Asser International Sports Law Blog

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

FIFA’s provision on the protection of minors - Part 1: The Early Years. By Kester Mekenkamp.

Editor’s note: Kester Mekenkamp is an LL.M. student in European Law at Leiden University and an intern at the ASSER International Sports Law Centre. This blog is, to a great extent, an excerpt of his forthcoming master thesis. 


On 24 November 2016, a claim was lodged before a Zurich commercial court against FIFA’s transfer regulations by a 17-year-old African football player.[1] The culprit, according to the allegation: The provision on the protection of minors, Article 19 of the Regulations for the Status and Transfer of Players.[2] The claimant and his parents dispute the validity of this measure, based on the view that it discriminates between football players from the European Union and those from third countries. Besides to Swiss cartel law, the claim is substantiated on EU citizenship rights, free movement and competition law. Evidently, it is difficult to assess the claim’s chance of success based on the sparse information provided in the press.[3] Be that as it may, it does provide for an ideal (and unexpected) opportunity to delve into the fascinating subject of my master thesis on FIFA’s regulatory system aimed at enhancing the protection of young football players and its compatibility with EU law. This three-part blog shall therefore try to provide an encompassing overview of the rule’s lifespan since its inception in 2001. This first part will shed its light on the “birth” and “first years” of the provision, thereby illustrating the relevant developments from 2001 till 2009. The heart of this analysis is formed by two decisions of the Court of Arbitration for Sport (“CAS”): The Acuña and FC Midtjylland case. The second part shall subsequently cover the rule’s “adolescent years”, which span from 2009 to the present. Therein, the major changes put forward in the 2009, 2015 and 2016 versions of the RSTP will be addressed, together with the important CAS decisions concerning Article 19. The third, and final, part will constitute a substantive assessment of the provision under EU Internal Market law. 


The first years, from 2001 onwards[4]

The 2001 “Commission-condoned” FIFA transfer rules included for the first time a section dedicated to the enhancement of the protection of minors.[5] An accompanying circular by FIFA stipulated that the new transfer rules imposed strict conditions “in order to provide a stable environment for the training and education of players”.[6] Moreover, stating that abuses frequent in the past had to be tackled, it seemed to inaugurate a new era of safeguarding young footballers.[7] The starting point of the new provision is a general prohibition for players under the age of 18 (“minor”) to transfer internationally.[8] The same principles apply to a so-called “first registration” of a minor who requests to be registered in a country other than that of his nationality.[9] An absolute transfer ban however was apparently deemed too radical.[10] The prohibition was therefore made subject to two exceptions. Firstly, the “parents-rule” allows for minors to transfer internationally when their family moves to a country, in which the new club is located, for “reasons not related to football”.[11] Secondly, within the territory of the EU and EEA, players younger than 18 but above the minimum working age can transfer internationally, given that their sporting and academic education is guaranteed by the new training club.[12] FIFA further stressed its intention to issue, together with UEFA, a code of conduct guiding the national associations regarding these conditional arrangements.[13] However, this self-obligation was removed from the subsequent 2005 edition of the RSTP.[14]

Only a year after the introduction of the new rules, the first adaptations were made in response to concerns raised by national associations.[15] FIFA’s Players Status Committee (“PSC”, FIFA’s competent body adjudicating any disputes on matters related to the protection of minors) decided to add a third exception, which became known as the “50 + 50-rule”.[16] Hereby it aimed at dealing with the case of players living close to national borders where “cross-border traffic is a daily matter”.[17] Those young players living within this 50 km range may attend a club of a neighbouring association if that club is similarly situated within a 50 km distance of the border, provided that these players remain living at home. The two-part FIFA Circular is rather ambiguous in its explanation, stating on the one hand that minors in this situation can solely “train” with the club situated across the border,[18] while on the other hand introducing a full exception to the transfer ban (thereby permitting a “complete” international transfer).[19] This latter view is in accordance with the regulations’ revision that entered into force on 1 July 2005.[20] Next to adding the “50 + 50-rule”, the new article 19 RSTP slightly adjusted and hence further clarified the first two exceptions. A minor can transfer internationally only if his “parents” move to another country for reasons not related to football, restricting the scope of the rule from “family” to “parents”.[21] Moreover, with respect to the “EU and EEA-rule” it set the international standard of 16 as the minimum age and spelled out several additional requirements on the arrangements made by the recruiting club for the academic education of the transferred player.[22] These oblige the club to: “provide the player with an adequate football education and/or training in line with the highest national standards”; “guarantee an academic or vocational education which will allow the player to pursue a career other than football”; “ensure that the player is looked after in the best possible way” by arranging housing with optimal living standards; and “provide its association with proof of compliance”.[23] Importantly, paragraph 4 orders national associations to safeguard compliance by clubs and paragraph 5 installs the PSC as the competent body to adjudicate in this field.[24] Hence, more explicit accountability and control was established concerning the abidance with the rules on the protection of minors.

In early 2007, FIFA issued a commentary on the RSTP in order to further clarify the separate provisions.[25] It stipulated that the international transfer of minors should be subject to stern restrictions in order to provide a stable environment for the player’s training and education.[26] Furthermore, “the term ‘parents’ has to be understood in a strict way”, a minor therefore cannot live with a close relative in the country of the new club. The document acknowledges that the “EU and EEA-rule” was adopted as to not interfere with EU free movement law.[27] National associations are once more reminded that they possess a vital role in ensuring compliance, amongst other by carrying our on-spot investigations regarding the mandatory educational arrangements if need be.[28] 


The Acuña case

These rules have not operated in a vacuum. The real effect of the provisions on the protection of minors has been shaped by the judicial practice of FIFA, through the PSC, and first and foremost the Court of Arbitration for Sport (“CAS”, the competent institution that deals with appeals contra FIFA’s internal decisions).[29]

The first (published) case before the CAS concerning a dispute on the provision’s content was Càdiz C.F. and Carlos Javier Acuña Caballero v. FIFA and Asociación Paraguaya de Fútbol.[30] In January 2005, the 16-year-old Acuña Caballero represented his Paraguayan club Olimpia in an international tournament for players under 20. His successful performance led to foreign interest, and on 14 February 2005 he, together with his family, left Paraguay for Cádiz, Spain.[31] Three days later, Cádiz C.F. (a club meandering through the Spanish second and third league) and the player signed an employment contract, and subsequently Olimpia agreed to the transfer.[32] However the Paraguayan football association refused to issue the compulsory international transfer certificate (“ITC”), referring to Acuña Caballero’s age.[33] The FIFA PSC decided upon the matter on 26 August 2005 by verifying whether the requirements of the “parents-rule” of Article 19(2)(a) RSTP were observed. By highlighting the apparent lack of intention to continue his education besides football, as well as the fact that the mother’s employment contract commenced much later than her son’s, the PSC found the case to be in total contradiction with the letter and spirit of the exemption: “the mother would have followed the player”[34], instead of the other way round. The PSC noted that the protection of minors is one of the fundamental principles of the RSTP, which requires the strict application of Article 19, and consequently refused the request of the Spanish association to register Acuña with Cádiz C.F.[35] Both the club and the player appealed this decision before the CAS, after which the tribunal organized a hearing of all parties concerned and several witnesses in order to grasp the factual context of this international transfer.[36] The CAS Panel swiftly countered the appellants’ views by stating that FIFA’s rules limiting the international transfer of minors do not violate any mandatory principle of public policy under Swiss law or any other national or international law, insofar that “they pursue a legitimate objective, namely the protection of young players from international transfers which could disrupt their lives, particularly if, as often happens the football career eventually fails or, anyways, is not as successful as expected and they are proportionate to the objective sought, as they provide for some reasonable exceptions”.[37] Subsequently it explained that, it had to be determined whether the move of the mother was related to the transfer of her son, and ergo whether the exception of article 19(2)(a) was applicable? The Panel found that “the players’ decision to move to Spain was made first”[38], by emphasizing the inconsistencies in the appellants’ statements, and as a result thereof doubting their truthfulness.[39] Furthermore, the club’s submission stated that “from all the possibilities, the offer made by CÁDIZ C.F. was the most suited to his parents’ wishes”, which lead the Panel to believe that in fact the clubs’ offer for her son made the mother look for a suitable job in Cádiz.[40] As such, the Panel established that the appellants could not benefit from the exception, since it concluded that Acuña’s family moved “for reasons linked to football”.[41]

The Acuña case exhibits a strict application of the rule. This strict application, although being in line with FIFA’s policy, lead to a disadvantageous outcome for the minor in question.[42] As argued by the player, his life in Paraguay meant living alone in a small apartment at his agent’s house and only seeing his mother two or three times a year.[43] The move to Spain allowed him to live with his mother and was therefore positive for both his career and his family. The CAS Panel addressed this matter by stating that “the task of the CAS is not to revise the content of the applicable rules but only to apply them”.[44] Moreover, it stressed that any adverse consequences in relation to the refusal to allow the player to be registered with the club were the result of the appellants own actions. The Panel finally put forward that the player would not have to face the adverse consequence for long as he would turn 18 in a couple of months.[45] 


The FC Midtjylland case

The next confrontation followed suit: the case of FC Midtjylland.[46] The Danish Superligaen club came in FIFA’s crosshairs through a FIFPro complaint concerning the signing of six young Nigerians.[47] These players were registered as amateurs and played for Midtjylland’s youth teams. Additionally, they were granted short-term residence permits as students, excluding the right to work, and enrolled in the Danish educational program.[48] The FIFA PSC emphasized that Article 19 RSTP on the protection of minors, being one of the principles included in the FIFA/UEFA and European Commission agreement and “one of the pillars of the regulations”, is applicable to both amateur and professional players.[49] Thereto, only a strict, consistent and systematically implemented interdiction subject to very limited exceptions could stop the abuse and maltreatment of many young players. The PSC hence warned the Danish Football Association (DBU) and FC Midtjylland, and subsequently refused the registration of the players.[50]

The CAS Panel addressed four main issues in relation to what had been brought to the fore in the parties’ submissions concerning Article 19 RSTP:

1. Is it applicable to both professional and amateur minor players?

2. What are the exceptions and are any of these applicable?

3. Does the application of the provision “contradict any mandatory provision of public policy or any of the provisions of EC Law”? Is there a breach of the non-discrimination principle, following the alleged inconsistent approach of FIFA?[51]

In short, the Panel answered the first question in the affirmative, based on a textual approach together with taking due notice of the intended objective as “to apply Art. 19 of the RSTP restrictively to professional players only could result in obviating protection of young amateur players from the risk of abuse and ill treatment”.[52] As to the second question, it was noted that the codified exceptions provided in Article 19(2) RSTP were not applicable to the case at hand. Nevertheless, the Panel regarded this list not to be exhaustive and allowed for two additional exceptions relating to students: first, “where the players concerned could establish without any doubt that the reason for relocation to another country was related to their studies, and not to their activity as football players”, and second, “where the association of origin and the new club of the players concerned have signed an agreement within the scope of a development program for young players under certain strict conditions (agreement on the academic and/or school education, authorization granted for a limited period of time)”.[53] Yet, neither of these additional exceptions applied here.[54] The third issue was related to appellant’s Cotonou Agreement argument.[55] The Panel agreed that the non-discrimination rights are conferred by article 13(3) of the Cotonou Agreement to “Workers of ACP countries legally employed in its territory”.[56] Nonetheless, the Nigerian players in question are to be considered as “students”, not as “workers” legally employed in Denmark, which means they fall outside the scope of this provision.[57] The Panel moreover dismissed, based on that same reasoning, the appellant’s claim founded on the Simutenkov[58] case in their attempt for the “EU and EEA-rule” of Article 19(2)(b) RSTP to be applicable.[59] The Panel furthermore stressed with regard to this third question that agreements between the EU and third countries that prohibit discrimination in working conditions are clearly limited in scope to foreigners “legally employed in the Member States” and do not concern access to the employment market.[60] It also endorsed the Acuña case in that the FIFA rules limiting the international transfer of minor players “do not violate any mandatory principle of public policy and do not constitute any restriction to the fundamental rights that would have to be considered as not admissible”.[61] Lastly on the fourth issue, in reaction to the appellant’s allegation that FIFA’s approach was inconsistent and favoured bigger clubs (by reference to Bayern München’s registering a minor player from South America), the CAS solely pointed at the general principle “that no one can claim for equal treatment by referring to someone else who has adopted an illegal conduct, without sanction (nemini dolus alienus prodesse debet)”.[62] Concluding, FC Midtjylland was found to have breached Article 19 RSTP as the CAS favoured a strict interpretation, yet simultaneously, it allowed for two additional implicit exceptions for students.

Around this point in time, the European Commission’s attention was also drawn to the protection of minors in sport. In its white paper on sport, it  pointed at “children who are not selected for competitions and abandoned in a foreign country, often falling in this way in an irregular position which fosters their further exploitation”.[63] Even though it makes reference to neither of the two abovementioned cases, this explicit consideration by the Commission, emphasizing the importance of protecting minors, could be seen as an indirect endorsement, prima facie, of the strict interpretation of Article 19 RSTP by CAS.

The next, second, part of this blog series shall aim to cover the rule’s “adolescent years”, which span from 2009 to the present. The major changes put forward in the 2009, 2015 and 2016 versions of the RSTP will be addressed. Furthermore, important CAS decisions concerning Article 19, Muhic, Vada I and II, FC Barcelona, RFEF, and the FIFA decisions relating to Real and Atlético Madrid, will be at the centre of the attention. 




[1] CNN, 24 November 2016, “FIFA: African footballer, 17, takes world governing body to court

[2] Article 19 FIFA RSTP (2016)

[3] Eurosport, 24 November, “FIFA faces lawsuit over rules banning transfer of minors

[4] The text of this blog contribution is part of my forthcoming thesis, which shall be submitted in order to complete my master’s degree in European Law at Leiden University.

[5] Art. 12 FIFA RSTP 2001.

[6] FIFA Circular no. 769, 24 August 2001.

[7] N. St. Cyr Clarke, “The beauty and the beast: Taming the ugly side of the people’s game”, 2011 CJEL, P. 627.

[8] Art. 12(1) FIFA RSTP 2001.

[9] Art. 12(2) FIFA RSTP 2001.

[10] Press release EU Commission, IP/01/29, 14 February 2001.

[11] Art. 12(1)(a) FIFA RSTP 2001.

[12] Art. 12(1)(b) FIFA RSTP 2001.

[13] FIFA Circular no. 769, 24 August 2001.

[14] F. de Weger, “The Jurisprudence of the FIFA Dispute Resolution Chamber”, 2nd edition, Asser Press (2016), p. 14.

[15] FIFA Circular no. 801, 28 March 2002.

[16] Supra at 14, pp. 36-37.

[17] Supra at 15.

[18] Ibid.

[19] New Art. 12(1)(c) FIFA RSTP 2001 in FIFA Circular no. 801, 28 March 2002, “Amendments to the FIFA Regulations for the Status and Transfer of Players”.

[20] Art. 19(2)(c) FIFA RSTP 2005.

[21] Art. 19(2)(a) FIFA RSTP 2005.

[22] Art. 19(2)(b) FIFA RSTP 2005.

[23] C. Lembo, “FIFA Transfer Regulations and UEFA Player Eligibility Rules: Major Changes In European Football And The Negative Effect On Minors”, Emory Int'l L. Rev 2005, p. 557.

[24] Art. 19(4) and 19(5) FIFA RSTP 2005.

[25] FIFA Circular no. 1075, 18 January 2007.

[26] Commentary on the Status and Transfer of Players, p. 58.

[27] Ibid, p. 59.

[28] Ibid, p. 59.

[29] For more information see A. Duval, “The FIFA Regulations on the Status and Transfer of Players: Transnational Law-Making in the Shadow of Bosman” in A. Duval and B. Van Rompuy (Eds.) “The Legacy of Bosman”, Asser Press (2016), pp. 81-116; A. Duval “The Court of Arbitration for Sport and EU Law. Chronicle of an Encounter”, MJ 2015, pp. 224-256.

[30] CAS 2005/A/955 Càdiz C.F., SAD v FIFA and Asociación Paraguaya de Fútbol and CAS 2005/A/956 Carlos Javier Acuña Caballero v/FIFA and Asociación Paraguaya de Fútbol.

[31] Ibid, para. 2.5.

[32] Ibid, paras. 2.6-2.7.

[33] Ibid, para. 2.10.

[34] Ibid, para. 2.16.

[35] Ibid, para. 2.17.

[36] Ibid, paras. 3.6-3.17.

[37] Ibid, para. 7.2.

[38] Ibid, para. 7.3.1.

[39] Ibid, paras. 7.3.2-7.3.5; Especially the circumstances surrounding the mother’s search for a job, the agreement between her and her employer, and the reasons why she decided to take up work in Cádiz while, being a cook, she could have worked anywhere in Spain, did not assist to their case.

[40] Ibid, para. 7.3.6.

[41] Ibid, para. 7.3.8.

[42] FIFA Circular no. 801, 28 March 2002.

[43] Supra at 30, para. 3.3.5 and 3.11.

[44] Ibid, para. 7.3.10.

[45] Ibid, para. 7.3.10.

[46] CAS 2008/A/1485 FC Midtjylland A/S v. Féderation Internationale de Football Association.

[47] A. Wild, “Young Football Players: Protection of Minors” in “CAS and Football: Landmark Cases”, Asser Press (2012), p. 249.

[48] Ibid, p. 250.

[49] Supra at 46, p. 3.

[50] Ibid, p. 4.

[51] Ibid, para. 10.

[52] Ibid, para. 15.

[53] Ibid, paras. 19-21.

[54] Ibid, para. 22.

[55] The Cotonou agreement between the EU and certain African, Caribbean and Pacific States, including Nigeria; Ibid, paras. 30-31.

[56] Supra at 46, para. 35.

[57] Ibid, para. 36.

[58] Case C-265/03 Simutenkov v Ministerio de Educación y Cultura and RFEFl [2005] ECR I-2579, Therein the ECJ ruled that non-EU/EEA sportsmen can challenge nationality clauses if: they are legally employed in a host EU Member State and “can rely upon a directly effective equal treatment provision included in an international agreement establishing a partnership between the EU and their country of origin, regardless of whether accession to the EU is envisaged or not”, see S. Van den Bogaert, “From Bosman to Bernard” in J. Anderson (Ed.), “Leading Cases in Sports Law”, T.M.C. Asser Press (2013), p. 104.

[59] Supra at 46, para. 40.

[60] Ibid, para. 41.

[61] Ibid, para. 45; Supra at 30, para. 7.2.

[62] Supra at 46, paras. 47-49.

[63] The White Paper on Sport (COM 2007) 391 final, point 4.5; European Parliament, Report on the on the future of professional football in Europe (2006/2130(INI)), p. 25.

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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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