A quick guide to the statutory and common law duties on sports agents
Published 12 February 2015 By: Andrew Nixon
Dave Nightingale, writing for the Sporting News many years ago, cynically said:
"Want to be an agent? Open your mouth and declare yourself one: you don’t need a law degree, you don’t need an education, you don’t have to have a licence – knowledge of sport is preferable but not mandatory."
"All you have to do is convince some professional athlete or would be pro that you can get a better deal for them than they could themselves. Voila - you are a member of the newest profession in the world."
Those were, clearly, simpler times. The agency relationship is an incredibly important one for the athlete: as such it is built on trust. Athlete agents perform a variety of functions, for example brokering and negotiating player transfers and contracts, activity that is typically regulated by governing bodies and federations. But it does not stop there: athlete agents also source and arrange commercial and sponsorship tie ups, as well as providing legal, financial and tax advice.
In my experience the majority of athlete agents perform vital roles for their clients. This might be down to years of experience or a vast network of contacts, which is hugely important as we are talking about exploiting very short careers, or it might be down to skills, experience and market knowledge from a negotiating perspective.
Notwithstanding this, a number of high profile transactions, particularly in football, and the revenue generated by agents from those deals, has led to growing concerns that some agents are charging exorbitant fees and that those fees are disproportionate to the services provided, and also that some agents are more interested in their own personal gain than the interests of their clients. As a consequence, the activities of athlete agents have come under considerable scrutiny by sports regulators and governing bodies. The sporting regulatory framework is, however, well known to most sports practitioners. I wanted, therefore, to provide a brief overview of how agents are regulated in addition to, and irrespective of, the rules imposed by governing bodies.
Common Law Duties
The common law definition of agency is as follows1:
“Agency is the fiduciary relationship which exists between two persons, one of whom expressly or impliedly manifests assent that the other should act on his or her behalf so as to affect his or her relations with third parties, and the other of whom similarly manifests assent so to act or so act pursuant to the manifestation.”
The existence of this fiduciary relationship is not contingent upon a contractual arrangement, and the range of duties bestowed is not exhaustive. Perhaps the most important duties relate to acting in accordance with, and not exceeding, express,2 or implied, authority,3 as well as using all proper skill and care,4 and to avoid conflicts of interest.
For example, an agent may not, without the consent of his principal, use information acquired through the principal/agent relationship in order to make a secret profit. More obviously, the agent may not acquire a benefit through breach of his duties to his principal. The case of Imageview Management Ltd v Jack5 is an interesting one in this regard, and in the context of the common law duties of an athlete agentgenerally.
In that case, an agent called Mike Berry negotiated a contract for Kelvin Jack, a Trinidad and Tobago international goalkeeper, to sign for Dundee United. A commission of 10% was agreed based on the player’s gross salary, but Berry also negotiated a side agreement without informing the player under which the club would pay him £3000 for obtaining the player’s work permit.
When the player found out about the side agreement he stopped the commission payments to Berry. Berry sued the player and the player counterclaimed for the commission already paid, and account of the secret profit. The Court found in favour of the player (and Berry failed in a subsequent appeal). This case not only involved a secret profit but a conflict of interest, such that the agent was only interested in moving the player to Dundee United, as opposed to any other club, because the side agreement was in place with Dundee United.
The fact is common law imposes high standards on agents in addition to, and irrespective of, any regulations imposed by sports governing bodies. This is an important point, and one that needs to be borne in mind by those who have expressed concerns about sports that do not regulate, or loosely regulate, the activity of athlete agents. As Lord Justice Jacob stated:
"An agent's own personal interests come entirely second to the interest of his client. If you undertake to act for a man you must act 100% body and soul for him. You must act as if you were him. You must not allow your own interests to get in the way without telling him. An undisclosed but realistic possibility of a conflict of interest is a breach of your duty of good faith to your client."
The Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Business Regulations 2003
There is no specific legislation relating to athlete agents, as there is, for example, in the USA. However, as well as common law, a number of duties are imposed on agents and agency activity through statute, which creates a regulatory, or quasi-regulatory framework in its own right. The Employment Agencies Act 19736 (the Act) and the Conduct of Employment Agencies and Employment Business Regulations 20037 (the Regulations) regulate those who provide services for the purposes of finding employment for people and/or supplying employers with employees.
I set out below what are, on balance, the most relevant provisions of the both the Act and Regulations for the athlete agent:
- Prohibition on offering financial benefits or benefits in kind to use an agent’s services;8
- An agent cannot without authority enter into a contract on behalf of and bind the principal;9
- An agent cannot enter into a contract on behalf of the employer and on behalf of the employee;10
- Transparent disclosure to the principal of fees payable, who will pay the fees and the services to which the fees relate, is required;11
- An agent must record all the terms of the agreement between the agent and principal in one document;12
- An obligation to have a separate client account, with monies to be held on trust for the principal;13
- Unless provided for in the agency agreement, a prohibition on deducting the agency fee from any sums paid to the agent on behalf of the principal;14
- A prohibition on receiving a fee from the principal if a fee has been received from the employer.15
There is an interesting debate to be had here, of course: what type of ‘agents’ are the Act and the Regulations aimed at? Clearly, recruitment consultants and head hunters, and any natural or legal person who finds employment for its principal (for example, an acting or model agent). The athlete agent is however, in many ways, a different beast: his or her role is not simply to find employment, but to more generally represent the interests of the athlete, for example by brokering playing contracts and commercial deals, making introductions and, as set out above, general day to day support and advice.
These statutory provisions are nevertheless relevant and binding and athlete agents should be aware of them (as indeed should sports regulatory practitioners). Breaching the Act or Regulations can constitute a criminal offence, and sanctions can range from a fine to ban for up to ten years. Furthermore, without prejudice to any right of action (and any defence) which may be available, failure to comply with any of the provisions of the Act or of the Regulations by an agency or employment business shall, so far as it causes damage, be civilly actionable.
I am not at the time of writing aware of an athlete agent having been prosecuted or sued under the Act or the Regulations, but they are more than simply an extra layer of regulation, notwithstanding the ‘interesting debate’ mentioned above. Certain provisions (such as the prohibition on agents charging clients (as opposed to the employer) a fee is not applicable to professional sport (and this is obviously reflected in various governing body regulations) but role of the Act, and the Regulations, in regulating athlete agency activity is often forgotten about, or considered as an afterthought, in the context of athlete agency.
In my view, governing body regulations should draw specific reference to the Act and the Regulations, as the Rugby Football Union do at RFU Regulation 8 - Agents, which states:
"Registered Agents (as defined in Regulation 8) must comply with all relevant legislation relating to their conduct and the performance of their role as Agents as may apply within the jurisdictions in which they are operating including without limitation the Conduct of Employment Agents and Employment Business Regulations 2003 or such similar or equivalent legislation within the relevant legislation."16
Bribery Act 2010
I also wanted to touch upon the Bribery Act 2010,17 which came in to force in the summer of 2011 and crystallised the unwieldy range of common law and statutory anti-bribery provisions which were in place but poorly enforced. There have been relatively few prosecutions so far and none relating to athlete agents, as far as I am aware, but it is nevertheless a key piece of legislation and one athlete agents should clearly be aware of.
There are two general criminal offences of bribery (sections 1 and 2):
- Bribing another person: it is an offence to offer or give a financial or other advantage in order to intentionally induce another person to perform a public or commercial function or activity improperly, or to reward a person for so doing; and
- Offences relating to being bribed: it is an offence to receive a financial or other advantage intending that a public or commercial function or activity should be performed improperly as a result.
Penalties on a summary and indictment basis can range from an unlimited fine to imprisonment for up to ten years.
So, these are provisions the athlete agent should be aware of and alive to. It would be an offence, for example, for an agent to accept or give financial reward or other gifts from or to a third party in relation to duties he carries out for his principal.
In the context of a player transfers such gifts or bribes are often referred to as ‘Bungs’. Bungs first came to attention in the early 1990s when it was alleged that illegal payments were made to Terry Venables and Brian Clough in relation to Teddy Sheringham’s move to Tottenham Hotspur 1992.18 George Graham, the former Arsenal manager, was also the subject of similar allegations in 1994 in relation to the transfer of John Jenson to Arsenal (it was alleged he received payments from Jensen’s agent).19 20 years on bungs remain a topical issue in football, as evidenced by the press attention generated by the then Luton Town manager Mick Newell allegations in 2006 that bungs were rife, allegations that ultimately led to the commission of Lord Stevens Report.20
The expansion of agencies from small, ‘one man band’ operations, into large businesses with commensurate turnovers also brings the corporate offence into view (section 7 of the Bribery Act). This provides that a commercial organisation will commit an offence if an associated person (for example an employee) performing services on the organisation’s behalf offers, promises or gives financial or other advantage to another person. Furthermore, the Fraud Act 200621 covers false representation, disclosure of information and abuse of position (which includes the position of an agent in relation to his principal).
The law of agency is wide-ranging and at times complicated. However, the purpose of this short piece is to act as a reminder that those natural or legal persons who, for a fee, introduce athletes with a view to employment are already subject to regulatory scrutiny through common law and statutory provisions, most of which overlap considerably with existing sporting regulations.
Common law and statute do not, as set out above, merely act as an extra layer of regulation, but in fact they are the primary layer of regulation and they prevail over the regulations of governing bodies. Arguably, there is actually no “rule of reason" for governing bodies to regulate the activity of athlete agents based upon the specificity of sport, and indeed FIFA has cited the fact that there are conflicts between the FIFA Regulations and national laws in some countries as one of the core reasons for implementing of a new approach to regulation of agents in football based upon the concept of working with intermediaries.
There are two interesting, and in some ways conflicting points, to take away, particularly in light of the new FIFA and FA Regulations on working with intermediaries. We know from the brief discussion above that the domestic statutory, regulatory and common law duties are not going anywhere, so those carrying out agency-services for footballers in the future will not be “unregulated” as such, notwithstanding how the governing bodies decide to proceed.
However, ultimately, one of the most important aspects of governing body regulation is that the framework will often provide for agency related disciplinary matters and disputes to be resolved by private arbitration. The counter factual (i.e. an agency environment unregulated by governing bodies but instead by the ‘laws of the land’) would mean disputes being dealt with through litigation, and sports would be ‘airing their dirty linen’ in public. That is a scenario that most sports, athletes and athlete agents want to avoid; and indeed this prospect may well have been a major driver behind the last ditch settlement agreement reached between Rory Mcilroy and Horizon Sports Management earlier this month.22
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- Tags: Agents | Bribery Act 2010 | Conduct of Employment Agencies and Employment Business Regulations 2003 | Contract Law | Criminal Law | Employment Agencies Act 1973 | England | Football | Fraud Act 2006 | Governance | Intermederies | Regulation
- Key sports law cases and developments to watch in 2015
- A Critical Review of FIFA’s ‘Working with Intermediaries Regulations’ 2015
- The end of the licensed football agent?
- A long way to go before a consensus is reached on the regulation of football agents
Andrew Nixon is a Partner in the Sport Group at Sheridans. Referred to in this year's Legal 500 as a “very bright and talented sports lawyer” Andrew's practice focuses principally on regulatory, governance, disciplinary, arbitration and dispute resolution within the sport sector. Andrew's clients include governing bodies, sports clubs, sports agencies and individual athletes.