Useful information

Within the transfer contract the club will wish to reserve the right to receive a certain percentage from any subsequent transfer of a player (economic rights). How does the club guarantee the recovery of its percentage share?

In order to understand the topic fully we will be using the following terminology:

New club – the club which the player is joining.

First transfer – the transfer of the player from a previous club to a new club under the first transfer contract.

Third club – the club, where the player moves to from a new club.

Subsequent transfer – the transfer of the player from a new club to a third club under the second transfer contract.

Economic rights have two stages: appearance and implementation

Appearance. A previous club and a new club sign a transfer contract, which contains the following clause (an example):

In the case of a subsequent transfer of the player from the new club into the third club, the new club takes upon itself a commitment to pay to the previous club X% from the cost of this transfer.

Implementation.When the player moves to the third club, a partial amount of the transfer fee (X %), which the new club is receives, should be passed to the previous club.

The above clause is the only one that relates to economic rights. Frequently, clubs do not include this clause in a contract and therefore cannot protect their economic rights. Consequently, problems with receiving the specified percentage frequently occur. The club, which has the right to receive a percentage of the sum of the subsequent transfer, may not know that the transfer has already occurred and has no information as to what the transfer sum was.

In order to avoid such problems, the transfer agreement relating to the first transfer must contain the following:

  1. That the new club be obliged to inform the previous club of any subsequent transfer of the player.
  2. That responsibility rests with the new club if it fails to give such notice
  3. Settlement procedures and due dates for payment if a subsequent transfer occurs
  4. The new club is responsible for any breaches of the payment procedures.
  5. An arbitration clause. Procedures for dispute resolution

If a transfer contract contains the above mentioned clauses, the previous club can quite easily recover the cost of economic rights (specified percentage) as the courts would recognise the validity of the clause in the contract. Therefore, we provide our clients with free of charge, detailed written consultation documents containing the correct legal terminology. This removes the need to waste the client’s money on a case with little or no chance of success.

When a club has spent a significant amount of money purchasing a new player, but that player, without a valid reason, terminates his contract. How does the club recover its investment?

According to FIFA rules, a club has the right to demand payment of full wage compensation which is the equivalent to the amount of wages the club would have paid to the player up to the end of his employment contract. For example, a player signed a 5-year contract with a club based on an annual wage of 60.000 Euros. If this player terminates his contract with the club after 3 years, then that player should have played for that club for 2 more years. Compensation is calculated as follows: 2 years x 60,000 Euros = 120,000 Euros.

FIFA does not always decide to reimburse the entire sum, which the club has requested. Therefore, it is more effective to include in the employment contract a clause containing a penalty on a player for termination by him of his contract. This penalty can be predetermined at any reasonable amount. In the above example this penalty could be set at around 300,000 Euros. If the penalty had been set at, for example, 1.000.000 Euros, then FIFA could decide that this amount is far too high.

Therefore, we provide our clients with free of charge, detailed, written consultation documents containing the correct legal terminology. This will fast-track proceedings of the case and considerably increase our client’s chances of recovering any losses.

A player terminates his contract with a club without a valid reason. What must the initial actions of a club be?

If a player fails to turn up for training or for an official game, then his actions amount to a breach of his contract of employment. It also shows that a player may be considering a termination of his contract with a club without a valid reason. In such situations the club should try to have telephone negotiations with the player or his agent, to remind them of the player’s contractual obligations. However, at the same time, it is vital that the club immediately prepares for legal proceedings:

  1. Under no circumstances should a club stop the payment of a player’s wages just because he does not come to collect them (if his wages are paid in cash). To continue the payment of wages for 2-3 months after the player terminates his contract proves that the club has performed its obligations under the contract.
    It is important when signing a contract of employment with a player, to obtain the players bank details, even if his wages are paid in cash. This allows the club the ability to continue to transfer his wages into his bank account even when the player has “escaped”.
  2. Once a club is aware that a player has terminated his contract, then all correspondence to the player must be send by recorded delivery to the player’s last officially recorded address.Under no circumstances should a club stop the payment of a player’s wages just because he does not come to collect them (if his wages are paid in cash). To continue the payment of wages for 2-3 months after the player terminates his contract proves that the club has performed its obligations under the contract.
    Even if a club, under an agreement in the contract, rents accommodation for a player, this does not automatically mean it’s the player’s official place of residence. A player must, at least once (for example, immediately after signing a contact), register with the club in writing his official address. The club is then entitled to send any correspondence to the player to that registered address.
    If a player at a later date changes his place of residence without notification, then it is no longer the club’s problem. It is essential that the club keeps receipts of all correspondence sent to the player by recorded delivery.

The club may wish to transfer the player, so that the club can receive a fee. However, the player may wish not to be sold as he may prefer to leave as a free agent. Why does this happen and what can be done to prevent this possible loss to the club?

In such a situation a player’s decision may be influenced by his agent. It is well known that an agent will receive a substantial financial reward when a player signs for a new club as a free agent. Without a transfer fee, how can the club recover its expense of maintenance and training of the player?

  1. In order to avoid such situations, it is necessary, in our opinion, to include in the player’s initial employment contract a specific clause, connected to a further extension of the contract. Such actions are valid as FIFA and CAS legally recognise such clauses. Therefore, the use of such mechanism can only be allowed if the above mentioned conditions are strictly observed. In particular:
    • the club’s option must be contained within the player’s main contract of employment
    • the total period (contract and option) for an adult player must not exceed 5 years. For a young player it cannot exceed 3 years
    • the option must be dealt with before the employment contract expires
    • the clause in the contract must be reasonable for both parties e.g. where a club can extend a contract unilaterally, then there is a requirement to offer the player a substantial pay rise. The amount of such a pay rise should be stated clearly in the original employment contract
    If such a clause is worded correctly it can contain provisions that allow financial sanctions on the player for non-compliance.
  2. If the club, which the player joins as a free agent, applies the ethics, which should exist in football, then it will do the following: it will contact the club, whose contract with the player has expired, to find out whether this club has any claims connected to the player. This initial contact can be used to start negotiations between the clubs about reasonable compensation.
    Unfortunately, this is not standard practice. Therefore, the only method of recovering at least some funds, spent on the player, is to claim training compensation. To simplify this process it is necessary (preferably 6 months prior to the end of an employment contract) to propose to the player an option of signing a new contract with conditions no worse than the old contract. The proposal must be sent to the official address of the player. At present, this proposal is a requirement for European clubs, but we think it should be used for every player. If the player rejects this proposal, then the club has the right to claim a sum of money from the player’s new club under established FIFA regulations.

The club educated and trained a young player from his early years, but before reaching the legal age of maturity, another club has ”enticed” him. How does a club prevent this from happening or at least, receive some compensation?

First, we need to define what we mean by a young player. The legislation of many countries makes it possible to sign an employment contract with a young player with the written consent of his parents, for example, at the age of 15. In such a case the player has the responsibilities of a professional player. The problem is the “stealing” of promising young players before they sign their first professional contract. This is a painful subject for football clubs in many countries, because a young player without a contract does not have same responsibilities, as a professional player.

But… There is a general rule, that the parents of a young player have the right to sign contracts on his behalf. Then only the player’s parents decide whether he is moving to another football academy or not. We think that this rule can be used, where the legislation of the country, in which the player’s club is based, allows it.

As a rule, education at the football school (academy) is free for a young player. However, this does not mean that a club and player’s parents cannot include a clause in the contract about free education. We believe this agreement can make provisions for the following:

  1. The club provides an education for the player free of charge, except in special cases
  2. An average cost of education for one player per annum is ____.
  3. Parents are obligated to compensate for the expenditure of the club in educating a young player, if all of the following applies:
    a) parents of a player did not change their place of residence, and
    b) at the end of the first year, the club carried out all reasonable wishes of the parents regarding the player’s education, and
    c) the player refused to accept the club’s proposal to sign a professional contract.

This advice is aimed at providing the possible solution to the problem; but it will need to be modified according to the national legislation of each club’s country.