Editor's note: Panagiotis
Roumeliotis holds an LL.B. degree from National and Kapodistrian University of
Athens, Greece and an LL.M. degree in European and International Tax Law from
University of Luxembourg. He is qualified lawyer in Greece and is presently
working as tax advisor with KPMG Luxembourg while pursuing, concomitantly, an
LL.M. in International Sports Law at Sheffield Hallam University, England. His
interest lies in the realm of tax and sports law. He may be contacted by e-mail
at ‘p.roumeliotis@hotmail.com’.
Introduction
The landmark Bosman
Ruling triggered
the Europeanization of the labour market for football players by banning
nationality quotas. In turn, in conjunction with the boom in TV revenues, this
led to a flourishing transfer market in which players’ agents or intermediaries
play a pivotal role, despite having a controversial
reputation.
As a preliminary remark, it is important to touch upon the fiduciary
duty of sports agents towards their clients. The
principal-agent relationship implies that the former employs the agent so as to
secure the best employment and/or commercial opportunities. Conversely, the
latter is expected to act in the interest of the player as their relationship should be
predicated on trust and confidence, as much was made
clear in the English
Court of Appeal case of Imageview Management
Ltd v. Kelvin Jack. Notably, agents are bound to exercise the utmost
degree of good faith, honesty and loyalty towards the players.[1]
At the core of this blog
lies a comparative case study
of the implementation of the FIFA Regulations on working with intermediaries (hereinafter “FIFA RWI”) in eight European FAs covering most of the transfers during the mercato. I will then critically analyze
the issues raised by the implementation of the RWI and, as a conclusion, offer
some recommendations.
FIFA RWI
In 2015, FIFA sought a new reform of football agents’
activity and adopted regulations on dealing with intermediaries[2] that are defined as “a natural or legal person who, for a fee or
free of charge, represents players and/or clubs in negotiations with a view to
concluding an employment contract or represents clubs in negotiations with a
view to concluding a transfer agreement”.[3]
As solemnly illustrated in the Preamble, their
purported aim is to bolster high ethical standards for the relations between
clubs, players and third parties as well as enable proper control and
transparency as regards player transfers.[4] In a nutshell, FIFA devolved its regulatory
powers to the national federations whereas it will just monitor the regulations’
proper implementation.[5]
Case studies of the national implementation of the RWI in eight countries
The concrete impact of the new RWI can be duly chartered through an examination
of European FAs’ implementation (i.e. Belgium, England, France, Germany, Italy,
Netherlands, Portugal, and Spain) as Europe possesses by far the biggest
transfer market globally.
Registration
The registration process is a conditio sine qua non for agents. Based on a literal interpretation
of the RWI, agents’ registration should occur on a transactional basis[6] and it is conferred upon
clubs and players to provide to the respective FA the intermediary declaration
and representation contract.[7] As FAs are empowered to go
beyond the minimum requirements enshrined in FIFA’s RWI[8] in some instances they
have implemented different requirements.
Burdensome character
For purposes of tracking and tracing their activity,
agents should, subject to signing and filing the so-called “intermediary
declaration”, be registered with the FA where they exercise their profession. Ergo, the plethora of administrative
rules simultaneously applied constitute glaring obstacles, as they allegedly impede
the provision of services on behalf of agents[9] and, on top of that, the enhanced
amount of registration fees[10] is burdensome. The net result seems
to be that a “fragmented
and multi-tiered system”[11] does not seem compatible
with EU law. It
is more likely than not that by curtailing the development of agents’ business,
EU law (i.e. restraint on competition, free movement of services) is infringed.
Lack of qualification assessment
Apart from France[12], where candidates must
sit a written examination and Spain[13], where a personal
interview with the respective FA takes place, in principle, such assessments
are not considered.
The self-certification of impeccable reputation does
not guarantee the quality of the services rendered by agents and the possession
of the requisite skills thereto. In fact, the EU Sectoral Social Dialogue
Committee for Professional Football confirmed a decreased quality of said
services. The obligation to undertake a serious examination should, a fortiori, be taken seriously into
account and put into practice as it will offer guarantees of objectivity and
transparency.
Of course one could contradict that agents derive
their value from their extensive network of contacts and market knowledge;[14] instead of their
education or license. Nevertheless, qualitative criteria need to be set as a
condition for eventual registration, as players should only have the option to
gravitate towards agents that can deploy them quality services. This is further
fortified by the fact that football has become a sophisticated business,
whereby complex contracts plausibly require qualified assistance so as to
achieve a better protection of players’ rights.[15]
Remuneration
In theory,
agents should be entitled to receive remuneration so long as they have brought
about the employment contract/transfer agreement for which they have been
engaged. The mere introduction of the parties to a contract, without evidence
of contribution to said conclusion, is not sufficient[16] as the
entitlement to commission crystalizes upon the provision of services.
Reality bears witness to the fact that the recommended
3% benchmark cap inserted in the FIFA RWI[17], albeit
being the apple of discord in recent discussions, has not been interpreted by
FAs as a “must”. Only 4/8[18] FAs
have transposed such recommendation in their domestic RWI while the others[19] have
ignored it.
A glance at current numbers proves that, in
spite of the recommended cap, agents’ fees have swelled; as from
2013, UEFA clubs have spent 97.2% (i.e. USD 1.54 billion) of the commissions pocketed
by intermediaries globally. Going forward, it is indicative that as per
the UEFA
Report for the FY 2016, the average commission rate amounted to 13%
in Belgium, England, Italy and Portugal, 9% in France, 15% in Germany, 12% in
the Netherlands and 8% in Spain. The above figures succinctly demonstrate that FIFA’s recommendation
has not led to a de facto limitation
of the remuneration paid to agents. This is also confirmed by a report for the EC
that outlined the increase in agents’ fees following
FIFA’s deregulation.
Benchmark cons
Potential low remuneration cap
would, unavoidably, incite agents to breach their fiduciary duty and favour
their own interests. Exempli gratia, they would rather clinch
deals in FAs that contemplate higher commission fees, even if it is contrary to
the best interests of their client’s career. Furthermore, reprehensible practices would definitely take place since
agents’ commission and
players’ remuneration function inversely (i.e. the more agents receive, the
less players earn), while it is also likely
that agents would be
discouraged to provide high quality services.
In the
same vein, it could lead to collision with EU law. As a matter of fact, it has already
raised EU competition law concerns as some have considered
it a disproportionate encroachment on agents’ economic freedom, thus, infringing
Articles 101 and 102 TFEU.
Benchmark pros
On the flip side, I would like to play devil’s advocate going forward. Should the 3% cap on fees apply, this would ward off “agents” whose sole purpose is to make “quick and dirty” money. Therefore, the 3% cap could work as an indirect assessment of the ones who are worth of being agents.
Conflicts of interests
From the outset of
the eventual transaction, players/clubs should endeavor to assure that no
conflicts of interest exist.[20] 6 out of 8 FAs[21] have transposed ad litteram the provision stipulating
the right of intermediaries to represent multiple parties to a transaction, so
long as they have articulated in advance potential conflicts of interest and received
written consent by all parties involved. The
CSKA Sofia v. Loic Bensaid case could be considered as a precursor to this
provision, in which it was stressed that an agent who represents both player
and club does not commit fraud so long as he has made the situation transparent
to the parties.[22]
In my view, said
provision ostensibly solves potential conflicts of interest but de facto goes against agents’ fiduciary
duty and ineluctably leads to such conflicts. By way of comment, should an
agent represent both the player and the destination club, he would have to act
in a neutral manner, which will adversely affect the player’s interests. In
order to maintain healthy relationships with the club so as to facilitate
future transactions, it is more likely that he will not seek the maximum salary
possible for the player. Conversely, should the agent represent both the player
and the club of origin, one can easily understand that a higher transfer fee
reduces the player’s salary and vice
versa.
In my view, with
such provision, unwittingly or not, an own-goal has been inflicted as FAs are
not incentivized to crack down on potential conflicts of interest. At least, if
the French[23]/Portuguese[24] practice is not followed (i.e. dual representation is
prohibited), the English model[25] could be an attractive solution. Notably, the
possibility to seek independent legal advice should be construed as a necessary
requirement that will safeguard players’ sporting/financial interests from
being compromised.
Minors
Almost all FAs outlawed payments when the player is a minor.[26]
Portugal[27]
seems to have applied a more stringent standard (i.e. representation is totally
forbidden), while Italy[28]
does not stricto sensu prohibit such
remuneration.
One might be tempted to conclude that outlawing payments is commendable
but such perception is erroneous as the premise behind it goes against the players’
interests:
- Agents not receiving consideration
in exchange for their services would most likely not provide the best advice for
their client, as, “good advice comes at a price”[29]
- Agents would have a vested interest
to tie up youngsters for many years, which might, in turn, work at their expense,
as the former might seek to capitalize their investment in the players as soon
as they get 18 years old. As submitted, when it comes to minors, unscrupulous
agents can go “forum shopping” and seek to conclude a representation contract
in the most favorable jurisdiction,[30]
i.e. the one that does not limit the duration of said contract.
The foregoing should be read in conjunction with the fact that in modern
football there are lots of talented young players with potential to become a
bone of contention for agents. Further to this, due account should be taken of
the fact that UEFA’s “home grown player rule” and the UEFA Financial Fair Play Regulations
push clubs to invest in youngsters and this renders their circulation in the
market more common than in the past.
The statistics provided by FIFA ITMS show that minors are the category
of players who have most often used an agent, in 17.6% of the concluded
international transfers against 15.2% and 14.5% between 18-25 and 26-32 years
old, respectively. Therefore, it borders on the absurd that agents cannot be
remunerated when engaged in transactions involving minors.
On top of that, higher thresholds ought to have been imposed i.e. the representation
contract should have a limited term and for this, a useful inspiration could be
derived from the case of Proactive Sports Management v Wayne Rooney, where it was decided that the
eight-year image rights representation agreement[31]
constituted an unreasonable restraint of trade.
Duration of the Representation Contract
FIFA’s
RWI left a normative vacuum by not including a provision on the maximum
duration of a representation contract. However, my comparative study shows that
5/8 FAs[32] impose
a maximum 2 year term on the representation contract.
Such a
limit protects not only the
players’ but also the clubs’ interests against potential abuses involved in the
engagement of agents for long periods.[33] Furthermore, it avoids
conflicts pertaining to restraint of trade as the absence of limits could lead to players being tied to their agent for a
disproportionate period of time.
However,
since exclusivity (i.e. maximum duration of contract) is not prescribed in FIFA
RWI, this could imply that they provide a safe harbor to players not to be
contractually bound for a predetermined period of time. As submitted, this
grants the players more bargaining power and would, indirectly, force agents to
act in the best interests of their clients.[34]
Harmonization at European level
It is crystal clear that multiple
national disparities exist in the regulation of agents. Hence, I believe a
streamlined uniform regulatory framework is needed at the European level and,
as such, could be put in place by UEFA’s FAs.
FAs Partnership
As football’s transfer money and underlying intermediaries’ commission
fees are mostly concentrated in Europe, it should be underscored that consolidated
RWI at the level of all European FAs would provide a
more potent regulatory space and countervail “FIFA’s regulatory
relinquishment”.
As FIFA switched the onus to FAs, some of them could come
together and become
embroiled in enforcing an enhanced monitoring system
and stricter conditions of access to the profession. This has also been
supported by the EU Sectoral Social Dialogue
Committee for Professional Football, which formulated that such harmonized
European policy is the desirable next step for a better regulatory oversight of
agents. Such partnership could be a laudable response
to the calls for a centralized and harmonized mandatory licensing system. It
should be done in cooperation with the EFAA, so as to take into
account the agents’ perspective and likely facilitate adherence to the
regulations.
In this respect, it would be prudent to follow the examples of other Sports
Associations. For example, FIBA when formulating effective regulations
pertaining to agents promoted harmonization while involving the agents through consultation
of AEBA. Pursuant to
the latest EC Report, the National Basketball Players
Association (“NBPA”) Regulations could also be considered as an example to
follow, as they enhance the “professionalization” of agents and are based on a
mandatory licensing system while setting accomplished higher education as
an indispensable condition. The NFL, on the other
side of the Atlantic, is also an interesting example as it requires a
university degree or sufficient negotiating experience of minimum 7 years.
As
it is generally felt that the agents’ business is “unethical,
complex and deceptive”, thus stringent conditions should be imposed to enter
the profession. A qualitative selection process is indispensable. Players must
be able to rely on agents equipped with the necessary skills and knowledge. FAs
should look back at the Piau case where the compulsory licensing
system was duly endorsed as legitimate by the then Court of First Instance of
the EU, inter alia, on the basis that
it was necessary to introduce “professionalism and ethical standards to protect
players whose careers are short”.
UEFA
On a separate note, UEFA, as it claims to operate in a
spirit of consensus with all its
stakeholders, has to be the leading frontrunner of a harmonised regulation. In the
framework of Article 165 TFEU and UEFA’s conditional supervised autonomy[35], this could be done in
dialogue with the EC that possesses coordination competence with regard to
sport, so as to ensure that potential new regulations can resist challenges on
grounds of restraint of trade and alleged infringements of EU law. The Arrangement for Cooperation signed
by the UEFA and EC earlier in February 2018 could be a good starting
point going forward.
Conclusions
It is unequivocal that FIFA’s RWI advent has had as a
main repercussion the deregulation of the industry, or better put, the granting
of autonomy to the FAs to regulate said industry using the minimum standards as
the cornerstone. The case study, though, evidences that important disparities
exist between crucial provisions of the various European FAs’ RWI, which leads
to compounding practical and ethical problems and to higher risks of forum
shopping.
It is forthwith conspicuous that such disparities
create challenges, which could be duly faced, first and foremost, by accepting that agents are
inherent to the mercato and, as
previously alluded, by taking account of their fiduciary duty. Ergo, it is contingent upon European FAs, in the framework of UEFA, to cooperate so as to adopt
a robust unified regime that will bring forward sweeping and streamlined changes
to the profession. To do so, agents’ should be consulted and respected, as
in the modern era of professional football, “they are the oil that keeps the
wheels of international football in motion.”[36]
[2] The term “agent” will be used, as it constitutes the international
jargon.