Role of law expands in evolving football transfer market

This post was contributed by Nick Eisen, Business Engagement Reporter, Birkbeck School of Business, Economics and Informatics

Football transfer deals require greater legal input than ever before, being more complex and involving more money, parties and issues than in the past. A presentation organised by the Birkbeck Sport Business Centre (BSBC) focused on these developments.

Titled The Football Transfer Market Uncovered: An Insider’s Perspective of How Things Work in Football, the presentation took place at the British Medical Association in Tavistock Square on Monday 22 February, and was part of the BSBC’s Public Seminar Series.

The speakers were Daniel Geey, Partner, and Jonny Madill, Associate, at the Sports Group of media law firm Sheridans, a long-term supporter of the Public Seminar Series. The two lawyers offered an overview of current issues in a complicated and often-misunderstood subject, and facilitated extended and lively question-and-answer sessions, in which the presenters and audience of sports industry professionals, academics, students and public explored evolving issues.

The evening divided into four main areas: the player contract, the lawyer’s role in the transfer process, the transfer window, and key commercial issues. On another level, lawyers had also been advising on intermediary (agent) regulation.

Football-transfer-market---Sheridans

Individuals, organisations and change

In an era of big money, new markets and revenue streams, new media, increased media coverage, and globalisation for football, one general theme was reconciling individual and organisational interests (such as player and club). Another theme could be seen as the sheer pace and level of change to which lawyers and others have to adapt.

Parties requiring legal advice in a transfer include the buying and selling clubs, player, player’s agent and the leagues and federations involved. Documents that lawyers negotiate and draft include the transfer agreement, employment contract, image rights, performance-related pay, release clauses and work permit. Failure to agree any one of these could mean the failure of the entire deal.

With such multiple parties and issues, one example of a contract strikingly indicated the challenge of adapting some mid-20th century procedures to the 21st century, and showed that rapid change in one area might not always entail rapid change in another: a multimillion-euro transfer deal was framed in a contract effectively less than five pages long. Daniel Geey pointed out that it was very unlikely that any other business would handle such a valuable deal and all its component parts so briefly.

Performance-related pay

Pay is one indicator of the changing relationship between clubs and players: there has been a shift away from unvarying, guaranteed remuneration and towards variable, performance-related reward: “giving players more control over their earnings”, as Jonny Madill described it. Here, the objective is to incentivise the player to aim for team benefit rather than personal benefit. Performance analytics (explored in an earlier BSBC/OptaPro event) help in devising incentives. Some have objected to the lower guaranteed earnings. Others stress the potential to earn more through performance rewards. Further tensions have arisen when rewards have not matched expectations.

Such structures can also create anomalies; sporting success can threaten financial failure: bonuses due to players for competition success at one club (Barcelona) led it into financial difficulties in paying those bonuses. The FA allows clubs to insure against such a possibility, though insuring against negatives (such as relegation) is prohibited.

In another area, changing approaches have also threatened to increase individual players’ liabilities. In one case, a club (Chelsea) sued a player for breach of contract and compensation on his transfer fee, due to an issue of illegal drug use. The club subsequently dropped the lawsuit. Players’ representative body FIFPro has questioned why players should be held liable for transfer fees negotiated between clubs without involving the players concerned or their advisers.

Release clauses

To balance the interests of player and club, release clauses also require careful drafting, consisting, among other things, of multiple triggers specific to different contingencies (such as approaches from certain clubs, relegation or time period).

Image rights

In the UK, image rights can now be 20% of a top-level player’s earnings (limited by UK tax authorities) and a valuable endorsement tool for that player’s club. Legally agreeing how the club can use the player’s image is therefore vital. Paying such earnings to a player’s image rights company rather than to the player reduces tax liability. Here therefore, the lawyer’s role is to negotiate between club and player’s company, as well as between club and player.

Work permits

The FA has an intricate new work permit regime, with one tier for European Economic Area (EEA) players and the other for non-EEA players. Lawyers have to navigate a complex system of qualifying points dependent on what minutes a footballer has played in which league in which jurisdiction and can appeal points decisions before an Exceptions Panel – divided into two levels… The UK’s EU referendum result could change the situation again.

Transfer window

The transfer window can also pit individual players against clubs. Some see restricting periods in which players can change teams as providing clubs with some stability. Others argue this restriction conflicts with normal employment rights. FIFPro has complained to the European Commission (EC) that the transfer system is incompatible with EU law, questioning transfer fees and why players’ employment rights should be different from other employment rights (again, how this will affect the UK will depend on the result of the UK referendum on EU membership).

Players’ agents also have a dispute about regulations. The Association of Football Agents has complained to the EC that world football governing body FIFA’s regulatory 3% cap on agent commissions constitutes price-fixing incompatible with EU law.

Jonny Madill concluded the evening by heralding ongoing and likely future issues, including that of transparency in football.

The evening was another event in the BSBC’s active strategy of engagement for all. Closing the evening, BSBC Director Sean Hamil emphasised the role of the Public Seminar Series as a forum for academia, industry and public to meet and explore important developments in sport

Image: Courtesy of richardobeirne under CC via Flickr.co

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