18ter makes it plausible to sustain the validity of the assignment of a percentage of the transfer fee to the player. In that regard, it is important to recall that FIFA’s prohibition has in principle effect only at federative level. This means that at civil level, any assignment will still be valid and enforceable.

Furthermore, the jurisprudence of the majority of the South American countries holds that federative rules have only effect within the framework of the federation and cannot contradict the civil legislation, of a higher hierarchy.

Argentina is an exception in South America. Ordinary Argentine courts settled that Federative rules are the “lex specialis” in relation to the general rules of the civil code. Therefore, if the regulations of FIFA and/or the Argentine Federation prohibit TPO, any contract in that sense will be null and void, even when under our civil code the assignment of a future transfer is perfectly valid.

Saved for this exception, the result of this is that FIFA’s remedy might be worse than the disease. Since FIFA can only sanction its own members (meaning clubs and players), if a club or a player enters into a TPO agreement, such player or club might be subject to disciplinary sanctions and the contract will still be valid and enforceable.

It is not unthinkable that a player or a club surrendering to the need of funds and signing a TPO agreement despite FIFA’s ban, thereby placing himself in a difficult position. The counterpart (the third party) might force the compliance of the agreement by threatening with reporting the deal to FIFA. In the end, the ban will have the opposite effect to what was sought: Players and clubs will be more vulnerable in their relationship with the third-party than before the introduction of art.18ter RSTP.

As said, it is hard to think that clubs will immediately find an alternative source of funding or will be able to live within their own means. Therefore, it is probable that clubs will try to circumvent or challenge the rule.

Again, the final consequences are hard to predict, but will of an important magnitude. TPO is not just a financing method ‎to bring players to clubs, sharing the risk with the investor, it is also a way to get cash-flow without the need to transfer the player to another club. Furthermore, it is an essential part of the scouting method that widens the club’s network, attracts young talents to the clubs and is also a way to cancel debts towards the player or to achieve a renewal of his contract.  


Conclusion

To conclude, I don’t think the TPO ban is the best way to achieve the –alleged- objectives declared by FIFA. Obligation to disclose, controlled payments (via TMS for example) and other regulatory approaches would have been better options. The pressure from an investor could have been diluted by setting a limit (maximum percentage or maximum number of players under TPO) and the reality is that the pressure to “force” a transfer comes in general from other actors, mainly the player and/or his agent. 

Now the new “pushers” will be the European clubs. How will it be possible for an Argentine club to refuse a -say- € 5 million transfer for a 19 year old player even if the club knows his value will double or triple if he stays at the club? With the TPO ban the club cannot rely on an investor paying, for example, € 3 million for 50% of the player's economic rights to “hold on” a few years. It is worth remembering that Chelsea tried to seal the transfer of Neymar for € 20 million when he was 18. However, Santos managed to reject such offer relying on TPO.

South American players account already for approximately 25% of all the international transfers worldwide[9], after the TPO ban this percentage will certainly raise.

As to the “morals” arguments, recently reiterated by UEFA’s president Platini who said TPO is “a form of slavery”[10], I believe they are just a fallacy. Every transfer needs the player’s consent and the investor owns a share of the profit of a potential future transfer, not a part of the human being. Otherwise, for clubs, owning 100% of a human being would be equally immoral.

Moreover, other types of assignments, like third party litigation funding, are legal in many countries, including the UK and France. The similarities and analogies than can be made with TPO are immense and nobody is claiming third party litigation funding is a way of “owning a person’s justice”.

With the introduction of the Financial Fair Play Regulations European clubs and federations are looking into ways to reduce expenditures and also scrutinizing what the “neighbors” are doing. Clubs want cheaper players and clubs from countries were TPO was long ago banned had a handicap for UEFA spots against clubs from countries were TPO was allowed and relied on TPO to acquire players.[11] The TPO ban serves both objectives: A reduction in the player’s transfer price and an end to the Spanish and Portuguese transfer “tactics” that relied heavily on TPO. 

Also, the inclusion or exclusion of the player in the definition of “third party” triggers conflictive issues. In most South American countries national labour laws or CBAs allow the player to obtain a percentage of the proceeds of his own transfer. If FIFA tries to extend the definition of “third party” to include players, this might certainly prevent a complete implementation of FIFA´s TPO ban in South America. 

As a conclusion I can say that, for South American clubs, the TPO ban just changed the “predator” in the transfer market. Our clubs can now stand stronger against investors, but as counter-effect they are in a much weaker position against European clubs‎.



[1] For a discussion on “buy-sell” clauses (the core of any TPO agreement) and whether they constitute prohibited influence see my opinion: Do “Buy-Sell” Clauses In Third Party Ownership Agreements Constitute Undue Influence Under FIFA’s Art 18bis?

 http://www.lawinsport.com/blog/argentine-sports-law-blog/item/do-buy-sell-clauses-in-third-party-ownership-agreements-constitute-undue-influence-under-fifa-s-art-18bis

[2] Brazil, Peru and Bolivia are exceptions to this rule; no such right is established in their regulations. In Argentina the minimum percentage is 15% according to art.8 of the CBA 557/2009 http://infoleg.mecon.gov.ar/infolegInternet/anexos/155000-159999/158453/norma.htm , in Paraguay 20% for international transfers, art.12 law 5322 from 29th  October 2014 http://www.escritosdederecho.com/2014/11/ley-5322-del-29-10-2014-estatuto-del-futbolista-profesional.html , in Uruguay 20%, art.34 of the Professional Footballers Statute http://www.mutual.com.uy/index.php?option=com_content&view=article&id=49&Itemid=83 , in Ecuador 15%, Chile 10% law 20.178 http://www.sifup.cl/wp-content/uploads/2014/12/Ley-20178-Estatuto-Laboral-del-Futbolista-Profesional-Chileno.pdf , and Colombia 8% art.14 Colombian Players Status Regulations http://fcf.com.co/index.php/la-federacion-inferior/normatividad-y-reglamento/158-estatuto-del-jugador

[3] http://www.fifa.com/aboutfifa/organisation/footballgovernance/news/newsid=2463828/

[4] http://www.insideworldfootball.com/world-football/south-america/16188-brazil-conforms-and-sets-date-for-ending-tpo-funding-practices

[5] General Resolution 3740/2015 http://eco-nomicas.com.ar/7183-rg-3740-afip-ganancias-transferencia-de-jugadores

[6] For more on “Bridge Tranfers” http://www.lawinsport.com/sports/football/item/what-is-a-bridge-transfer-in-football

[7] Third party: 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.”

[8] http://www.fifa.com/aboutfifa/organisation/news/newsid=2292724/index.html

[9] Source: FIFA TMS Global Transfer Market Report 2015, page 78.

[10] http://in.reuters.com/article/2015/03/16/soccer-platini-tpo-idINKBN0MC1B220150316

[11] http://www.e-comlaw.com/world-sports-law-report/article_template.asp?Contents=Yes&from=wslr&ID=1388

 

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