A review of Argentina’s new sports training-compensation law

Published 18 July 2016 By: Ariel Reck

Player_Holding_Football_in_front_of_Argentinian_Flag

On November 18, 2015, the Argentine Parliament passed law 27.2111 (the “Law"), establishing at national level the right to training compensation to any sporting club. The Law applies to every sport, collective or individual, and rewards the training offered to young athletes from the age of 9 to 18.

 

Background

The new law was passed in the context of a major reform of the sporting legislation in Argentina (which has also included a new Sports Act and anti-doping regulations). It also follows a long-time claim from small amateur sporting institutions, mainly football clubs, that training compensation is required, as the Argentine Football Association has established no regime. The original project was drafted by the Latin American Association of Sports Law (ALADDE)and endorsed by several legislators at the Parliament.

 

Calculating Compensation

Those readers familiar with the FIFA training compensation system stipulated under Article 20 of the Regulations on the Status and Transfer of Players (for a review, see here2) will find the Argentine law peculiar in many aspects. The relevant age group is 9 to 18 years (instead of 12 to 21), compensation is calculated on a percentage basis (rather than a fixed amount depending on the new club category), and triggering factors of the compensation include not only transfers or first employment contract, but also renewals, terminations and prize money in individual sports.

The system also effectively combines into one single regime a mix of two regimes that are distinct under FIFA: training compensation3 and solidarity contribution.4 In this regard, it is important to remember that the Law applies to every sport in Argentina and most of them differ greatly from football, not only in structure and regulatory framework but also in economic significance.

The Law differentiates between team and individual sports for the purpose of the applicable compensation. In team sports it is payable:

  1. when the amateur player signs his first professional contract; and
  2. each time the professional athlete is transferred to a new club or signs a new contract.

The contract is deemed to be “professional” if it is equal or exceeds the minimum basic income in Argentina, irrespective of its denomination (scholarship, bonus, etc).

The amount to be paid is 5% of the gross value of the entire contract, or 5% of the gross value of the transfer, termination agreement or buy-out payment depending on the event that triggers the compensation (a renewal or a signing of a new contract, a transfer between clubs or a termination by mutual agreement or via a buy-out clause). The payment shall be made 30 days after the event that gives rise to the compensation.

As to the employment contract as the triggering factor of the compensation, the Law includes a controversial iuris et de iure (irrebuttable) presumption. Even if the contract is signed or renewed for less than three years, that period will be the minimum basis for the calculation of the 5% compensation.

 

Distrusting Compensation Payable To Multiple Clubs

In case of multiple training clubs, the compensation shall be divided equally by each year of training (10% per year of training from 9 years to 18 years). The compensation is payable 30 days after the occurrence of the event leading to the training compensation and cannot be assigned, renounced or transferred to third parties.

In individual sports, such as tennis, the training compensation is payable as follows. In any tournament with prize money that exceeds 36 minimum monthly wages, the organizer shall pay 5% of the prize amount to the federation in charge of the sport. The federation shall then distribute the amount in four equal parts between the clubs that trained the first, the second, the third and the fourth qualified athlete in that tournament. If any of the aforementioned clubs is a foreign organization, the amount shall be retained by the national federation and used for the development of the sport.

In a very similar fashion to the FIFA system, the time limitations for a club to file a training compensation claim under the Law is two years (since the transfer, the signing of the contract, the registration in the club or the end of the tournament, depending the event that gives rise to the compensation). After that period, if the club does not file a claim on time, the respective federation has six months to claim such compensation and use the funds to the development of the youth divisions of the sport (here the system differs from the FIFA regulations where the right of the federation arises after eighteen months and the statute of limitations is two years in total).

The law also provides pecuniary sanctions (from 25% to 100% of the amount of the training compensation at stake) for clubs that hide or disguise the real value of the transfer, the prize money or the employment contract in order to reduce the amount of the otherwise payable compensation.

 

Dispute Resolution Process

As to the dispute resolution system to handle any conflicts that may arise in the application of the Law (and the author anticipates that there will be many) the potential beneficiary of the compensation can opt between presenting the claim before the ordinary local judiciary or an arbitration tribunal specialized in sports law and independent from the federations. Also when a federative mechanism exists but the club`s claim is not resolved in a period of six months, the claimant can consider such delay as a denial of justice and revert to the ordinary courts or arbitration tribunal for a final decision of its claim.

Federations are obliged to regulate in their own statutes the right to training compensation. If no regulation was set in force within six months of the passing of the Law, or if the national Law is more beneficial than the federative regulation, then the Law applies in default until such time as complying regulations are passed. The six-month time frame elapsed on May 18, and virtually no sporting federation passed its own training compensation system. It is yet to be seen how the decision-making bodies will solve the potential conflicts between federative rules and the national Law. Will the “more beneficial” test be applied to the regulation as a whole, or to each article in dispute?

 

Potential For Future Disputes

The drafting of the Law is not perfect and leaves potential for future disputes.

For example, during the relevant training period, from 9 to 18 years old, the athletes are often not registered at federative level. Proving whom the Law applies to and to what degree may well be contentious. To compound the problem, clubs that train players at that age often do not have a precise and reliable registry, and sometimes children play for more than one club at the same time. Maybe an official registry will be needed in every Federation.

The minimum three-year contractual period for the calculation of the compensation is also a controversial rule that can lead to double or multiple compensation for the same periods. Imagine a player that signs for a club for one year, and after that signs for a different club for one year, and again for a third time for one year. According to a literal reading of the Law, the clubs that trained the player will be entitled to compensation for 3 years from each of the 3 clubs. This does not seem right. Hopefully the application of the law will correct this certainly unwanted effect of the presumption.

Finally, in several sports (in particular in individual sports), the young athlete pays a fee or contribution to the club in order to practice the sport. It seems more difficult to justify training compensation in these cases. Again, it will be a matter to solve for the tribunals in application of the law to concrete situations.

We have yet to see how the Law will be applied in concrete cases, and of course the majority of sports federations have not yet put in place their own regulations, which indicates that we should anticipate disputes around applicability and enforcement.

However, these potentially contentious issues aside (which will be gradually ironed out over time), in general terms it is important to stress that the Law is a necessary, important and well intentioned development for amateur sports clubs in Argentina. It represents an answer to a longstanding claim for training compensation and will, the author hopes, help to cultivate the infrastructure of grassroots sports throughout the country.

 

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Author

Ariel Reck

Ariel Reck

Ariel is a lawyer in Argentina focused exclusively on the sports sector, mainly the football industry. He has particular experience advising on third party player ownership issues, player´s transfers and international sports disputes before FIFA and CAS. He has also spoken at conferences on these issues in Argentina and at international level.

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