The booming of the football industry over the last decade has led to an increasing interest from new actors to join in and take part of the system. Clubs are becoming increasingly bigger, and this can be spotted analyzing their growth in financial value. Traditional sources of income have become outdated, and clubs are in the constant search of new forms of funding to keep on investing on their development. An example of these new sources was the appearance of the Third-Party Ownership (TPO).
Player’s rights are one of the main assets a club owns, and their value is of paramount importance, thus being a key element to consider when arranging the transfer price of a deal. The author Pastore (2018) explains that a player has, both “federative rights” and “economic rights”. Whereas the first cannot be split and must be awarded in exclusivity to a club, the latter could be sold to third parties. TPOs can be defined as an instrument by which a club sells to a third party, typically a private investor, the total or partial ownership of the player’s economic rights in exchange of the right to receive a part of its future transfer value (TAS, 2017) (Alvarez Rubio, 2018). Therefore, the traditional scheme of selling club-buying club and player introduced a new participant. This financial resource was already working for a long time in South American countries, such as Brazil, and in some European leagues, Spain or Portugal.
The instrument presented itself as a win-win solution for clubs who, struck by an economic crisis, were suffering the close transfer deals. On the short term, the club could reduce the burden of paying the total cost of a transfer or gain an influx of immediate money for a player on their squad and the TPO would benefit from the possible gain in value of the player bought. In other words, there is a shared cost in the buying of a player, with the objective of generating a shared profit in the future selling of the player. Italians recognized a similar institution in their local rules, up until 2014: the compropietá, by which two clubs could arrange a transfer but both would own and share the economic rights.
TWO KEY CASES:
In some cases, the deal between club and the investor included clauses that if an offer was received with a price over the agreed, it must be accepted by the club. And this was one of the issues that most infuriated regulators: UEFA and FIFA; they believed it could harm the intrinsic value of sports, conditioning the competitiveness among clubs. The most relevant case was Radamel Falcao exiting Atletico de Madrid. The Colombian striker was bought ahead of the 2011-2012 season by Atletico de Madrid from FC Porto for €40 million. During his first season, Falcao became the top scorer of the Club taking them to win the Europa League trophy. The following season the “Tiger” also led the club to win the Copa del Rey and the European Supercup and was now on the transfer target of many European topflight clubs. After that season, he moved to AS Monaco. A shock move to a promoted club who offered a high transfer fee and salary to the player, but it was later discovered that it was not only his decision to take. Years before, in 2009, to support his move from River Plate to FC Porto, Doyen Sports – one of the main TPOs in Spain – financed 55% of the transfer fee to keep that same stake of the player’s right. When moving to Atlético de Madrid, Doyen once again kept its stake by financing Atletico’s buying of the player. When Falcao was the most targeted player of the market, the offer from AS Monaco was the only one Doyen Sports was willing to accept because it made them earn a great profit.
This wasn’t the first case that raised concerns over TPOs. In fact, years before Argentinian players Carlos Tévez and Javier Mascherano were the protagonists of a similar story which didn’t have a happy ending. Both players were Corinthians players back in 2006. Their sudden almost free transfer from Corinthians to West Ham on transfer deadline day of 2006 left everyone amused. How could this be possible? Media Sport Investment was an international sport investment fund which who was the owner of Corinthians (bought 51% of their stake in 2004) and at the same time had a percentage over some players, as a TPO. The investment fund, whose proprietor was Mr. Kiavash Joorabchian had adopted that business model: a part of a player’s stake of his own club (in this case Corinthians) is sold to MSI, who will later profit from the transfer. West Ham and MSI reached a deal for both players by which the investment fund kept the power to decide on any future transfer deal, without giving the player nor the English club any control or influence over the final decision. In fact, in the case of Mascherano’s contract, the club was only allowed to lay off the player in the event of a permanent incapacity or an incapacity of 18 months in a period of 20 (Shukla, 2020). When the Premier League discovered the issue behind the transfer, it sanctioned West Ham with a £5.5 million fine, and decided by the 2008-2009 to ban TPOs.
These two are only some of the cases that made it to the media, but over time, the overall conclusion of TPOs by the football institutions was that most of them had an opaque background, especially the investors owners of the funds (Rebello de Mendoça, 2018). Following the Tevez and Mascherano case, FIFA also started to investigate following the mayhem over this case, and by 2008, article 18 bis was introduced in the Regulation on Status and Transfer of Players (FIFA RSTP) in which it stated the following:
“Third-party influence on clubs. No club shall enter into a contract which enables any other party to that contract 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. The FIFA Disciplinary Committee may impose disciplinary measures on clubs that do not observe the obligations set out in this article”.
Despite this first attempt of regulation, it didn’t succeed in prohibiting these activities due to the fact that it was very generic clause to regulate the entire activity (Pastore, 2018). By the end of 2014, FIFA Executive Committee approved Circular Letter nº 1464 in which it defined the concept “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”. In the letter it reformed Article 18 bis of 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.”. Finally it added a new article 18 ter to regulate Third party ownership of players’ economic rights: “No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation.”. The global conclusion with these new rules was that FIFA had finally and effectively banned TPOs, they allowed for the ones which were signed to reach termination, but no extension of them was to be made.
RFC SERAING CHALLENGES FIFA ARTICLE 18BIS AND TER
(TAS 2016/A/4490 RFC Seraing c. Fédération Internationale de Football Association (FIFA), sentence du 9 mars 2017)
The Belgian club RFC Seraing based on the city with the same name which plays on the First Division Jupiler League. When the new rules came into force, the club understood that the newly introduced reform of the RSTP articles went against European competition law. Therefore, the club reached a cooperation agreement with Doyen Sports, one of the main TPO companies in the world, by which the club would sell to the fund the 30% of the rights of three players in exchange of 300.000€. Through the Transfer Matching System, which obliges clubs to explain every detail of any operation, FIFA initiated an investigation on the deal. Once FIFA had the contract it was revised, and the Disciplinary Committee opened an investigation. Whilst the ongoing investigation, RFC Seirang submitted to the TMS a new player, and in that transfer, it also mentioned that an agreement had been reached with Doyen for 25% of the economic rights of the player at 50.000€. By the end of July 2015, the FIFA Disciplinary Committee had reached the conclusion that both deals breached the rules of articles 18bis and ter of the RSTP. By September, the decision had been reached: FIFA understood that the club’s deals indeed constituted a violation of the articles, and sanctions with a 150.000CHF fine and 4 registering periods ban, not allowing them to register any new transfer. On appeal, the committee dismissed the club’s recourse.
On the CAS tribunal, the appellant (RFC Seraing) claimed that both articles were contrary to European Union law, specifically, contrary to the freedoms recognized by the European Charter and Treaties: Freedom of circulation of capital, of services, circulation of workers, as well as contrary to EU Competition Law and the European Charter of Rights and the Charter of Rights of the EU.
However, FIFA alleged that it is difficult to prove that there had been an effective restriction of freedoms as a direct consequence of the new rules. As a matter of fact, FIFA justifies the measures arguing that these new rules allow for a higher contract stability, guarantee the independence of the player and safeguard competition by preventing potential conflicts of interest.
The Panel acknowledges the fact that European Law can control the rules and regulations of organizations such as FIFA, and therefore, the rulings from the CJEU can also be applied. Hence, concerning the free movement of capitals, according to jurisprudence, can be limited and restricted with a legitimate purpose regarding the general interest, and FIFA has justified why they established such limitation. In addition, the Panel understands that the imposed limitation isn’t total since TPO can invest on clubs, and can effectively finance clubs or can help a club finance a transfer operation, but what can’t be done is gain an indirect control of a club nor reduce its independence.
Secondly, regarding the freedom of circulation of workers and the freedom to provide services the club argues that this is limiting players from moving easily form one country to another, and limits the action of TPOs, who are a financial service provider. The Panel believes that this limitation only concerns a transfer in which a TPO scheme is used. Therefore, it can’t assume the interpretation of the club because no feasible evidence of what is being alleged has been provided.
Thirdly, with regards to the EU Competition Law, the club believes that the TPO prohibition rules hamper competition because it limits the access of clubs to financing options, but FIFA responds that it is doing so to prevent unfair competition. The conclusion the Panel reaches is that, once again, FIFA is not limiting competition but pursuing a justified interest in the ban of TPOs. Neither has the Club proved a violation of EU Competition Law, specifically articles 101 and 102 of the Treaty of Functioning of the EU.
Fourthly, regarding the claim that the ban is contrary to the European Charter of Rights and the Charter of Rights of the EU, the Panel finds no argument justifying the violation of the rights. The same occurs in alleging that the ban on TPOs is contrary to Swiss law.
Finally, the last allegation from the club is that the ban on TPOs is contrary to CAS jurisprudence. The club alleges that CAS has validated in previous cases contracts with TPOs. The Panel replies to this argument that the case cannot be rendered to this one, mainly because TPOs was not the object of that litigation and back then Article 18 ter had not been approved by FIFA.
To conclude, the Panel admits partially the appeal to reduce the transfer registration ban to 3 periods, instead of the 4 FIFA imposed. The other allegations were dismissed and the ban on TPOs was seen as fair and proportionate.
Nonetheless, RFC Seraing took the case to the Swiss Federal Tribunal calling for an annulment of the CAS award. The Tribunal concludes that even though TPOs are not contrary to public order according to Swiss law, the ban on them isn’t either contrary to public order, and dismisses the case (Alvarez Rubio, 2018).
References
Alvarez Rubio, J. J. (2018). Extensión y límites de la especificidad del deporte: arbitraje deportivo (TAS), normas FIFA sobre TPO y Derecho europeo. Arbitraje, XI(3), 703-734.
Pastore, L. (2018). THIRD PARTY OWNERSHIP AND MULTI-CLUB OWNERSHIP: WHERE FOOTBALL IS HEADING FOR. Rivista di Diritto ed Economia dello Sport, XIV(1), 23-58.
Rebello de Mendoça, P. H. (2018). Third-party ownership prohibition in football and European Union fundamental freedoms: CAS decision on RFC Seraing case. The International Sports Law Journal.
Shukla, R. (2020, September 14). The curious case of Tevez and Mascherano: A transfer saga worth an Oscar. Retrieved October 19, 2022, from Football Pink: https://footballpink.net/the-curious-case-of-tevez-and-mascherano-a-transfer-saga-worth-an-oscar/
TAS. (9 de March de 2017). Arbitrage TAS 2016/A/4490 RFC Seraing c. Fédération Internationale de Football Association (FIFA), sentence du 9 mars 2017.
