At the beginning of December the UEFA Executive Committee announced a plan to tackle third party ownership (TPO) in football. For a background to what TPO is and the regulatory framework, click here.
The Basics: What is Third Party Player Ownership?
TPO in the football industry is where a football club does not own, or is not entitled to, 100% of the future transfer value of a player that is registered to play for that team. There are numerous models for third party player agreements but the basic premise is that companies, businesses and/or individuals provide football clubs or players with money in return for owning a percentage of a player’s future transfer value. This transfer value is also commonly referred to as a player’s economic rights. There are instances where entities will act as speculators by purchasing a percentage share in a player directly from a club in return for a lump sum that the club can then use as it wishes.
What was so significant about the recent UEFA announcement?
The press release said the following in relation to TPO:
“Among the other decisions taken, the committee decided that the ownership of football players by third parties should be prohibited as a matter of principle. Consequently, world football’s governing body FIFA will be requested to issue relevant worldwide regulations prohibiting third-party ownership of players. UEFA, through its Professional Football Strategy Council (PFSC), would also be ready to implement a regulatory framework to ban third-party ownership arrangements in UEFA competitions, should FIFA not take the appropriate steps. In that case, a transitional period of three to four seasons would apply.”
It is important to take a look at a number of the statements to assess what UEFA is trying to achieve.
1. “ownership of football players by third parties should be prohibited as a matter of principle”
As would be expected in a short press release, UEFA does not elaborate as to the matters of principle but it can be presumed that such concerns, as the Premier League has previously touched on, relate to integrity of competition issues, the concern that TPO contracts may compromise the decision making autonomy of a football club decision and ensuring transfer fees remaining within the football family.
2. “Consequently, world football’s governing body FIFA will be requested to issue relevant worldwide regulations prohibiting third-party ownership of players.”
This part of the statement presumes that the FIFA administration has the political capital to legislate and outlaw TPO on a global level. I believe many would state that such a plan would be a political minefield. There are manyclubs and individuals in national associations and confederations that view TPO as a positive way of re-risking their business (i.e. by sharing the risk with a third party company of the player’s potential not being realised). With TPO prevalent in South America For example, the ability of FIFA to convince the necessary national and regional stakeholders to vote for such a change would be difficult at best. It then begs the question of how UEFA could push through such regulation.
3. “UEFA, through its Professional Football Strategy Council (PFSC), would also be ready to implement a regulatory framework to ban third-party ownership arrangements in UEFA competitions, should FIFA not take the appropriate steps.”
This is the most ambigious point of the press release because it is not clear what UEFA is stating. One reading of the wording suggests UEFA will not allow players who are third party owned to play in Champions League and Europa League competition. That would theoretically not prohibit clubs from signing and playing third party owned players in domestic competition (unless there are domestic prohibitions like in the Premier League, Football League or Ligue 1). The alternative reading of the statement is that any club who has a third party owned player will not be able to play in UEFA club competition (i.e. an absolute bar). It is unclear which avenue UEFA is proposing.
4. “In that case, a transitional period of three to four seasons would apply.”
The time scales for the PFSC implementing such important changes may take a significant amount of time. Additionally, the three to four season transitional period may ultimately mean around five years in total without such regulations having any teeth. This means third party owners will still have a significant window to monetise their assets.
It may also be questioned whether the regulations would have retrospective effect or whether they would only bite for agreements entered into after the regulations came into force.
The alternative for third party owners is to claim any such regulation imposed by UEFA or FIFA is illegal. In the European Union for example, third party owners may argue that any such regulation breaches the European Union laws on free movement of capital or workers. Similarly, competition law arguments could be utilised to assesses whether (potentially under Article 101 of the Treaty on the Functioning of the European Union) any agreement prevents, restricts or distorts competition in the relevant player market.
This is very much the tip of the iceberg for FIFA and UEFA to deal with. Much more detail will gradually flow out of the governing bodies in order to clarify these as well as other important questions. What seems apparent is that, at the very least, UEFA seems on a collision course with third party owners.