“Wild West” or “Brave New World”? The new FIFA and FA Intermediaries Regulations

Published 27 March 2015 | Authored by: John Mehrzad, Grahame Anderson

On 1 April 2015 FIFA’s controversial new Regulations on Working with Intermediaries (the “Intermediaries Regulations”)1 are due to come into effect.

For critics, on the one hand, the implementation date on April Fool’s Day reflects their ill-conceived nature. For them, the new regulations will usher in the wild west2 with everyone and anyone being able to become involved in agents’ activities.

On the other hand, for FIFA, the regulations are necessary, since the current regulations, the Regulations Players' Agents (2008),3 have not worked; 70% of global transfers do not involve licensed agents, average commission payments are 25% of the value of player transfer deals and, as a result, the system has not been as transparent as it should have been with some players being exploited.4

In light of those polarised views, this article proposes to consider more closely (i) changes in the new regulations; (ii) legal challenges; and (iii) likely disputes in the post-1 April 2015 brave new world?

 

The Intermediaries Regulations in English Football

There has already been considerable review,5 comment6 and analysis7 on the Intermediaries Regulations. Without detracting from those excellent contributions, this article has the relative advantage of coming after the Football Association (the “FA”) set out the applicable tests and provided standard form representation contracts alongside its own Regulations on Working with Intermediaries (made to facilitate FIFA’s Intermediaries Regulations).8

Acting as an intermediary

The new system modifies the focus from who can be an intermediary to how they operate. There are no longer the same restrictions on entry into the profession: exams and insurance. Instead, intermediaries must register ‘in the form as may be prescribed from time to time9 by the FA. From now on, the sole barriers to entry will be “impeccable reputation10 and conflicts of interest.11

On 20 March 2015, the FA added to its website its “test of good character and reputation.12 The headline point is that one cannot be an intermediary with an unspent conviction for violence, a financial or dishonesty offence, or be subject of professional or financial disqualifications, including bankruptcy. Those in the industry will have noted similarities with the FA’s Owners and Directors Test (in particular the reference to “Disqualifying Conditions”).13 Unlike that test, however, the intermediaries test does not impose an obligation to self-report.

Legal persons will now also be able to act as intermediaries as well as natural persons. This will do away with arguments in future about whether or not a contract was void or unenforceable because it was entered into by an agency rather than the individual agent.

Drafting and disclosure of representation contracts

FIFA states that a core part of their intention was to increase transparency in the profession.14 To that end, the FA has set out a system of disclosing representation contracts within 10 days of execution,15 and where there has been any variation, novation, et cetera. Further, existing agents will be required to lodge extant contracts by 1 April 2015, or within 10 days of registration of the intermediary. It is not clear what the penalties for failure will be (save for the catch-all threat of misconduct proceedings under the FA Rules16). Similarly, it remains unclear what steps the FA are taking to ensure the confidentiality of the contracts that are lodged with them. A search of the Information Commissioner’s Office register reveals that the FA is registered as a Data Controller17 under the Data Protection Act 1998.18 It is unclear to whom the content of lodged contracts will be available.

The representation contract will also have to incorporate certain obligatory terms in a standard representation contract, just published on the FA website.19

Remuneration

The change that has grabbed the most headlines in the Intermediaries Regulations is the following:

"…as a recommendation, players and clubs may adopt the following benchmarks: (a) the total amount of remuneration per transaction due to intermediaries who have been engaged to act on a player’s behalf should not exceed…3% of the player’s gross income for the entire duration of the relevant employment contract "20

A similar “benchmark” applies to intermediaries acting for clubs in relation to a player contract or a transfer agreement.

Notably, though, the FA’s new standard form contract does not refer to the 3% at all.21

Understandably, agents and their lawyers have baulked at the suggestion that a cap may be imposed on their remuneration. Certainly, that is how it was originally perceived, and a summary of the Intermediaries Regulations, still available on the FIFA website,22 refers to this as a “limit”. It was also described as a “limit” in FIFA Circular 141723 in April 2014. Similarly, the French translation of the present Intermediaries Regulations24 describes the 3% in more mandatory terms. Though prefaced by saying the benchmarks are a recommendation, the translation of “benchmark” is, in French, “critèresor criteria. Similarly, where in English FIFA’s Intermediaries Regulations state that remuneration “should not” exceed 3%, the French translation says “ne peut exceder” or cannot exceed 3%. In short, the true status of the 3% is unclear.

Minors

The Intermediaries Regulations also provide that "[p]layers and/or clubs that engage the services of an intermediary when negotiating an employment contract and/or a transfer agreement are prohibited from making any payments to such intermediary if the payer concerned is a minor".25

What it does not say is that no representation contract between an intermediary and a minor or club may contain a payment provision if, at any point during the life of the contract, the player is under 18. This presents agents and their lawyers, in our view, with three options for ensuring that they are remunerated for their work with minors.

First, the payment provision could be triggered at a time when the player reaches 18. The FA’s Intermediaries Regulations provide that the maximum duration of a representation contract is 2 years.26 Accordingly, unless the minor entered into the contract on or before the day of his sixteenth birthday, a maximum-length contract would subsist until he had reached the age of 18. The payments could then be made.

Second, section C4 of the FA’s Intermediaries Regulations provides that the payment of agreed instalments can take place after the expiry of the representation contract where the life of the player’s employment contract subsists beyond the representation contract. This will be of use where the representation contract is for a duration of less than 2 years and/or at the end of which the player is still under 18.

Third, agents could seek to explore other options for remuneration. The new system does not apply to arrangements that cover image rights, sponsorship deals etc. There is nothing in the new system to prevent agents and clubs entering into scouting contracts and the like.

It is also important to note that a legal person registering as an intermediary cannot apply to deal with minors;27 there will be specific disclosure and barring restrictions on who can.28

Legal Challenge

Given agents could see their remuneration dramatically reduced, it is unsurprising that they are up in arms at the proposed new regime.29 The Association of Football Agents (AFA) has seen fit to challenge the implementation30 of these benchmarks (the FA’s Intermediaries Regulations currently incorporate the language of the FIFA text identically), as price-fixing” for the purposes of Article 101(1) of the Treaty on the Functioning of the EU or an “abuse of a dominant position” for the purposes of Article 102.31

The AFA is also reported 32 to be due to meet the FA before the end of March 2015 with the threat of an application for injunctive relief under FA Rule K arbitration or otherwise being pursued if the AFA is not satisfied with the FA’s proposals.33

The clock is, however, ticking. The challenge at European level will simply not be determined before 1 April 2015. Whilst an injunction could be sought on an interim basis, given the FA’s standard form contract does not now set out any prescribed percentage cap or even benchmark for commission, there would appear to be no realistic grounds for a domestic challenge at present. That may change in the future if the FA determines that 3% is, in fact, the fall-back default percentage in the case of a dispute.

 

Future disputes

Whilst the nature of disputes involving intermediaries may not change, their frequency could well do under the new regulations. These are the areas that may well see disputes in the future:

  1. The new regulations do not change the other forms of statutory and common law obligations on a person acting in the capacity of an agent.34 To that extent the “wild west” cannot come to pass as intermediaries will not be permitted to act in any other way than in the best interests of the player or club they are representing. Put simply, intermediaries will still owe fiduciary duties to the player or club they represent. It is likely, therefore, that we will still see the same arguments made by a player or club in the future; the intermediary did not act in their best interests, the intermediary made a secret profit from a transfer or contract renegotiations, the intermediary did not declare interests that may conflict with the interests of the player or club.
  2. There may be an increase in disputes about who was the effective cause35 of a transfer or a contract negotiation – and is, therefore, entitled to a commission payment. Where more individuals and now even companies become involved in those negotiations – and customarily there are often quite a number – it is likely that there will be disputes over who is really entitled to payment in the first place.
  3. Whilst the precise effect of the nature of the 3% commission “benchmark” is played out, intermediaries will no doubt seek to secure remuneration from sources other than through the transfers or player contracts. The likely consequences are that intermediaries will seek higher percentage fees from other player-related commercial agreements, such as image rights or sponsorship or other forms of endorsement related contracts. It may, in practice, be a case of what an intermediary loses out of one hand, they will try to gain in another.
  4. Although the new standard form FA intermediary representation contract contains a 2-year term as under the previous regulations, arguably intermediaries may receive less remuneration than previously since instead of the 5% standard commission being received, they may only receive 3%.36 In those circumstances, intermediaries may argue that the standard duration of a representation agreement should be longer, say 3 or 4 years - and that period would not, given the change in commission payments, amount to a restraint of trade.37

It is worth noting that the new system does away with the automatic jurisdiction of FIFA (and ultimately the Court of Arbitration for Sport) when a dispute arises. Instead, the FA’s standard representation contracts contain a compulsory reference to FA arbitration (pursuant to Rule K of the FA Rules).38 This will almost certainly be speedier and more time efficient than drawn out litigation up to FIFA and beyond.

Given the new FA standard form contract does not refer to a 3% cap and there is also no reference to 3% becoming the default payment if there is a dispute, there currently does not seem to be any reason for the new regulations to be prevented from coming into force on 1 April 2015, as intended by FIFA. However, although the world previously populated by agents may not immediately become the “wild west” with a huge growth in intermediaries all fighting over smaller slices of the proverbial cake, at least the volume of representation-related disputes – if not their nature – may well increase in the post-1 April 2015 brave new world.

 

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About the Author

John Mehrzad

John Mehrzad

John is recognised as a leading barrister specialised in employment, commercial and sports law, practising from Littleton Chambers where he is the Head of the Sports Law Group.

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Grahame Anderson

Grahame Anderson

Grahame is a barrister at Littleton Chambers and a member of Littleton’s Sports Law Group.  In addition to sports law, he specialises in employment and commercial work.

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