A review of FIFA’s TPO ban and alternative financing models for clubs

Published 15 March 2016 By: Luís Villas-Boas Pires


Two years have passed since the author’s last LawInSport article1 on third party ownership (“TPO”), and yet the topic remains one of the most talked about in sport news. It seems as though almost all stakeholders in football (FIFA, clubs, third party investors, lawyers, journalists, universities) have commented on the matter, either making statements, taking action or investigating issues such as the legality of the ban, the extent of its scope and effects, and potential alternative financing models to work around its terms. 2

As a result, the author feels that it is an opportune moment to provide an update on some key TPO issues. The update will come in two related articles.

The first article, below, will briefly recap the main points of the TPO ban and then examine a number of the principal alternative investment models that have come to the author’s attention, which allow third parties to continue to participate in the market ostensibly without breaching the terms of the TPO ban.

The second article will examine the case of Doyen Sports Investment limited (Doyen) and Sporting Clube de Portugal (Sporting), concerning the disputed validity of economic rights participation agreements relating to the players Marcos Rojo and Zakaria Labyad.


FIFA’s TPO ban

In December 2014, “in order to protect the integrity of the game and the players,3 the Executive Committee of FIFA implemented a ban on TPO4 by adding a new Article 18ter to the FIFA Regulations on the Status and Transfer of Players. The new article states:

"No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation…"5

Consequences of the ban

Building on the previsions in Article 18bis,6 the principal consequence is that no club or player may enter into contracts with third parties (which are defined as any counterpart other than a club) where the third party has the right to participate in the compensation payable in respect of any future transfer of a player from one club to another or to offset a scenario in which such rights have been subject to transfer to that person.

That is, in the latter situation the club is forbidden from assigning credit rights on a future transfer of economic rights. The author’s view is that this has been the model that football investment firms such as Doyen Sports Investment Limited (“Doyen”) would wish to continue to use had FIFA's ban only targeted the direct ownership of economic rights by third parties.

In other words: the result of FIFA's new article is a worldwide blanket ban on TPO.

Effective date

Although a 3-4 year transition period was expected (as was the case in UEFA's licensing system that provided for a five year transition period for European associations), FIFA decided that the ban took effect from 1 May 2015 with the following caveats:

  • Agreements covered by the ban shall remain in force until they expire (i.e., contracts entered into until 31 December 2014) - Article 18ter number 3;
  • Agreements covered by the ban that were entered into between 1 January 2015 and 30 April 2015 may not have a contractual duration of more than one year beyond their date of signature - Article 18ter number 4;
  • All these contracts must be registered in the TMS by the end of the month of April 2015 therein specifying the details of the third party concerned, the name of the player and the contract´s duration - Article 18ter number 5.

Consequently and save for the caveats mentioned above, clubs are no longer allowed to use this mechanism to share financial risk and hire talented players that would otherwise be beyond their reach.

Early effects on clubs

Brazilian clubs are especially exposed,7 given that almost all of the economic rights of their players are owned by third parties.8 It will also, in the author’s view, have a significant impact on several European leagues, most notably Portugal, Spain, Greece, Belgium, Holland, Turkey.

For example, according to the prominent Portuguese newspaper, Jornal de Notícias in July 2014, Sporting Clube de Portugal (“Sporting”) only owned at that time 100% of the economic rights of a third of its squad, Sport Lisboa e Benfica decided to terminate the Benfica Stars Fund which held economic rights of thirteen players and Futebol Clube do Porto at that time only held 100% of the economic rights of twelve athletes.9

FIFA have also taken a strong stance. For example, they sanctioned the Belgian club FC Seraing with a transfer ban and fine of CHF 150,000 for breaches relating to TPO and third-party influence. Their press release stated, “the transfer ban will prevent the club from registering any new players, nationally or internationally, for four complete and consecutive registration periods”.10

Taking into account the short transition period provided by FIFA, affected clubs are likely experiencing difficult times as they struggle to find alternative financing models that allow them to access capital without breaching the ban. The next section will look at some of the alternative third party investment models that have come to the author’s attention.


Alternative financing models

Third party investors are unlikely to withdraw from the market because of the TPO ban. Rather, the ban requires a reinvention of the business model. Innovative and creative solutions are expected from future investors as they seek to participate in alternative ways. The following methods have already come to the author’s attention.

Purchasing shares directly in the club

This solution involves the founding or incorporation of a new club by investors; or the purchase of shares in existing clubs.

This is because the ban does not extend to clubs, unless the investing-club is able to influence the club where the invested player plays on matters relating to team independence, policies or performance within labor and transfer matters.

For example, if a third party investor currently owns the economic rights of several different players, the investor could exchange those rights with a club in return for shares in the club (which may need to increase its share capital). This would likely require a report from an independent chartered accountant that has to evaluate those economic rights owned by the third party investor.11

One potential issue with this model is the need to be careful not to use the club exclusively to make investments in football players (i.e. as an instrument to execute bridge transfers12 with no sporting nature). So the club also needs to compete in the leagues/tournaments organized by the relevant football association. In accordance with the opinion of FIFA Disciplinary Committee, “transfers for reasons that are not of a sporting nature are not permitted and must be considered illegitimate in terms of the Regulations”.13

The author believes that this solution is supported by UEFA14 as the money flows directly into the clubs instead of being channeled via third parties investment vehicles. In fact, one of the arguments made by UEFA to ban TPO was that current third party structures channel large sums of capital away from the game that should remain with the clubs.15

Although, the author believes that this solution won’t fall foul of Article 18ter, there might be a problem relating to the integrity of the game if a club owns economic rights of several players who compete for different clubs within the same competition or league. In such circumstances, the owner of such rights could be perceived by the general public as affecting the integrity of sporting results.


Another alternative model lies within the loan of funds to clubs.

In short, the third party investment is made by way of a loan to a club, the repayment of which (i.e. principal and interest - which varies in accordance with the transfer fee) is linked to whether the player is bought by a different club for higher amount.16

Although it will depend how the agreement is construed, this may be perceived as falling foul of Article 18ter as the third party will be entitled to participate in the compensation received in a future transfer of the player. However, in case the agreement is drafted as a regular financial loan, the author believes that this should be permissible as the goal or the intention of the latter is not to prohibit such agreements. Otherwise, it would prevent clubs from accessing any loans in the market.


As a result of the liberalization of the agency (intermediary) market enabled by FIFA under there new Regulations on Working with Intermediaries, any person or company that complies with the intermediary regulations approved by the relevant football association can act as intermediary.17

Those acting as an intermediary for a club are entitled to be remunerated for their services for a sum related to a percentage of the transfer fee of the economic rights of the player he/she represent. For example, as disclosed by the website footballeaks,18 the intermediary of the player Alejandro Grimaldo (i.e., Interfootball Management SL) is entitled to receive from Sport Lisboa e Benfica 10% of the transfer fee in the event the referred player is transferred to a third club.

Taking security

Another possible solution involves investment funds and entails the following steps:

  • “Lenders will take floating charge security over the entire squad of player registrations, such security being enforceable only upon an event of default by the club.
  • Additional collateral19 be granted to the lender by the club (which will obviously vary on a club-by-club basis), the terms of the loan being such that this additional collateral would have to be realised before realising any security over player assets.
  • Any need to enforce security over player registrations, only after an event of default and only after the lender has not been repaid from the enforcement of the additional collateral, would follow the exact same process as if an administrator had been appointed over the club. If an administrator is appointed over a club, the administrator tries to obtain the best possible price for a player for the benefit of creditors whilst ensuring fixtures are fulfilled to maintain the club as a going concern. The club would have total control of which player assets are sold and for what value prior to any default.
  • The ability of lenders to be repaid principal and interest from the proceeds of a future sale. Such a scenario would be structured in a way that does not give any proprietary rights to the lender in the player registration itself, but is simply a commercial term of the loan facility.”20

This solution arguably also fall outside of the scope of the ban. It is a simple lending mechanism that requires securities for the funds the third party lends, with no influence or control in the transfer of players. The only issue I see is where can we find clubs that are not overleveraged and have free securities to grant to the new lender.

One of the arguments against this solution is the fact that the lenders will, to some extent, “participate, either in full or in part, in compensation payable in relation to the future transfer of a player” (Article 18ter). In fact, the mechanism is still tied to future transfer value and centered on player’s employment contracts.

The author believes that this argument may hold true on a literal interpretation of the wording of the Article. However, adopting a purposive interpretation (i.e. taking into consideration the goal or intention of the Article), we should ask: does the Article intend to avoid clubs entering into loans under the normal course of business? Was the purpose of the article to prevent clubs (that are mostly incorporated as companies) of pledging the economic rights of their squad? The author view is that this is not the case and that any other interpretation will go beyond the purpose of the article.



In sum, the investment methods above could arguably all be implemented without breaching the TPO ban and in compliance with FIFA’s Regulations, although there are counterarguments to be raised in each solution presented above. However all those above mentioned mechanisms are not as sound as the economic rights participation agreement model that was used by Doyen as we will see in the next article.


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Luís Villas-Boas Pires

Luís Villas-Boas Pires

Luís Villas-Boas Pires holds an Undergraduate Degree in Law from the Universidade Católica Portuguesa. Prior to his career in sports law, Luís worked for 11 years in both Lisbon and London as a M&A, Corporate and Capital Markets lawyer.

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