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Player Contracts: FIFA Regulations on Working With Intermediaries: analysis

This article was first written for and published by World Sports Law Report Volume 12 Issue 11, November 2014. Click here to view the original. 

John Mehrzad 

FIFA’s new Regulations on Working With Intermediaries will
come into force on 1 April 2015, regulating the player contract itself rather
than the person conducting it, an approach that is arguably consistent with its
Transfer Matching System. John Mehrzad, a Barrister at Littleton Chambers and
Udo Onwere, an Associate Solicitor at Farrer & Co LLP, explain the current
situation regarding regulation of agents, the planned future approach and how
this could impact disputes involving player agents. Mehrzad has acted on behalf
of several agents in disputes before domestic courts, the FIFA Player Status
Committee and the Court of Arbitration for Sport. Onwere is a former
professional footballer who now advises individuals both in and outside the sporting
world on all aspects of tax and estate planning.

With due respect to all involved, it is probably fair to
state that football player agents are somewhere between politicians and lawyers
in terms of popularity. We have read the stories of millions being taken out of
football through agent fees and about players, some of whom are minors, being
exploited by their representatives. Now, in an attempt to address the practical
failure of current regulations, from 1 April 2015 FIFA intends to usher in a
new regulatory regime for player agents (subject to legal challenge).

This article proposes to consider:

• the situation at present;
• the
  new regulations, and
• in brief, what this may mean from a legal perspective in terms of
  future agents disputes. 

Also included within this article will be a short discussion
about a challenge being brought against FIFA’s plans. 

THE SITUATION AT PRESENT

Since 1 January 2008, the FIFA Player Agent Regulations
(2008) (the ‘2008 Regulations’) have provided for a system for licensing player
agents. The 2008 Regulations set out prescribed steps for the introduction of a
player to clubs with a view to negotiating or renegotiating an employment
contract, or the introduction of two clubs to one another with a view to
concluding a transfer agreement with one association or from one association to
another¹.

The purpose of the 2008 Regulations is to ensure specific
standards are maintained, thereby ensuring that players are not exploited and
clear records are kept of who was involved in the negotiation of a player
contract or a transfer. If the player is a minor, their legal guardian has to
sign the representation contract². The names of the parties, the
duration and remuneration due to the player’s agent, the general terms of
payment, date of completion and signature of the parties also has to be
contained in the representation contract³. The player agent is also
advised to send a copy of the contract to the relevant association⁴.
Those agents are also advised to use a standard representation contract, which
was provided by FIFA to its member national associations⁵.

Only natural persons with an ‘impeccable reputation⁶’
who are licensed by the relevant national association, may carry out those
player agent’s activities⁷. In practice, this means that individuals
have to sit and pass a licensed agent examination held by the relevant national
association prior to being permitted to carry out those activities. However,
with the new regulations due to come into effect next year, FIFA has already
announced that it does not intend to hold a further agents examination⁸.

The 2008 Regulations are required to be implemented and
enforced by national associations⁹. In the case of international
disputes in connection with the activity of players’ agents, a request for
arbitration can be lodged at the FIFA Player Status Committee¹⁰ and
its decision may be appealed to the Court of Arbitration for Sport (CAS).

Breaches can result in licences being withdrawn¹¹ or disciplinary sanctions being imposed either by the national association, or
the FIFA Disciplinary Committee¹². Sanctions which can be levied on
an agent, player or club include a reprimand or warning, a fine, or (for an
agent) a suspension of a licence for up to 12 months, a licence withdrawal or a
ban on taking part in any football-related activity or (for a player) a match
suspension or a ban on taking part in all football-related activity or (for a
club) a transfer ban, deduction of points or demotion to a lower division¹³.

THE NEW REGULATIONS

FIFA take the view that the current 2008 Regulations have
not worked since, in particular, only 25-30% of transfers over recent years
have been carried out by licensed agents¹⁴. It should be obvious,
though, that had the 2008 Regulations been implemented uniformly and,
critically, been enforced by national associations, such figures would not
exist. It is the authors’ view that this points to a systematic failure of
implementation and enforcement rather than any particular problem with the
substance of the 2008 Regulations.

Certainly, achieving harmonisation in terms of a regulatory
approach across all 209 FIFA national member associations would be a huge
challenge to any supranational regulatory body. It is entirely predictable that
there would be conflicts between national law and FIFA regulations as well as
inconsistency in implementation and enforcement in different countries.
However, again in the authors’ view, those failures point to the need for
enforcement measures to be strengthened domestically and, if necessary, FIFA’s
own Disciplinary Committee to intervene. At present, proceedings before FIFA
and subsequently on appeal to CAS typically take years to complete. Such delays
do not incentivise parties to take enforcement steps. In short, to have a workable
regulatory system in practice, there needs to be an expeditious enforcement
system in place.

Turning to the substance of the new regulations, the
Regulations on Working with Intermediaries (the ‘Intermediaries Regulations’),
which are due to come into effect from 1 April 2015, set out minimum
standards/requirements that must be implemented by each of FIFA’s member
associations at national level¹⁵. Upon the coming into effect of the
Intermediaries Regulations, the current licensing system under the 2008
Regulations shall be abandoned¹⁶.

The key changes contained within the Intermediaries
Regulations are as follows: 

• Those engaged in providing services to a player
  or a club to conclude an employment contract between a player or conclude a
  transfer agreement between two clubs will be termed an ‘intermediary¹⁷.’
• An ‘intermediary’ may be both a legal or
  natural persons¹⁸, such that corporate bodies such as agencies will
  fall under the scope of the new regulations.
• There is no examination requirement.
  ‘Intermediaries’ will merely need to 5 have an ‘impeccable reputation’ and not
  have ‘a potential conflict of interest’ to become registered with the national
  association¹⁹.
• Players and clubs may adopt the following
  ‘benchmarks’ – the total amount of remuneration per transaction due to
  intermediaries on the player’s behalf should not exceed 3% of the player’s
  basic gross income for the entire duration of the relevant employment contract;
  the total amount of remuneration per transaction due to intermediaries who have
  been engaged to act on a club’s behalf in order to conclude an employment
  contract with a player should not exceed 3% of the player’s eventual gross
  income for the entire duration of the relevant employment contract; or the
  total remuneration per transaction due to intermediaries who have been engaged
  to act on a club’s behalf in order to conclude a transfer agreement should not
  exceed 3% of the eventual transfer fee paid in connection with the relevant
  transfer of the player²⁰.
• Any party that violates the provisions of
  the new regulations may be sanctioned by the national association, the
  sanctions of which may be extended by the FIFA Disciplinary Committee²¹.
• If relevant principles are not complied
  with, the FIFA Disciplinary Committee may itself take appropriate measures²². 

It is this 3% benchmark ‘cap’ which is proving the most
controversial aspect of the Intermediaries Regulations. The Association of
Football Agents (the ‘AFA’), the representative body for around 500 football
agents in England, contends in a complaint to the European Commission that that
particular restriction in particular infringes Arts. 101 (1) and 102 of the
Treaty on the Functioning of the European Union 2012/C 326/01 (TFEU), which
concern the distortion of competition and the abuse of a dominant position
respectively.

The Court of First Instance decision in Piau v. Commission [2005]
ECR II-29, a case brought by a football agent against previous FIFA agent
regulations, established that FIFA is an undertaking (as it undertakes economic
activity) for the purposes of Art. 101 (1) TFEU. It is, therefore the AFA’s
position that the 3% benchmark is an anti-competitive agreement to price-fix
and/or amounts to the abuse of a dominant position to impose unfairly low
pricing on the market, which cannot be justified. The AFA has asked the
Commission to complete its investigation and make findings prior to 1 April
2015, when the Intermediaries Regulations are due to come into effect and, in
the meantime, to adopt interim measures prohibiting FIFA and its member
associations from implementing those regulations.

Future agents disputes In the event, as FIFA intends, the
Intermediaries Regulations come into effect from 1 April 2015, the following
may occur: 

• More persons, both natural and corporate,
  are likely to become involved in player transfers or the negotiation of a
  player contract. Present-day agents, agencies and probably other individuals
  and professions, such as lawyers, accountants or financial advisers, may become
  involved in such negotiations. As a
  result, more disputes over who is really the ‘effective cause’ of the transaction,
  and therefore who is entitled to a fee, may arise, such as in G v. OCAS 2006/A/1019.
• New and inventive ways to secure payment
  will be considered, especially if there is a 3% ‘cap’ on fees arising from the
  transaction itself. At present, the invalidity of an aspect of a representation
  contract does not necessarily nullify the enforceability of the remainder of
  the contract. Subject to disciplinary measures, ‘intermediaries’ may choose to
  test national associations’ appetites to enforce provisions that provide them
  with additional payments other than as anticipated under the Intermediaries
  Regulations, for example a high percentage for work carried out in relation to
  a player’s commercial rights.
• Currently, in England, representation
  contracts are for a standard period of two years. However, where remuneration
  is likely to be reduced over that 7 period due to a ‘cap,’ there may be move to
  extend the length of representation contracts. This may, in turn, re-open
  issues about restraint of trade in relation to holding a player to a contract
  for a number of years despite a relatively short career. 

Ultimately, the current 2008 Regulations demonstrate that
certain measures do not work in practice across all FIFA member associations
unless both those associations and FIFA are prepared to take speedy enforcement
measures. Whilst the Intermediaries Regulations have given rise to understandable
controversy due to the 3% ‘recommendation,’ which will be tested at European
level in due course as a result of the AFA’s challenge, it is the authors’ view
the key to turning around the statistics that FIFA cites for needing reform is
not a ‘cap’ on fees, but rather implementing fit and proper enforcement
measures to ensure compliance globally. To date, some national associations
have done so admirably, such as the FA, but others have not. It is at those
failures that FIFA should direct its reforms. Unless and until that happens,
new regulations are unlikely to change the status quo of how they are
implemented in practice. 

References 

1. Art. 1.1 2008 Regulations.

2. Art. 19.2 2008 Regulations.

3. Art. 19.5 2008 Regulations.

4. Art. 19.6 2008 Regulations.

5. Art. 21.1-2 2008 Regulations.

6. Art. 6.1 2008 Regulations. In assessing this
prerequisite, conduct which may be considered includes any prior conduct of the
applicant that breached FIFA regulations, any criminal record, any false or
misleading statement made in the application, conduct of the applicant’s
business dealings, any ban from managing or directing a company, the
applicant’s financial history, and any previous history of failed or removed
applications.

7. Art. 3.1 2008 Regulations.

8. As reported on the English Football Association website:
http://bit.ly/1zw8xhk

9. Art. 1.5. 2008 Regulations.

10. Art. 30.2 2008 Regulations.

11. Art.15 2008 Regulations.

12. Art. 32 2008 Regulations.

13. Art. 33-35 2008 Regulations.

14. See the views of the Director of Legal Affairs at FIFA:
http://bit.ly/1x3SLJH

15. Preamble to the Intermediaries Regulations.

16. Art. 11.2 Intermediaries Regulations.

17. Art. 1.1 Intermediaries Regulations.

18. ‘Definition of an Intermediary’ within Intermediaries
Regulations.

19. Art. 4. Intermediaries Regulations.9

20. Art. 7.3 a)-c) Intermediaries Regulations.

21. Art. 9.1-2 Intermediaries Regulations.

22. Art. 10.1-2 Intermediaries Regulations. 

This article was co-written with Udo Onwere, Associate at Farrer & Co. LLP, London