The Sports Law Department at Ronald Fletcher Baker LLP explores the impact of the new FIFA regulations on working with intermediaries..
The role played by football agents has come under intense scrutiny and criticism in recent years as the value of transfers has increased.
In 2009, a decision was taken by FIFA to conduct an in-depth reform of the players’ agent system through a new approach based on the concept of intermediaries. Following amendments by the 64th FIFA Congress in June 2014, the new Regulations on Working with Intermediaries (the “New Regulations”) were approved. The New Regulations are due to come into force on 1 April 2015 and are binding on FIFA’s member associations, which must implement them. The New Regulations will supersede the current FIFA Players’ Agents Regulations (the “Current Regulations”).
This article examines the New Regulations and explores the implications for agents, players and clubs.
FIFA estimates that only around 25% - 30% of international transfers are conducted through licensed agents. The Current Regulations require each member association to operate a licensing system for agents in the member association’s jurisdiction. This provides a contractual link for member associations (or FIFA if the transaction is international) to sanction unscrupulous behaviour by agents. With around 70% of international transfers involving unlicensed agents, the current licensing system does not provide the desired level of control over such intermediaries in football transactions.
In addition, FIFA has also disclosed that the average commission paid by clubs to agents for international transfers is around 28% of the value of the transaction. As such, FIFA wants to curb what it sees as excessive agents’ fees and bring these fees closer into line with the value of the services provided.
The Current Regulations
FIFA has stated that the Current Regulations will be abandoned and replaced by the New Regulations on 1 April 2015. Accordingly, all existing players’ agent licences will lose validity with immediate effect. The New Regulations indicate a radical change in approach by FIFA and will cover the activities of intermediaries rather than just agents.
Under the New Regulations, any natural or legal person who either:
- represents players and/or clubs with a view to negotiating an employment contract; or
- represents clubs in negotiations with a view to concluding a transfer agreement;
By abandoning the present licensing system, the procedure to become an intermediary has become much simpler than before. Furthermore, legal persons will be able to act as intermediaries. Thus, in the near future we can expect players to be represented by an intermediary’s company rather than simply the intermediary. Nevertheless, the New Regulations raise several issues for agents, players and clubs.
The New Regulations - Issues
The New Regulations stipulate that players and clubs shall act with due diligence in the selection of intermediaries. The definition of due diligence (Art 2.) is described as using reasonable endeavours to ensure that intermediaries:
- sign the Intermediary Declaration (the “Declaration”) as presented in Annex 1 of the Regulations;
- register themselves in the registration system as implemented by the relevant national association every time they are involved in a specific transaction; and
- satisfy the relevant association that the intermediary has an impeccable reputation and has no contractual relationships with a footballing entity that could lead to a conflict of interest.
The Declaration at Annex 1 of the New Regulations forms a key element of the new Regulations. By signing the Declaration the intermediary will be confirming that he understands and agrees to be bound by the provisions of the applicable national and international laws, and also agrees to be bound by the Statutes and regulations of FIFA and those of the relevant member association when carrying out his activities. He will also be declaring that he has an impeccable reputation. Furthermore, intermediaries will be declaring that they shall not take part in betting, gambling, lotteries or other such similar events connected with football matches and they acknowledge that they are forbidden from having stakes, either actively or passively, in organisations that promote, broker or arrange such events or transactions.
It is the responsibility of players and clubs to ensure that intermediaries sign the Declaration and representation contract. However, the interpretation of the concept of due diligence is left open and will no doubt differ from country to country.
The Football Association (the “FA”) has considered the impact of the New Regulations in its current Player Representation contract template for use by authorised agents by suggesting that a clause be added stating, “In the event that the Agents Regulations cease to have effect and/or the Proposed New Regulations are implemented, the Player and the Authorised Agent intend this Representation Contract to survive and to continue to bind both parties”. Nonetheless, the above clause is not obligatory and it is uncertain whether a representation contract that does not contain this clause (and terminating after 1 April 2015) will still be valid. In any event, the door may be left open for a player to challenge the legitimacy of his representation contract.
Players and clubs will be required to disclose to their associations full details of all agreed remuneration to be paid to intermediaries. Moreover, and for the sake of transparency, member associations will be required to publish, on an annual basis, names of all the intermediaries they have registered, all transactions in which the intermediaries were involved and the total amount of all remuneration received by said intermediaries.
The New Regulations also attempt to provide for an overall rationalisation of fees paid to intermediaries in that intermediaries’ fees should not exceed 3% of the player’s basic gross income or of the transfer compensation as a recommendation. Further, intermediaries’ fees should not exceed 3% of the eventual transfer fee – which may, in the case of a free transfer or loan, be nil. Lastly, the New Regulations state that intermediaries should not be paid at all where the player in question is a minor whether the intermediary is engaged by the player or by a club.
Association of Football Agents - Complaint
In response to the New Regulations, the Chairman of the Association of Football Agents (AFA) stated that, “Our members are not going to support a system which allows unqualified agents to operate.” He added, “We will challenge the regulations in Europe unless the FA [Football Association] agree to make them user-friendly, by retaining some sort of qualification and giving currently licensed agents precedence over unlicensed intermediaries”.
The AFA have since lodged a formal complaint to the EU Commission on the basis that the New Regulations, in particular Art. 7(3) and (8), (i.e. 3% cap on fees and no payment if the player is a minor) infringe EU Competition Law. At this time it is unclear when, or if, the Commission will intervene.
The AFA are understandably concerned that, as established and experienced licensed authorised agents, they should have some recognition within the new framework and that any new entries into the industry should be subject to some form of education and examination.
The Football Association
The current FA Football Agents Regulations (whilst not perfect) are expansive, robust and seek to protect the interests of players, agents and clubs. Presently, the FA is gathering further information from the relevant stakeholders (including the Premier League, Football League, Professional Footballers Association and the AFA amongst others) and is seeking to obtain agreement from these parties before providing a definitive response in relation to the New Regulations.
There is a suggestion that intermediaries in England would be placed at a competitive disadvantage if the FA sought to over regulate their activities under any new regime. However, this same issue was raised in connection to the matter of third party ownership as a consequence of the Tevez and Mascherano affair in 2006/7 (the FA and Premier League have since banned third party ownership of players). This is in contrast to clubs in countries such as Spain, Portugal and the South America that actively promote this type of structure. Currently, there is no evidence that this will be the case and in fact, probably the opposite will be true given the pulling power of the Premier League for players worldwide.
There is a consensus amongst licensed agents in England that the FA needs to come forward with a set of regulations designed to protect the players (from unscrupulous unlicensed agents) and also licensed agents from untrained intermediaries, therefore upholding the years of work that have been put into the creation of the profession of licensed agents.
Under the New Regulations, clubs and players will be free to choose whoever they deem fit and proper to represent their interests, but intermediaries will be obliged to meet a set of minimal criteria to be allowed to register, which may be further developed and enhanced by the national associations in accordance with the principle of subsidiarity.
Conducting business in a national territory will therefore require prior registration, and registration will imply a regulatory relationship between intermediaries and national associations, thereby making intermediaries subject to sanctions for improper conduct.
The perception of football agents is generally disparaging and their complaints over the capping of fees will find little sympathy. However, if one compares the commission rates of agents in the music industry or other sports, although they vary, rates are never less than 5% and sometimes as high as 20%, if not more. Such fees are set by the market and it has been argued that the New Regulations seek to artificially depress the market rate. Football agents are understandably angry at the possibility of their fees being capped and the notion of a commission threshold is totally unacceptable to most, if not all agents.
However, the above turns on whether a fixed cap would be deemed proportionate. An alternative, and perhaps less restrictive solution would be for FIFA to require the principal to pay the intermediary’s fee. In most high profile transfers or employment contract negotiations, the intermediary acting for the player will have his fee negotiated with, and paid for by, the club. The contrast between the beneficiary of the service (the player), and the party required to pay for the service (the club), means that the market for an intermediary’s services has not reached an efficient equilibrium. In reality, when a club pays the player’s agent, the agent’s fee more often represents the value of the player’s services to the club than the agent’s services to the player.
It is not difficult to foresee problems arising from the anticipated flood of new intermediaries into the market place and, consequently, the bargaining position of players is likely to increase when engaging the services of an intermediary.
The New Regulations provide for national associations to go beyond the minimum standards set and the FA should regard this as an opportunity to safeguard players, clubs and intermediaries. The FA would do well to retain the bulk of its current Football Agents Regulations and incorporate the principles established in the New Regulations. Anything less will inevitably lead to further problems in the future for the FA, as it is clear that FIFA has sought to shift the burden of regulating and sanctioning agents, players and clubs to the member associations, and will only intervene if it decides to extend a sanction to have worldwide effect in accordance with the FIFA Disciplinary Code.
It remains to be seen whether the New Regulations will have the desired effect but there is little doubt that their impact will be uncertain.