Why FIFA should reform football's training compensation regulations

Published 22 November 2019 By: Toni Roca, Xavi Fernández

Football Training

In recent times we have witnessed a genuine revolution in FIFA’s transfer system through the approval of numerous new structural and regulatory reforms, including, most notably, the creation of a clearing house for payment centralization1, the application of solidarity mechanism to domestic transfers with an “international dimension2, limitations on player loans, and the controversial recommendation to cap agent’s commissions3.

Unfortunately, one of the basic pillars of the system has been left in the background and no amendments to its current functioning have been proposed: we refer to training compensation (TC).

The purpose of this article is to explore the problems with the current regulatory framework for TC, especially as it relates to the signing of a players first professional contract. The authors then seek to take advantage of FIFA’s current reformist attitude by proposing possible improvements to the current system, all with the objective of protecting training clubs’ legitimate rights. Specifically we examine:

  • Problems when signing the first professional contract (the definition of 'professional')
    • Who is obliged to determine the players status?
    • The impossibility of knowing when the first professional contract is signed. 
  • Problems with subsequent transfers of a professional player. 
  • Suggestions for improving the system.

Problems when signing the first professional contract (the definition of 'professional')

As is well known, TC is triggered on two occasions:4

  1. When the player signs5 his first professional contract; and

  1. When a professional player is transferred between two clubs of different associations – whether during or at the end of his contract - in both cases before the end of the season of his 23rd birthday.

In the author’s experience, signing the first professional contract involves, by far, the greatest number of problems and leads in practice to the difficulty, if not the impossibility, for training clubs to claim the TC, which undermines the system.

The main problem, from which all the remaining ones arise, has to do with the definition of “professional player” under Article 2.2 RSTP, being described as the one who

“has a written contract with a club and is paid more for his footballing activity than the expenses he effectively incurs”.

The question is obvious: what are ‘expenses effectively incurred in footballing activity’? Is it only understood to be the direct costs of such activity (i.e. sports equipment and travel expenses to the sports facilities) or should indirect costs also be taken into consideration (i.e. maintenance, accommodation, plane tickets to the player’s home country, school or university fees, etc.)?

We face a largely undefined legal concept which does not provide certainty to the system; and, unfortunately, the jurisprudence of the Court of Arbitration for Sport (CAS), which has ruled on the matter on a number of occasions, has not in the author’s view contributed to its clarification either.

Indeed, according to CAS, the qualification of a player as professional must be done on a case-by-case basis, taking into account whether the player receives more than what is required for his footballing activity6 (although it is irrelevant if it is much more or a little more7) as well as his age to justify the relationship between one concept and the other. As a result, there are now CAS awards in which a player who receives €300 is deemed professional, whereas another one receiving €400 is not8. This ‘fine line’ makes it very tricky for clubs and practitioners to say with certainty when TC is properly due.

From the author’s point of view, the idea of the “compensation for expenses” is clearly out-dated and does not correlate to the current reality. Nowadays, the vast majority of clubs cover all the expenses incurred by their players for their footballing activity, as they provide the facilities, the equipment, they pay the coaches, etc. At most, players buy their boots and shin guards (if their agents does not do so) and may also spend money on transportation to and from training sessions if the club does not have its own residence (although sometimes the club will even cover this).

If we apportion the annual cost of those three elements per year, the result is that any player receiving more than €60 per month should be considered professional, which is absurd. In the author’s view, a player should be considered professional only if he receives enough for that to be his single livelihood in the country in question, thus considering that a player receiving €300 is professional is turning our backs to reality, because that amount is clearly below the poverty threshold (at least in Europe).

The definition poses a second problem: the fact of cumulatively requiring the existence of a “written contract”. If, as CAS states9, the decisive element to determine the status of the player is the economic one, then the requirement of a written contract seems unnecessary. Among other reasons, it opens the door to fraud, since what happens if a club pays a player €2,000 per month but does not sign a written contract but rather has a verbal agreement? Is the player categorised as professional or not if the ‘written’ element of the contract is missing? Would it not be possible in these cases to assimilate the federative license to a contract?

Who is obliged to determine the player’s status?

On 1 July 2019 FIFA issued the Circular nº 1679 introducing the new definitions of the RSTP. Among others, the following definition of “registration” was added:

the act of making a written record containing details of the player that include: (i) the start date of the registration; (ii) the full name (first, middle and last names) of the player; (iii) date of birth, gender, nationality and status as an amateur or professional (as per article 2 par. 2 of these regulations) (…)”.10

The second problem is that clubs are the ones who classify their players as amateurs or professionals at the time of registering them. No type of control whatsoever is exercised by their respective National Associations to verify that the status granted by the clubs is indeed correct and in accordance with Article 2.2 RSTP.

Thus, we face the perverse paradox that it is the club obliged to pay TC who determines, in a totally subjective and self-interested way, the player’s status that will later appear in his official passport. In the experience of the author this means that, in practice, in order to avoid having to pay TC (plus tax and Social Security) clubs often register their players as amateurs when they are, in fact, professionals according to the RSTP definition, thus clearly harming training clubs’ position.

The impossibility of knowing when the first professional contract is signed.

Although the RSTP clearly states in Article 3, Annexe 4 that “the club with which the player is registered is responsible for paying training compensation within 30 days of registration”, reality indicates that this rarely happens and, as happens with the solidarity mechanism, training clubs have to literally chase the debtor clubs in order to be paid TC.

The problem that training clubs face at the moment of claiming TC for this first fact is very simple: it is almost impossible for them to know when a player has signed his first professional contract.

Neither TMS nor any database reports the event, and in case the training club has any indication and claims, the debtor club will, for confidentiality reasons, never provide a copy of the contract signed with the player. Consequently the training club can only rely on the fact that the player is registered as professional in his official passport. But if, as we say, the player is registered in his passport as amateur despite being professional, the training club can only start a long and costly process before the FIFA Dispute Resolution Chamber (DRC) and struggle on a case-by-case basis to prove (i) that the passport information is false and (ii) that the player is a professional because he receives more than a mere compensation of expenses.

And here lies the second big problem: it is in the author’s experience almost IMPOSSIBLE for a training club to prove that the passport information is incorrect. Article 12.3 of the Procedural Rules of the PSC and the DRC establishes that “Any party claiming a right on the basis of an alleged fact shall carry the burden of proof”, and the only evidence that would disprove the presumption of veracity of the player’s official passport is a contract between third parties that the training club literally cannot provide, that the respondent obviously never provides and that FIFA never demands the respondent to produce even if the training club expressly demands it in its claim (which, in the view of the author, is difficult to understand).

We are thus faced with a situation that leaves training clubs in a defenceless position, as without evidence they are deprived of any real chance of winning a claim before the DRC, and they are forced to appeal to CAS if they want to continue defending their rights, which of course costs a significant amount of money.

As if this were not enough, and although fortunately there are the exceptions, we cannot forget that some clubs use bridge transfers to try to circumvent the RSTP provisions and thus have another method of trying to avoid paying TC to the training clubs.

All the foregoing is particularly serious since, if in the second case only the former club of the player is entitled to receive TC, but when speaking about the signing of the first professional contract, ALL the clubs in which the player was formerly registered and trained are entitled to receive compensation. In other words, the clubs affected by this first case are many more.

The fact that the system is not working is evidenced by the figures that FIFA’s Chief Legal Officer – Mr. Emilio García Silvero – shared in September at the 8th International Congress on Football Law held in Madrid: in 2018 only USD 22.7 million were paid as TC, compared to USD 67.7 million paid as solidarity mechanism (a third).

Problems with the subsequent transfer of an already professional player

There are three possible scenarios in which a professional player can be subject to a subsequent international transfer11:

  • transfer on loan,

  • definitive (normal) transfer, or

  • free transfer (this is, when the player leaves the club’s discipline at the end of his contract or by mutual agreement - the so-called “free agents”).

The second case is easier to claim than the first one and does not raise as many disadvantages, since in practice its enforceability reduces to a single case: free players. And that is so because according to well-established jurisprudence of the DRC and CAS, neither loans nor definitive transfers trigger TC.

As regards to loans, CAS has repeatedly confirmed the DRC position in the sense that the temporary transfer of a player does not interrupt his training, and the club that receives the player in loan is exempt from the obligation to pay TC. For sake of clarity, we transcribe here the standard argument of DRC decisions in this type of claims:

“For the sake of completeness, the Chamber at this point wished to refer to its well-established jurisprudence in relation to the loan of players and indicated that the loan of the player from the Claimant to Club G did not constitute a “subsequent transfer” in the sense of art. 3 par. 1 sent. 3 of Annex 4 of the Regulations. The Chamber was eager to point out that it could not have been the intention of the legislator of the relevant regulatory provisions to trigger the consequences of art. 3 par. 1 of Annex 4 of the Regulations on the occasion of a transfer on a loan basis and, thus, potentially deprive the loan of its essential flexibility and, in connection with the training and education of players, its purpose of providing young players with the opportunity to gain practical experience in official matches for another club in order to develop in a positive way. Hence, for the purposes of the provisions of the Regulations governing training compensation, the loan of a young player from his club of origin to other clubs does not interrupt the ongoing training period of the player and the obligation to pay training compensation arises only in case a player is transferred on a definitive basis, with the effect that, at that moment, the club which transferred the player on a loan basis to another club is entitled to training compensation for the entire period of time during which it effectively trained the player, however, excluding the period of time of the loan”.12

Despite the abovementioned, and with regard to the fact that the temporary transfer of a player does not interrupt his training, it is worth mentioning that CAS has established that the loanee club is entitled to receive TC after the player has returned to his origin club and has been transferred to a new club for the period of time the loanee club has effectively trained the player.

As an example, we transcribe here part of the ruling from FC Kuban v. FC Gagauzyia (CAS 2016/A/4543):

“In principle, the loan of a player to another club does not interrupt the continuing training period of the player. As a consequence, a club which transferred a player on a loan basis to another club is entitled to training compensation for the period of time during which it effectively trained the player. Likewise, a club which is loaned a player, and thus effectively trains the player, is in principle entitled to training compensation corresponding to the period it provided training to that player.”13

And in the case of a definitive transfer, practice shows that the seller/training club and the new club always agree that TC is included in the transfer compensation, the training club waiving to claim for any additional concept (including solidarity and TC). TC could only be claimed in case the clubs expressly state in the contract that it is not included in the compensation agreed, which obviously never happens. In this regard see, by way of example, the Decision of the DRC of 1 March 2012 in which they stated:

“In view of the foregoing, the Chamber stated that, according to its well-established jurisprudence, if two parties enter into a transfer agreement which provides, inter alia, for the financial conditions of the relevant transfer, i.e., the payment of transfer compensations, training compensation is, in principle and unless otherwise provided, considered as being included in the transfer compensation. Thereby, the DRC mentioned that the Court of Arbitration for Sport (CAS) also followed this jurisprudence, e.g., in the matter CAS 2004/A/XXX Club T/ Club L (par. 7.4.9). Equally, the panel emphasize that, in case the parties intend to agree on an additional amount in relation to the payment of training compensation, the transfer agreement should explicitly refer to a specific amount, distinct from transfer compensation, which would be due as training compensation”

The only case of Article 2.1.ii Annexe 4 that really triggers TC is the one in which players finish their contracts and leave their training club as free agents. But this fact is further limited by the application of the special provisions for the EU/EEA of article 6 Annexe 4 RSTP, which establishes that no TC will be paid if the former club does not offer the player a contract no later than 60 days before the expiration of his current contract.

In conclusion, in case of a subsequent international transfer of a professional player, TC can only be claimed in two occasions:

  1. If the player leaves the training club as a free agent and the latter has fulfilled the obligation to offer a contract (provided it is a transfer within the EU/EEA).

  1. In case of loanee clubs, as mentioned above. The lesson here for the new club is always to verify in detail the player’s passport and to confirm whether the loanee club waived its right to TC, otherwise they can face a higher cost for the transfer of the payer than initially expected.

Contrary to what happens with the signing of the first professional contract, and despite its limited enforceability, this second case is easier to follow and to claim by training clubs, as they will simply have to monitor the new club with which the player signs and claim the amounts due.

Suggestions for improving the system

In the authors’ view, the following suggestions could help improve the current system:

  1. Modification of the definition of professional player. The definition of professional player could remove the reference to the compensation of expenses and be replaced by an objective criterion that provides legal certainty, which does not depend on a “case-by-case” interpretation and, above all, which does not depend on the clubs’ decision when registering the players.

This new objective criterion should enable training clubs and FIFA itself to know unambiguously when the first professional contract has been signed, otherwise the implementation of the Clearing House will not solve the problem and training clubs will still be unable to claim what its rightfully theirs.

And if the economic compensation criterion is maintained, we consider that it should be adapted to a reasonable assumption of what should be understood by the term “professional” in 2020, such as the minimum inter-professional salary in each country14.

  1. Audits. FIFA could carry out random audits to clubs and analyse if they have properly registered their players, and the Disciplinary Commission could impose severe penalties on those clubs that register them as amateurs when they are in fact professionals, and especially on those clubs that use bridge transfers to try to circumvent the rule and avoid paying TC.

  1. Proceedings before the PSC and the DRC. In general (not only in disputes regarding TC or the solidarity mechanism), FIFA could oblige the parties to provide the evidence requested by the other party, especially the employment and transfer contracts that are the basis for the resolution of the different disputes.

  1. TC at national level. The most common thing is that players sign their first professional contract in the country in which they have been registered as amateurs, and the vast majority develop their entire sports career in a single country, cases in which the provisions of the RSTP do not apply.

Therefore, if the real aim of FIFA is for the training clubs to always be rewarded for their training and education efforts, it is imperative that both the solidarity mechanism and TC are enforceable at a national level, and not left to the choice of each National Association to implement it or not. The solution is very simple and involves including Articles 20 and 21, and Annexes 4 and 5 within the nationally binding provisions of Article 1.3 RSTP.

Otherwise it will continue causing obvious damage to training clubs, whose training efforts will only be rewarded it the player moves abroad, which is extremely unfair.

  1. Suppression of TC. Alternatively, and in view of all the problems of the first TC accrual scenario and the few cases in which TC accrues in the second, it may be opted to completely abolish TC and, instead, increase the percentage to be distributed as solidarity mechanism from 5% to 10%, and also to be compulsory at domestic level –Article 1.3 RSTP.

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Author

Toni Roca

Toni Roca

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.
 
Academic Information 
- 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.
 

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Xavi Fernández

Xavi Fernández

Intern, Corner Abogados 
 
Xavi graduated in Law. He  Studied the Master's for Access to the Legal Profession, Course 2018-19, at ISDE.

He has a Master's in Sports Management & Legal Skills with FCBarcelona, Course 2018-19 at ISDE.

He is currently on internship at Corner Abogados with Toni Roca.
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