Top ten tips to understand third party investment in football players

Published 17 March 2014 | Authored by: Daniel Geey

With third party investment in football players (TPI) becoming a hot topic for discussion at present, I thought it would be useful to briefly set out my top ten tips to help understand the key concepts.

1. TPI in the football industry is where a football club does not own, or is not entitled to, 100% of the future transfer value of a player that is registered to play for that team. There are numerous models for third party player agreements but the basic premise is that companies, businesses and/or individuals provide football clubs or players with money in return for owning a percentage of a player’s future transfer value. This transfer value is also commonly referred to as a player’s economic rights. There are instances where entities will act as speculators by purchasing a percentage share in a player directly from a club in return for a lump sum that the club can then use as it wishes.

2. The Premier League, Football League, Football Association, the Polish and French leagues have all implemented regulations to prohibit TPI in their leagues. There appears to be a growing tide of opinion against TPI. The original prohibition regulations in the Premier League came as a result of the Tevez affair where a third party owner had the contractual right to force West Ham to sell the player if a suitable bid was received. This was against the current regulations that were in place at the time. Subsequently, the Premier League tightened its regulations to prohibit any type of TPI. Other leagues swiftly followed.

3. Within the last year, UEFA and the global players union FIFPro have suggested that TPI should be banned and FIFA has suggested at the very least that the activity should be more tightly regulated.

4. The European Club Association appears very much sat on the fence at the present with some clubs like Porto strongly in favour of TPI. It is argued that TPI provides an additional source of funding to clubs who can then share the transfer risk with an external investment company. The degree to which certain federations have an appetite to deal with TPI and how quickly such regulations could be put in place still however remains to be seen.

5. UEFA’s latest position appears to be that, in the coming years, it will not allow players that are third party owned to play in their Champions League and Europa League competition. That would theoretically not prohibit clubs from signing and playing third party owned players in domestic competition (unless there are domestic prohibitions like in the Premier League, Football League, Ligue 1 or Polish league). UEFA general secretary Gianni Infantino has said UEFA “will certainly look into” the possibility of banning third party-owned players from UEFA competitions and that “this kind of player ownership is a growing threat”.

6. Current FIFA Rule Article 18bis of FIFA’s Rules on the Status and Transfer of Players states that: “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.” This is not a specific ban on TPI but a ban on a third party owner from influencing a club’s employment or transfer related matters.

7. The probable reason why FIFA may be less likely to implement an outright ban is because in countries like Spain and Portugal and especially South America TPI is prevalent. Outlawing such a practice would be both politically and practically difficult. This is in contrast to the Football Association, the Premier League and the Football League prohibition position. The rationale is that it is evidently easier for national associations to implement TPI prohibition rules with narrower scope, than it would be for FIFA.

8. With UEFA looking to ban players who are third party owned from playing in their club tournaments, many are questioning whether regulation of the practice rather than an outright ban would be preferable. In addition, some believe that it is not a ban but total transparency of the arrangements that is required. This could even be expanded to include a list of the owners of such transfer rights. Such transparency could allow the football family to scrutinise any potential conflicts of interest between, for example, those who own the economic rights of a player and those who also own a stake in a football club.

9. If such a TPI prohibition for UEFA competition was to be enacted, another question for UEFA to consider would be whether the provisions would have retrospective effect. If so, many clubs would effectively have to ‘buy-back’ the registrations of players who wanted to play in UEFA competition. Many would argue that would be unreasonable for contracts entered into prior to any proposed rule change. If the proposed rule did not have retrospective effect, clubs who had third party owned players would still have the benefit of being able to play them in UEFA competition but would not be able to register new players. Such uneven regulation would be far from ideal but a transitional period would no doubt be required.

10. Listen to my latest podcast on TPI with football website here or the podcast here

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About the Author

Daniel Geey

Daniel Geey

Daniel is a Partner in the Sport Group.

Daniel’s practice focuses on helping clients in the sports sector, including rights holders, leagues, governing bodies, clubs, agencies, athletes, sports technology companies, broadcasters and financial institutions.

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