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Prohibited Provisions in Football Contracts: FIFA Regulations on the Status and Transfer of Players

Updated: Jul 28, 2021



Introduction


A bad contract is bad for business, hence transparency and compliance with laid down rules are some of the tests measuring the integrity of a contract. In the football business, FIFA is responsible for creating, maintaining, and reinforcing a framework of rules that govern business operations within football, for protecting the integrity of the sport and the interest of all stakeholders.


In line with this regulatory function, FIFA enacts rules to guide specific areas of concern, one of such is the FIFA RSTP[1], regulating inter alia the transfer of football players between clubs.


The governance of football is beset with its own peculiar challenges, one of which is preventing the influence of third parties in the operations of football clubs. Third-Party Influence (TPI) became increasingly important, prompting FIFA to adopt measures since 2008 to forestall the overbearing influence of external forces towards a football club’s management, limiting and/or affecting its independence in the decision-making process. For the sake of clarity, TPI refers to a situation where a counter club or any third-party, outside a football club, is contractually entitled to exercise influence on the club’s freedom, particularly as to the transfer and employment of its players. In this regard, Article 18bis of the FIFA RSTP (Article 18bis) expressly prohibits TPI[2]. Consequently, any contract negating this provision might result in disciplinary sanctions against the clubs involved[3].


This article aims to provide an insight into a few kinds of contract provisions that may be regarded as infringing Article 18bis, before concluding on how football clubs could try to avoid such a breach.


Case law aspects


To show some examples of contractual clause types that might be considered as either violative or non-violative of Article 18bis, here are a few noteworthy cases that dealt with this issue (published within relevant jurisprudence and FIFA TPI Manual[4]), involving clubs from the Asian Football Confederation (AFC), Union of European Football Associations (UEFA) and the South American Football Confederation (CONMEBOL).


1. AL ARABI SC, AL HADAF SPORTS SERVICES COMPANY (AFC)


Al Arabi Sports Club (Al Arabi SC) and the company Al Hadaf executed a MoU for cooperating in football and other sports. An illustration of the MoU clause, found violating Article 18bis provided that[5]:


1.1 Prohibiting the employment/future transfer of the players without third party’s consent


* Al Arabi SC has no right to negotiate with any clubs whether domestically or internationally regarding the transfer or rent of the contracted players who are recruited and whose expenses are covered by Al Hadaf, unless it gets a written authorization from Al Hadaf.


FIFA Disciplinary Committee (FIFA DC) held inter alia that, the clause obliging Al Arabi to inform Al Hadaf and secure its written consent before recruiting, negotiating, or transferring the players in question, imposing restrictions on their future employment/transfer-related issue, clearly limited Al Arabi’s independence, infringing Article 18bis.


2. CHELSEA, AJAX, RANGERS (UEFA)

Chelsea concluded two separate transfer agreements for the engagement of one player from Ajax and another one from Rangers. Both agreements provided some nearly identical clauses, held violative of Article 18bis by the FIFA DC and the FIFA Appeal Committee (FIFA AC), and led to disciplinary sanctions. Following an appeal, the FIFA AC decision was overturned in this respect by the Court of Arbitration for Sport (CAS)[6]. An example of these clauses and its related rulings went as follows:


2.1 Prohibition of transferring the player without the counter club’s consent


* Ajax/Rangers hereby represents and warrants to Chelsea that neither it, nor any of its advisors, agents or intermediaries shall, either directly or indirectly, solicit, accept or engage in any discussion or negotiation in relation to any offer from any other club for the temporary or permanent transfer of the Player’s registration without Chelsea’s express prior written consent.


- According to the FIFA DC, as Ajax/Rangers were prevented from discussing/negotiating the player’s transfer without securing in advance Chelsea’s written consent, there were blocked from transferring the player without Chelsea’s prior authorization. Provided that clubs shall be free to negotiate and loan their players without having to obtain prior approval from another club, the FIFA DC considered that, via this clause, Ajax/Rangers were influenced in their transfer-related matters, limiting their freedom and independence, in violation of Article 18bis.


- Chelsea challenged unsuccessfully the FIFA DC decision to the FIFA AC. Matter then was brought before the CAS, where Chelsea was found not having violated Article 18bis. Pursuant to the Sole Arbitrator, “unless a single player is so exceptionally important for a given club that an agreement like the ones at hand can demonstrably influence that club’s sporting and economic behavior, there must be a network of similar agreements for various players that when aligned can truly influence the “independence”, “policies” or “performance of teams” of a club.”[7] The Arbitrator stated inter alia that it would be “illogical to consider that important clubs such as Rangers and Ajax could be influenced in their independence, policies or performance of teams based just on the obligations undertaken by two players”[8].


3. CORINTHIANS, BAYER LEVERKUSEN (CONMEBOL, UEFA)


A player was transferred from Bayer Leverkusen to Corinthians, while Bayer Leverkusen retained a share of the player’s economic rights. The transfer agreement among other contained the following part of a clause, which was held infringing Article 18bis by the FIFA DC, FIFA AC and finally, the CAS[9]:


3.1 Obligation to disclose any offer and accept an offer equal or greater of a specific transfer fee


* “(…) In case SC Corinthians receives an offer for the transfer of the player to another club, SC Corinthians shall inform Bayer 04 Leverkusen immediately about the offer and its contents. SC Corinthians is obligated to accept the offer to transfer the player, if the transfer sum amounts to EUR 8,000,000, -- or higher.

(…)”


According to FIFA DC, this clause breached TPI rule as, had Corinthians received a transfer offer for the player, in the amount of minimum EUR 8.000.000, it was obliged not only to disclose to Bayer Leverkusen all the offer’s details, but also had to transfer the player’s registration rights, regardless of its own interest in keeping the player for its sporting or other needs. This clause enabled Bayer Leverkusen to influence Corinthians’ independence in employment and transfer-related matters, violating Article 18bis. The matter was later appealed by Corinthians to the FIFA AC that upheld the FIFA DC decision, and subsequently to the CAS, which fully confirmed the FIFA AC ruling and the imposed sanctions.


4. REAL MADRID, MANCHESTER CITY (UEFA)

Manchester City and Real Madrid executed a transfer agreement for a player’s permanent transfer to the latter, which provided among other the following clause that was considered by FIFA DC and FIFA AC infringing Article 18bis:


4.1 Higher sell-on fee in case of player’s permanent transfer to a club of a specific region


“In the event that REAL MADRID transfers the registration of the Player to a third party club (a “Third Party Club”) on a permanent basis (a “Further Transfer”) then REAL MADRID shall pay to MCFC an amount (the "Sell-on Fee”) equal to 15% of the amount by which the consideration received by REAL MADRID as a result of such Further Transfer (net of taxes) (the “Profit”) save that, in the event that the relevant Third Party Club is a club in the region of Greater Manchester, the relevant Sell-on Fee shall be 40% of the Profit.”


Following an appeal lodged before the CAS, the latter set aside the FIFA AC decision[10], inter alia concluding:


- Given the international principle of contractual freedom, adopted by Swiss law, vis a vis the scope behind the application of Article 18bis, the violation of Article 18bis is subject to the cumulative fulfillment of the following conditions[11]: 1) the existence of such an influence so that, 2) this influence causes a limitation in the independence of the influenced club, and 3) this limitation to be of such degree that will undermine the integrity of competition in the sense of Article 2 g) of the FIFA Statutes[12].


- Having in mind the position of Real Madrid in football based on its sporting merits, CAS ruled that even if the said clause could be held as limiting or affecting in some way the club’s decisions, it did not violate Article 18bis, since it could not influence its independence and freedom to such an extent, so as to put at real danger the integrity of the competition[13].


Conclusion

To eliminate the risk of facing disciplinary sanctions by FIFA for violating Article 18bis, a football club must stay away from entering into agreements with any third-party, containing clauses that entitle the latter to exercise a controlling influence of such an extent over the club’s activities, so that this influence be potentially held as truly limiting the freedom of the football club to decide independently.

As it was seen, there are several examples of clauses that were found complying with Article 18bis by the CAS. Nevertheless, clubs must always be cautious as, pursuant to the different rulings of the relevant jurisprudence, the criteria for establishing an actual infringement of Article 18bis appear to be varied significantly, subject to a case-by-case basis examination.

In view of the above, football clubs should always exercise due diligence before consenting to a similar type of contractual clause. A football club’s management shall balance beforehand the possible consequences arising from such a contractual engagement of the club, by making an analytical estimation of each case’s pragmatic facts in line with the reality of football’s transfer market.

The eQuest Sports Law team have extensive experience advising on the transfer of football players. For further guidance, you can contact our sports law team consisting of:

Maisa AlSaidi (Maisa@equestlaw.com), Nicole Jeanine Petras (Nicole@equestlaw.com), Angelos Zavolakis (Angelos@equestlaw.com), Uche George Egbe (Uche@equestlaw.com) and Clive D’Souza (Clive@equestlaw.com)

The content of this article is exclusively for informational purposes and is only a reference. It does not under any circumstance constitute legal advice. Please obtain legal advice prior to acting on the contents of this article.

eQuest Law and its consultants exclude entirely any type of liability for any action and/or non-action taken by any natural person and/or legal person due to the information presented within this article.

[1] FIFA Regulations on the Status and Transfer of Players (https://resources.fifa.com/image/upload/regulations-on-the-status-and-transfer-of-players-january-2021.pdf?cloudid=g1ohngu7qdbxyo7kc38e) [2] Article 18bis para. 1 FIFA RSTP: “No club shall enter into a contract which enables the counter club/counter clubs, and vice versa, or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.” [3] Article 18bis para. 2 FIFA RSTP: “The FIFA Disciplinary Committee may impose disciplinary measures on clubs that do not observe the obligations set out in this article.” [4] FIFA Manual on “TPI” and “TPO” in football agreements (https://resources.fifa.com/image/upload/manual-on-tpi-and-tpo-in-football-agreements-x8394.pdf?cloudid=jhre73qeqmjn6hzi81rn) [5] FIFA Manual on “TPI” and “TPO” in football agreements, page 103 [6] CAS 2019/A/6301 Chelsea Football Club Limited v. FIFA (https://resources.fifa.com/image/upload/cas-2019-a-6301-chelsea-fc-v-fifa-redacted.pdf?cloudid=pucflzgbigisjpvvv2wr) [7] CAS 2019/A/6301, para. 177 [8] CAS 2019/A/6301, para. 178 [9] CAS 2020/A/7016 Sport Club Corinthians Paulista v. FIFA (https://resources.fifa.com/image/upload/cas-2020-a-7016-sport-club-corinthians-paulista-v-fifa.pdf?cloudid=owuwbqv1gll2ivkveien) [10] TAS 2020/A/7158 Real Madrid CF c. FIFA (https://resources.fifa.com/image/upload/tas-2020-a-7158-real-madrid-cf-c-fifa.pdf?cloudid=v7fubqdnrnf8o325vu5g) [11] TAS 2020/A/7158, para. 128 [12]FIFA Statutes June 2019 edition (https://resources.fifa.com/image/upload/fifa-statutes-5-august-2019-en.pdf?cloudid=ggyamhxxv8jrdfbekrrm) [13] TAS 2020/A/7158, para. 142, para. 143 and para. 144

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