FIFA’s proposed solidarity mechanism reforms – an effective solution or a lost opportunity?
Published 16 January 2019 By: Toni Roca
On 25 September 2018, FIFA announced that football stakeholders had endorsed a long-desired “landmark reform of the transfer system.” 1 The reform package, which was formally endorsed by the FIFA Council a month later,2 includes a number of different proposals,3 chief among which are reforms to the solidarity payments mechanism.4 In the words of FIFA President, Gianni Infantino, a key objective is to “reinforce solidarity mechanisms for training clubs” and to achieve “the effective enforcement of rules that will deliver millions in solidarity payments to clubs”5. To try to accomplish this, the two specific reforms proposed are:
The creation of a “clearing house” to centralize payments associated with transfers; and
The application of the solidarity contribution to domestic transfers with an “international dimension”.6
This article examines the two proposals in light of how the system currently operates. Specifically, it looks at:
The current problems with solidarity payments;
Whether a clearing house can be an effective solution;
How exactly the “international dimension” will apply; and
Proposals on how to improve the current system.
This article assumes a certain level of knowledge about both how the transfer system and solidarity payments currently work, and the new reforms that have been proposed. Readers not familiar with these topics are advised to first read this article on solidarity payments7 and this article on the new reforms8.
THE CURRENT PROBLEMS WITH SOLIDARITY PAYMENTS
Before we examine whether a clearing house can be an effective solution, it is first necessary to outline the current problems with the system. To highlight the issue, this is in broad terms the usual process that a training club (that has not been informed by the new club of the transfer of the player) needs to follow in order to receive its share of the solidarity contribution once it’s aware that one of its former players has been transferred internationally:
First, it will need to ask its National Association to send the official player’s passport, a task that in some cases takes several weeks.
If the club has access to FIFA’s Transfer Matching System9 (TMS) it will have to search for the contact details of the new club of the player (hopefully they are updated) and send them a request to pay. But if the club is not in TMS (and many of them are not10), then it will have to try to find an email address online (usually a general “info” account) or to fill in a “contact form” of the new club and hope that the request reaches the person responsible for these issues.
If the club is lucky and gets an answer, there is still a significant risk that the new club won’t send through a copy of the transfer agreement, usually arguing confidentiality reasons. This prevents the training club from having certainty on the economic terms of the transfer,
Two are the main problems at this stage:
sometimes the figures the training club is told differ substantially from the ones reported in the media. Here the training club has two options: (1) to resort to blind faith and trust the reported information provided, or (2) file a claim and ask FIFA to inform them of all the economic terms contained in the TMS (see Annexe 6, Article 6 Regulations on the Status and Transfer of Players); and
in many cases, clubs only inform of the fix fees agreed, but not on the variable ones (sell-on-fees, bonus per games appearances, per titles, etc.), all of which also trigger solidarity contribution if they are met.
If there is no positive answer (or no answer at all) from the new club11, then the only option left for the training club is to file a claim in front of FIFA’s Dispute Resolution Chamber (DRC), and this can only be done via the TMS (Annexe 6 RSTP).
In case the club has no access to TMS, then its National Association must file it for them. But in some cases (like in Spain) the National Association won’t perform the process for the club; instead it will tell the club to request an individual license from TMS and then the club must undergo a training process before it can start using it (a process that takes a few more weeks).
Depending on the amount of solidarity contribution requested (above CHF 50.000 cf. Art. 17.2 FIFA Procedural Rules), the training club will have to advance costs between CHF 1,000 and CHF 5,000 just for its case to be accepted. In some cases, clubs are so small that they can’t even afford to advance this amount of money.
Assuming everything goes smoothly up to this point, the procedure before the FIFA DRC then has a duration of between three and six months (and have been known to last for more than three years12).
Additionally, the decision will only contain the ruling (not the findings). Parties are allowed to ask for written reasons, which takes an additional four to six months, meaning a total of 12 months to receive a final decision on what is often a relatively simple claim. Of course, in the meantime the training club does not receive its payment.
If the claim is accepted, debtors are usually obliged to pay within 30 days from the date of the decision the principal plus late payment interests (at a rate of 5% per year), and also the procedural costs. However, there is a possibility to avoid the procedural costs if no party asks for the findings of the decision.
Often, the 30 day-period will elapse without the debtor paying (sadly, this is relatively common). In this scenario, the training club must open new proceedings before FIFA’s Disciplinary Committee.
It usually takes several weeks or months until the case is accepted and, when it is, the Disciplinary Committee grants the debtor a new deadline to pay before sending the file for a formal decision.
Clubs usually pay at this stage, because they don’t want to be sanctioned. If they don’t, then the case is submitted to the members of the FIFA Disciplinary Committee and a final decision is issued, normally imposing an additional fine on the debtor.
By now, it is not uncommon for 1.5 – 2 years to have passed since the first email to the player’s new club. And if there’s an appeal to the Court of Arbitration for Sport (CAS), then that may well be extended out still further to 2 – 3 years-time!
Clubs know this, and that’s why many of them are not complying with the RSTP. The better tactic (from a financial perspective) is to remain passive and let the training club do the chasing. They know that by making them open a case the time, costs and administrative burden will be enough to force many training clubs to drop the claim; and, if the amount due as solidarity contribution is very little, then the club may decide not to even file a case to begin with.
This way they keep the money that otherwise should have been distributed as solidarity. And, on the other hand, they know that the worst scenario they will face is a mere 5% yearly interest plus the costs in one or two-year’s time, with no further sanctions. The conclusion seems clear: it’s really worth it not to pay!
IS A “CLEARING HOUSE” AN EFFECTIVE SOLUTION?
Under the new reforms, a centralised “clearing house” is proposed to:
….process transfers with the aim of protecting the integrity of football and avoiding fraudulent conduct. This will ensure the good functioning of the system by centralising and simplifying the payments associated with transfers such as solidarity, training compensation, agents’ commissions and, potentially, transfer fees.13
At present, we have very few details on how the clearing house will operate. The author does however have two main questions relating to the proposal, from which a number of discussion points arise:
Will it be an existing and independent entity (like a bank) or a financial services company newly created and/or under FIFA’s control?
And more importantly, what powers will it have? Simply to centralize and control solidarity payments, or will it have a broader frame of action? For instance: will it be in charge of making the calculations of the amount due to each club? Will it be responsible for contacting the clubs and ask for the relevant bank details, invoices, etc.? Will it have any kind of jurisdictional faculties?
In the author’s experience, a number of colleagues in the industry are suggesting that FIFA’s intention is that solidarity contributions will be automatically deducted from transfer payments and that the clearing house will then distribute it to the relevant training clubs based on the information contained in FIFA’s TMS and the players’ passports.
An automated mechanism like this will of course be a positive change, as it will put an end to many of the current problems that training clubs are facing. However, the author is skeptical that this can be achieved, at least not in short time.
For a full automated process like this to work properly, the whole system would need reliability and accuracy, and unfortunately the current suggested scenario does not (as far as we are currently aware) seem to provide a solution for these two elements. There are a number of reasons for this:
First, we have the problem of the players’ passports. There is not a single passport for every player, instead a player has as many passports as countries he has played in. For example, a footballer who has been registered for clubs in Uruguay, Argentina, Spain and France has four different passports, one issued per each National Association.
Another issue is that sporting seasons differ from one Association to another14, which leads to overlapping problems at the time of doing the solidarity contributions calculations.
And finally, in some cases players from Africa or Eastern Europe have multiple and contradictory passports issued by the same Federation, so the new club has no certainty as to whom it has to pay.
So, for the clearing house to work properly, the first step would be for FIFA to work on a single worldwide passport for ALL players in the world, thus suppressing any potential conflicts in determining the period attributable to each training club.
On the other hand, the clearing house will need to have the details of all the clubs in the world, specially bank details where payments should be made.
And here we find the second biggest problem, because a significant number of training clubs are not uploaded in the TMS, and at this point we are not speaking only of non-European clubs. For example, in Spain the vast majority of clubs that do not participate in professional competitions don’t have access to TMS, as they have no need to be.15
A great number of training clubs are so small that they don’t even have a webpage or an email address for where to contact them. Some don’t even have bank accounts, instead working with the club President’s bank account.
This raises new questions: assuming that the amount of solidarity contributions has been automatically deducted from the transfer, what will happen if the clearing house is not able to contact one of the training clubs and, thus, cannot proceed with the payment of its share? Will it retain this money and, if so, for what purpose? Will it be reimbursed to the club from which the money was deducted? Will it go to the National Association of the training clubs not found, to a special fund of FIFA?
Additionally, Article 2.3 of Annexe 5 RSTP states “An association is entitled to receive the proportion of solidarity contribution which in principle would be due to one of its affiliated clubs, if it can provide evidence that the club in question - which was involved in the professional’s training and education - has in the meantime ceased to participate in organised football and/or no longer exists due to, in particular, bankruptcy, liquidation, dissolution or loss of affiliation”. How will this provision work in an automated process?
What happens in those cases, consistently authorized by the CAS16, where clubs agree on net compensations, decide to change the club responsible for the payment of the solidarity contributions and no automatic deduction can be made?17
Finally, what will happen if, for whatever reason, the clearing house does not pay the solidarity contributions in due time as per the RSTP? Will the clearing house grant late payment interests to clubs? If there’s any dispute at all, where will clubs address their claims, to the clearing house or to FIFA?
In the author’s view, if the real intention in incorporating the clearing house is to automate the whole solidarity contributions process, then a massive prior task needs to be undertaken by FIFA, otherwise the system seems doomed to fail. This seems very unlikely in the short-medium term.
On the contrary, if the whole process is not automated - but only the deduction of the solidarity contributions amount (as the author tends to believe) - then its creation will not solve any problem at all, it will only pass it from the clubs to the clearing house.
And if a single entity is to solve these conflicts for the thousand transfers worldwide where compensations are agreed every year18, it will be a never-ending task, and instead of solving a problem, there is a real risk that FIFA will have created a bigger one.
Based on the foregoing, the author believes that the best decision would be to follow the current model of the English FA and to limit the powers of this new clearing house to simply process payments - once clubs have agreed on calculations, payment and invoice terms. Concurrently, FIFA should look make improvements to the current system. We will pick up on this theme in section four (below), and the author will make a number of proposals as to how this might be achieved. First though we shall examine the second solidarity reform proposal: extending payments to domestic transfers with an “international dimension”.
DOMESTIC TRANSFERS WITH “INTERNATIONAL DIMENSION”
The second biggest change announced by FIFA is that solidarity contributions will apply not only to international transfers, but also to domestic transfers with an “international dimension”. The obvious question here is: what is meant by an “international dimension”?
Is it only the that the player’s nationality is different from that of the two clubs involved in the transfer? Can we also find “international dimension” when the claiming club is from a different Association than the two domestic clubs, regardless of the player’s nationality? Is a previous international transfer of the player mandatory to apply this new provision? What happens with players with two or more nationalities?
Let’s look at some examples to see the different outcomes and their impact on training clubs depending of the criteria followed by FIFA:
Uruguayan player, born in Montevideo, whose career is as follows:
Seasons 12th to 16th birthday: Danubio FC (Uruguay)
Seasons 17th and 18th birthday: Peñarol (Uruguay)
Seasons 19th to 23rd birthday: RCD Mallorca (Spain)
Seasons 24th and 25th birthday: Sevilla FC (Spain)
Seasons 26th to 31st birthday: Real Madrid (Spain)
Assuming the player was always transferred with a compensation, what solidarity contributions will trigger as per FIFA’s reform?
Transfer from Peñarol to RCD Mallorca: International transfer, current Regulations apply, and solidarity contributions is only due to Danubio.
Transfer from RCD Mallorca to Sevilla: First domestic transfer involving a foreign player. In principle, according to the reform we have an international component here, and both Danubio and Peñarol would be entitled to receive solidarity contributions.
Transfer from Sevilla to Real Madrid: A new domestic transfer in which Danubio and Peñarol can claim solidarity contributions. But can also RCD Mallorca claim the solidarity contributions for the four years it trained the player?
Same career, but now with a Spanish player that left very young to Uruguay, where he began playing football with Danubio:
Transfer from Peñarol to RCD Mallorca: No difference from Example A above, international transfer, current RSTP applies and only Danubio shall receive solidarity contributions.
Transfer from RCD Mallorca to Sevilla: First domestic transfer involving a Spanish player (trained in a foreign country) between two Spanish clubs.
Are Danubio and Peñarol entitled to claim solidarity contributions, provided they belong to a different National Association than that of RCD Mallorca and Sevilla? Do we have an “international dimension” here?
Transfer from Sevilla to Real Madrid: Again here, are Danubio and Peñarol entitled to claim solidarity contributions? And what about RCD Mallorca?
If the answer to points 2 and 3 above is no, there is a clear injustice in comparison to Example A, as all three training clubs (Danubio, Peñarol and RCD Mallorca) have invested the same effort and money in training the player but depending on his nationality they are compensated or not.
Same career as before, but the player has two different nationalities (Spanish and Uruguayan). Which one shall prevail?
A young player of Italian nationality. Comes to Spain right after he was born and has never left the country since. During his whole training period19 he was under RCD Mallorca’s discipline. Afterwards, he was transferred to Valencia, to Sevilla and to Real Madrid, respectively.
Do the domestic transfers Valencia Sevilla and Sevilla Real Madrid trigger solidarity contributions in favor of RCD Mallorca? Can we conclude that there is “international dimension” in this case, given the foreign nationality of the player?
These are only some of the controversial scenarios that one can foresee, and it’s clear that depending on the criteria finally chosen by FIFA, the objective of “reinforce solidarity mechanisms for training clubs” will be reached or not.
As explained in the proposals section below, all these problems could be easily solved if solidarity contributions applied to ALL transfers where a compensation has been agreed, no matter if international or domestic, and not only to some of them.
COMMENT – PROPOSALS TO IMPROVE THE CURRENT SYSTEM
Both the introduction of a clearing house and the extension of the solidarity contributions to some domestic transfers with an international dimension are very welcome. However, on the information we have available to date (which is, notably, rather limited) these two measures don’t, in the author’s opinion, appear to address the problems properly and fall short of FIFA’s aspiration.
In the author’s view, the system designed by FIFA to compensate training clubs is actually very good, but it does not work for a very simple reason: there are no consequences if clubs don’t observe the rules.
Unfortunately, the large proportion of clubs worldwide don’t take the necessary steps to calculate and distribute in time the amounts due to training clubs, as required under Article 2.2 Annex 5 RSTP20. They are not proactive, instead they wait until the training clubs address them. And in many cases, even after having been requested to pay, they don’t do it either.
Why is that? Because ironically the entire system is designed in a way that prevents training clubs from receiving solidarity contributions in a quick and easy way and encourages the acquiring clubs (who are often far more powerful) not to comply with the obligations in the RSTP.
Accordingly, in the author’s view, the solution to this does not lie in the creation of a clearing house, but by raising awareness about the importance of the solidarity mechanism for greater good of the football family and the implementation of severe disciplinary sanctions for non-complying clubs.
Until we learn more about how and to what extent the new reforms will apply, the author proposes ten measures that would, in his view, help the current system to work and ensure that all training clubs receive their compensation:
- Application of solidarity contribution to ALL transfers.The first and most obvious proposal is that solidarity contributions should apply to ALL transfers worldwide where a compensation is agreed, no matter if the transfer is domestic or international, and regardless of the presence of any “international component”.
If FIFA’s real intention is to “reinforce solidarity mechanisms for training clubs” and to “deliver millions in solidarity payments to clubs”, then the best it can do is extend it to all transfers, without exception.
And the way to do it is quite simple: just by adding Article 21 and Annex 5 of FIFA’s RSTP to the provisions which are binding at national level and must be included without modification in every National Association’s regulations (Article 1.3.a RSTP).
- Transparency. Clubs with a legitimate interest (this is, clubs that trained the player) should have easy access to all the economic terms agreed for the transfer of their former players, both fix and variable.
And this could be done in two ways: (i) either by allowing training clubs to have access to the information contained in the TMS, or (ii) by obliging clubs to send a copy of the transfer agreement (or of the TMS report), with the imposition of disciplinary sanctions if they don’t.
- Overdue payables. Payment of solidarity contributions should be regarded as “Overdue payable”, in the terms of article 12bis RSTP. Thus, clubs failing to pay the solidarity contributions within the 30-day period foreseen in Annex 5 RSTP should be granted a 10-day period to pay and, if they don’t, severe disciplinary sanctions should be imposed.
First time a club does not pay a solidarity contributions in time, a fine, and subsequent breaches automatically deduction of points or bans for registering players, so that clubs take this matter seriously.
Expedited procedures. Procedures on solidarity contributions before FIFA’s DRC should not last more than two months starting from the reception of the claim by the training club, and decisions should always include their findings and the sanctions (as per point 3 above), thus being immediately final and binding.
- Costs. The advance of costs established in Article 17.4 of the Rules governing the procedures of the Players’ Status Committee and the DRC should be waived.
If not, costs should not be based on the amount claimed, but on the category of the claiming club (for example, Category IV clubs should be exempt from advancing costs), thus making easy for training clubs to access to FIFA’s jurisdiction.
On the other hand, “Procedural costs” as detailed in Annex A of the above quoted Rules should be significantly increased, so that a club “forcing” a solidarity contribution procedure before the DRC is punished.
- Club obliged to pay. Clubs should not be allowed to change the responsibility for the payment of the solidarity contributions, so that training clubs don’t suffer the consequences thereof and always know who they have to address and claim against (see jurisprudence above).
- Single player passport and unification of season. FIFA should work on a single worldwide passport for every player and make it accessible to all clubs in the TMS (note: FIFA has just informed of its intention to create a single electronic Passport in its recent Circular nº 165421).
- Unification of seasons. In line with point 7 above, it would be recommendable to adopt a single worldwide method of calculation for the sporting seasons, in order to avoid overlapping problems.
To this respect, two are the most common alternatives: either the yearly basis (January 1 to December 31) or the European system (July 1 to June 30 next year).
- Awareness campaigns. FIFA should work on campaigns focusing on the importance (i) of the solidarity mechanism for the good of the game and all the football family, and (ii) of complying with the Regulations.
- New stakeholders. Finally, we recommend broadening the concept of “stakeholders”. Current participants22 represent the powerful stones of the football world, and it would be desirable that the voice of the humble ones is also heard, together with the lawyers that work and “suffer” with them on a daily basis, who could be represented by the International Association of Football Lawyers23.
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- Tags: Court of Arbitrary for Sport (CAS) | Dispute Resolution | Employment | fifa | FIFA Dispute Resolution Chamber (FIFA DRC) | FIFA Transfer Matching System | football | Regulation | Regulations on the Status and Transfer of Players | Solidarity Payments | Training Compensation
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Toni is a sports lawyer and partner at Corner Abogado, Palma de Mallorca (Spain). He advises clubs, agents, sportsmen and federations on matters including transfer and contracting of players, dispute resolution before national and international bodies (FIFA, CAS); sponsorship and image rights and disciplinary proceedings.
He is also Chief Executive Officer at Football Transfer Watch, Palma de Mallorca (Spain), who specialise in efficient player transfer monitoring and end-to-end claim management solutions for football clubs around the world.
- Degree in Law by the University of the Balearic Islands.
- Master in Sports Law.
- Master in Tax Law.
- Master in Labour Law.
- Member of the Madrid Bar Association
- Member of the Spanish Sports Law Association.
- Member of the Esports Bar Association.
- Professor of the LLM Master in International Sports Law at ISDE.
- Professor of the Master in Sports Management and Legal Skill with FC Barcelona.
- Member of different Disciplinary Committees in Olympic Federations.
Languages: Spanish, Catalan, English and German.