This year’s FIFA congress in Sao Paulo should not be remembered only for the controversy surrounding the bid for the World Cup 2022 in Qatar. The controversy was surely at the centre of the media coverage, but in its shadow more long-lasting decisions were taken. For example, the new Regulations on Working with Intermediaries was approved, which is probably the most important recent change to FIFA regulations. These new Regulations will supersede the Regulations on Players’ Agents when they come into force on 1 April 2015. In this blog post we compare the old and the new Regulations followed by a short analysis and prospective view on the effects this change could have. 

The Road to the New Regulations

Players’ agents, or “intermediaries” should we use FIFA’s new terminology, provide their services to football players and clubs to conclude employment contracts and transfer agreements. FIFA has been regulating this activity since it introduced the first Regulations on players’ agents on 1 January 1996. Even though the Regulations were amended several times since then, it is only during the last five years that a permanent consultation process was put in place. According to a FIFA press release, the consultation process involved member associations, confederations, clubs, FIFPro and professional football leagues. Surprisingly however, the press release does not mention whether agent stakeholders, such as Pro Agent were also consulted. The ultimate objective of these consultations was to propose a new system that is more transparent and simpler in its implementation and administration.[1] At the beginning of 2013, a Sub-Committee for Club Football was set up to deal exclusively with the issue of reforming the Players’ Agents Regulations. Later on that year the Committee presented a draft for the FIFA Congress 2013 based on the following three findings:

1. The current licensing system should be abandoned

2. A set of minimum standards and requirements  must be established in FIFA’s future regulatory framework

3. A registration for intermediaries must be set up [2]

The draft Regulations were finally approved by the FIFA Executive Committee on 21 March 2014 and by the FIFA Congress on 11 June 2014. Furthermore, the three objectives outlined are supposedly reflected in the new Regulations.  

A Rough Comparison of the Old and New Agents/Intermediaries Regulations

In the following flowcharts we have summarized the key requirements enshrined in both the old and the new agents/intermediaries FIFA regulations. This provides a clear comparison of the differences and similarities existing between the two regulatory frameworks.

Flowchart: Becoming an Agent under the Old FIFA Regulations
FlowchartRegulationsPlayers'Agents.jpg (179.7KB) 

Flowchart: Becoming an Intermediary under the New FIFA Regulations
FlowchartRegulationsonWorkingwithIntermediaries.jpg (146.5KB)

By abandoning the old licensing system, the procedure to become an intermediary becomes much simpler than before. The applicant does not have to undergo an examination by FIFA anymore, nor does he need to conclude a professional liability insurance in his own name or provide a bank guarantee from a Swiss bank for a minimum amount of CHF 100,000. Furthermore, in contrast to the old Regulations, legal persons can now also act as intermediaries. Thus, in the near future we can expect players such as Cristiano Ronaldo, Radamel Falcao and coach Jose Mourinho to be represented by the agents’ company GestiFute rather than simply the agent Jorge Mendes. 

However, it should be noted that FIFA’s new Regulations on Working with Intermediaries are to be considered as minimum standards or requirements. In accordance with Art. 1(3), the right of associations to go beyond these minimum standards/requirements is preserved. In other words, national associations can set higher thresholds for becoming an intermediary should they wish for. In order to better understand the practical reality of the regulation of agents it is therefore necessary to analyse to what extent different associations set different standards and requirements.  

Registration

Under the new Regulations, the national associations will still be responsible for adopting a registration system regarding the intermediaries. However, several important changes between the old and the new Regulations can be deciphered, including the contractual terms between the intermediary and the player/club and the remuneration terms.  

Contractual terms

Under the old Regulations, the representation contract between the agent and the player and/or club would only be valid for a maximum period of two years. Moreover, the contract could be extended for another period of maximum two years (Art. 19(3) of the old Regulations). According to Art. 3 of the new Regulations, "intermediaries must be registered in the relevant registration system every time they are individually involved in a specific transaction". Players and clubs disclose all the details to the association when called upon. Thus, by allowing players not to be contractually bound to a specific intermediary for a specific period of time, the bargaining position of the player when engaging the services of an intermediary is likely to increase.

Remuneration terms

In both the old as well as in the new Regulations the amount of remuneration shall be calculated on the basis of the player’s basic gross income. [3] Nonetheless, where under the old Regulations the remuneration is calculated on the basis of the player’s annual income, under the new Regulations the remunerations is calculated on the basis of the player’s income for the entire duration of the contract. Moreover, as stipulated in Art. 7(3)a) of the new Regulations, the “total amount of remuneration per transaction due to intermediaries (…) should not exceed 3% of the player’s basic gross income for the entire duration of the contract”. Secondly, the new Regulations prohibit any payment to intermediaries when the player is a minor.[4] With the new provisions on remuneration FIFA hopes to avoid that intermediaries exploit players. Indeed, in many countries it is still common practice for players to (unknowingly) sign contracts with their agents forcing them to pay a much higher share of their income. This was perfectly possible under the old Regulations since it did not provide a remuneration limit due to the players’ agents and there was no prohibition regarding remuneration to the agent when the player is a minor and should be way more difficult under the new Regulations.

Conclusion
With the new Regulations FIFA attempts not to regulate access to the activity anymore, but instead to shape the practice itself: players and clubs are authorised to choose any parties as intermediaries and can change intermediary at any moment since they are not bound by a contract with the intermediary. Furthermore, with the remuneration limit of 3% of the player’s income FIFA aims to limit the risk of players being exploited by their intermediaries.

Even though FIFA has explicitly stated the new Regulations will not deregulate the profession, it seems that it is placing the main responsibility to regulate onto the national associations. Not only will all the national associations be required to introduce a registration system, but they are also responsible for enforcing the rules and for imposing sanctions in case the new Regulations are breached. As we have seen, when selecting an intermediary, players and clubs shall act with due diligence. However, the definition of the interpretation of the notion of due diligence is left open and could differ from country to country.

With the game of football becoming ever more globalised and with an ever increasing amount of international transfers of players, regulating the profession of agent/intermediary at the national level is becoming increasingly difficult. In this context, FIFA has adopted a surprising orientation by delegating the responsibility to regulate the profession to the national associations.

[1] http://www.fifa.com/aboutfifa/organisation/administration/news/newsid=2301236/

[2] http://www.fifa.com/aboutfifa/organisation/bodies/congress/news/newsid=2088917/

[3] The Regulations on Players’ Agents, Art. 20(1) and the Regulations on Players’ Agents, Art. 7(1)

[4] The Regulations on Players’ Agents, Art. 7(8)

Editor's Note:  Marjolaine is an attorney admitted to the Geneva bar (Switzerland) who specialises in sports and life sciences.  She currently participates as a scientific collaborator at the University of Neuchâtel on a research project to produce the first article-by-article legal commentary of the 2015 World Anti-Doping Code.

Over the past days, we have been flooded by media reports discussing the “Caster Semenya-case”, reports rapidly relayed in social networks. Since the debate has a distinct legal component and since almost every report appears to draw significantly from the legal background, I granted myself permission – as compensation so to speak - to publish a somewhat more personal, less legal, post than I usually would.

Let me make one thing clear from the outset – I am still ‘agnostic’ about the question of how to solve the issues surrounding the male versus female divide in sports. Each time I have been asked to write or speak on the subject, I have tried to stick to describing the legal situation and its implications. I do not have the miracle solution as to how to handle this infinitely complex issue. And I am not sure anyone can claim to hold that solution at this point. Like everyone, I am doing my research and trying to be humble enough to stay within the realm of my competences.

What I do know: when discussing legal regulation, it is usually not wise to focus disproportionality on an individual case, no matter how much that case stands out. Humans are wired to respond to the particular and the concrete. Caster Semenya’s story is a compelling narrative, which can also very conveniently be supported by pictures (often in poses that – deliberately? – do not do her justice). By contrast, legal regulation is general and abstract and must be designed to address multiple potential situations. I am not naïve enough to believe that regulation is not influenced by politics and – yes - emotions. Still: law-making must be able to distance itself from the pressure of public opinion. This is especially true if the resulting regulations are to deliver satisfactory results on the long term, after the public eye has turned away.

The Court of Arbitration for Sport ruling in the Dutee Chand matter that suspended the validity of the IAAF Hyperandrogenism Regulations was based on a lack of sufficient scientific evidence. More precisely, the decisive factor for the CAS panel was that the IAAF had not adduced sufficient evidence that testosterone levels - at the threshold set in its Regulations - conferred to female athletes an advantage that would outrank any other natural characteristic, in a manner that would place them in a position comparable to male competitors. Absence of evidence is not evidence of absence. Thus, the mere fact that the IAAF – reportedly – intends to continue seeking support to regulate hyperandrogenism and related issues does not truly amount to a ‘challenge’ of the CAS’ ruling or a ‘contempt’ for the decision of the panel. Nor do the IOC recommendations to the same effect. These statements are, on the contrary, the logical sequel of the interim award and the two-year deadline given to the IAAF. I previously made the point – along with my co-author - that the rendering of an interim award was surprising, for various reasons related to legal technique and arbitration practice. But the reactions of the IAAF and the IOC to that award seem rather unsurprising. What is more significant from a legal perspective: the CAS panel placed the burden of proof on the IAAF. This means that, as long as the science is unsettled, women with hyperandrogenism will be given the benefit of the doubt.

Which leads us back to Caster Semenya. I have been reading that making history in Rio could paradoxically be career-ending for her[i]. This is because an outstanding victory would represent outstanding indication of her enjoying an unfair advantage. This may – unfortunately – hold true for public rumour. However, what the CAS panel was looking for in the Dutee Chand award is clearly scientific studies, supported by data and analysed by experts. Evidence in court may not always be rocket science, but CAS panels do not rely on purely anecdotic evidence either.

Meanwhile, the manner in which the topic is being dealt with today is fundamentally divisive, when we should be aiming for cohesion. It positions men against women, sports authorities against athletes, (presumed) non-hyperandrogenic females against (suspected) hyperandrogenic ones. The level playing field is an ever-elusive ideal – some may call it an illusion or utopia - but one worth striving for. It is one of the primary reasons humans bother to look at a couple of other humans running around a 400m loop. Perhaps regrettably, giving legal contours to the level playing field will always involve compromise of some sort, leaving out certain factors to include others.

Today, Caster Semenya is competing legitimately under the rules currently applicable to her. End of the story. And she is entitled to enjoy it - like any other individual, male or female, - who invested years of their lives into their Olympic dream. Let us continue the debate around the legitimacy of gender categories in sport, but without tarnishing the reputation of individuals in the process.

[i] See e.g. http://www.bbc.com/sport/olympics/37102204 (accessed 18.08.16): “For what greater indication of unfair advantage could there be, when the IAAF is trying to buttress its case, than a victory unlike anything history has ever seen before”.

Yesterday, 18 May 2016, the licensing committee of the Dutch football federation (KNVB) announced its decision to sanction FC Twente with relegation to the Netherland’s second (and lowest) professional league. The press release also included a link to a document outlining the reasons underlying the decision. For those following the saga surrounding Dutch football club FC Twente, an unconditional sanction by the licensing committee appeared to be only a matter of time. Yet, it is the sanction itself, as well as its reasoning, that will be the primary focus of this short blog.

Background

By way of reminder, FC Twente is the typical example of a professional football club who had been “punching above its weight” for years. After taking over the club in 2003, president Joop Munsterman and his fellow associates took extreme financial risks in order to overtake clubs like PSV and Ajax as the best club in the Netherlands. At first they were successful, but winning the Dutch league in 2010 did not prove enough for the overambitious executives of FC Twente. The club started spending more money than ever on the transfer marker and new massive loans were taken to upgrade the stadium to Champion League standards. Unfortunately, all this extra spending did not materialize in extra sporting successes. Furthermore, the money derived from selling players was not sufficient to service the debt incurred in the process.

Yet, the scope of FC Twente’s financial trouble did not become apparent until November 2015. It was then that footballleaks released the Economic Rights Participation Agreement (ERPA), or TPO agreement, the club had signed with the Maltese investment company Doyen. The fine prints of the ERPA, explained in our blog of 2 December, took everyone by surprise, including the KNVB’s licensing committee. More than the precarious state of the club’s finances, it was the fact that FC Twente had deliberately mislead the KNVB regarding its relationship with Doyen that shocked the Dutch federation.[1]

As an immediate reaction to Twente’s omissions, on 15 December, the licensing committee decided to conditionally withdraw FC Twente’s license, unless the club collaborates fully to an independent internal investigation into its structure and governance. Moreover, the licensing committee sanctioned FC Twente with a €45,250 fine and a three-year exclusion from participating in European competitions. The report of the internal investigation, published on 1 March 2016, highlighted the complete lack of transparency in transfer matters, i.e. all the transfers and their financing were taken care of by vice-president Van der Laan without the involvement of other board members. The ‘Additional Agreement’ signed with Doyen, for example, was never mentioned in any of the board meetings. The report also brought to light a fresh case of deliberate deceit of the licensing committee in the transfer of Dusan Tadic to Southampton the summer of 2014. According to FC Twente’s original disclosure to the KNVB, Tadic’s agent would receive €1.8 million, which was 15% of the transfer amount. However, in January 2016, a month after FC Twente promised full collaboration in the investigation, it suddenly turned out that Tadic’s agent still had a claim of €1.8 million based on a second agreement between him and the club regarding the same transfer. Not only was this second agreement never notified to the licensing committee, it was also never mentioned to the investigators during several meetings held in December 2015. 

The licensing committee’s decision

In a nutshell, the licensing committee decided to unconditionally withdraw FC Twente’s license, but to simultaneously grant it a new license so that it is permitted to play in the Dutch second professional league. The committee held that:

“The Dutch licensing system was repeatedly, deliberately and systematically undermined by FC Twente and the licensing committee was repeatedly, intentionally and purposely misled. This behavior undermines the functioning of the licensing system, contributes to an unfair competition between professional football clubs, creates income for FC Twente it would not have obtained under fair conditions (e.g. income from the selling of TV rights) and leads to player transfers that possibly would not have taken place had the club behaved ethically.”[2]

It added that it had already considered an unconditional withdrawal of the license in December 2015, but decided against it because it needed more information, such as an independent report. The licensing committee’s conclusions drawn from the report was twofold. On the one hand, the licensing committee praised the fact that FC Twente collaborated with the investigation, that it promised to continue with the reorganization of the club’s governance structure after  a new license was granted[3] and that it will not ask for a UEFA license for the next three seasons.[4]

On the other hand, the licensing committee felt it needed to act as a consequence of the new information regarding the Tadic transfer. The committee determined that the “Doyen Gate” was not an isolated incident, but that it fitted in a pattern of systematic unethical behavior by FC Twente’s management. Consequently, it concluded that FC Twente had breached Article 9 of the Dutch license regulation, which requires a license holder (i.e. a professional football club) to timely provide the licensing committee all the relevant information and documents regarding the club’s financial situation, transfer details, etc. Interestingly enough, the license regulation offers only two sanction possibilities for breaching Article 9: A fine of maximum €45.250 under Article 11(1); or the complete withdrawal of the license under Article 12(2)c). The option to sanction a club with a relegation to the lower divisions is currently not an option, as stipulated by the license committee in paragraph 9 of its decision.

The lack of alternative options proved to be problematic for the licensing committee because it found a fine of €45.250, given the circumstances, disproportionately light, but the decision to withdraw the license disproportionately heavy.[5] A complete license withdrawal could realistically lead to the disappearance of FC Twente, a football club with (as held by the licensing committee) an important role in the Enschede region. “The licensing committee is aware that the effects (of a collapse) could be disastrous for FC Twente, its employees, financers, supporters and professional football in the region”.[6] With this statement, the licensing committee is demonstrating that it is taking into account inter alia the guarantee issued by the municipality of Enschede on a loan of €32 million for FC Twente in December 2015, under the condition that the club would obtain a license. Without this loan, FC Twente would have gone bankrupt. In the end, the licensing committee came up with the rather pragmatic solution to withdraw unconditionally FC Twente’s license, immediately followed by the granting of a new license to participate in the second professional league, “in order to limit the disproportionate consequences of the license withdrawal”.[7]

What makes the licensing committee’s decision worthy of debate is that the regulations, strictly speaking, do not provide for the option to replace a first division license with a second division license. The committee admits that it has sought the limits of the licensing regulations, but defends its decision by stating it is sanctioning FC Twente for its past actions in a proportionate manner while taking into account the interests of the club and its stakeholders.  

Aftermath

In an official statement following the decision, FC Twente declared that its currently studying all its options. Although an appeal remains one of the possibilities, one could argue that it might be too risky for FC Twente to do so. Concretely, an appeal would probably lead to a sanction that actually exists under the regulations: A fine of €45.250 or an unconditional withdrawal of a license. A more interesting issue is whether any other professional club might consider questioning this decision. Clubs who believe to have been placed in a disadvantageous position as a result of FC Twente’s deliberate and systematic deceit, could argue that the current sanction does not address the gravity of the misconduct. Moreover, the fact that the sanction is not enshrined in the KNVB’s regulations, could make it difficult for the licensing committee to uphold it in an appeal procedure.

This decision puts the final nail in FC Twente’s coffin. The surprising rise and brutal downfall of the Dutch club exemplifies the advantages and downsides of TPO. This practice (and other financial tricks linked to the transfer system) enabled Twente to leverage up and make the impossible possible (winning the Eredivisie), but at the same time strapped it with an unsustainable debt that has brought the club to its knees. Basically, fans must choose between a few seconds (or years) of glory on the one hand, or a sustainable future for their club on the other.

[1] FC Twente had not disclosed to the KNVB an Annex, called ‘Additional Agreement’, to the ERPA that insinuated far-reaching influence by Doyen in employment and transfer-related matters, thereby breaching FIFA and KNVB Regulations.

[2] The licensing committee’s decision, page 1.

[3] In this regard it should be noted that four FC Twente board members resigned in March as a result of the report. See “FC Twente geeft toelichting op onderzoeksrapport Knüppe” (http://www.fctwente.nl/blog/2016/03/fc-twente-geeft-toelichting-onderzoeksrapport-knuppe/).

[4] The licensing committee’s decision, page 3.

[5] Ibid., page 4.

[6] Ibid., page 5.

[7] Ibid.