Friday, July 03, 2015

Understanding FIFA's new rules on player & club agents, and the FA's response

FIFA has introduced new rules managing football agents representing football players and clubs. No longer do Licensed Agents, now called Intermediaries, have to pass a FIFA examination on proper conduct or hold professional liability insurance. Lawyers Daniel Geey and John Mehrzad explain how England’s Football Association has responded with new regulations to deal with registration, transparency and procedures:

Top 10 Tips to understand the 
new Intermediary regulations

1. The Basics: 

The FA Regulations on working with Intermediaries (the “FA IRs”) came into force on 1 April 2015. This was as a result of FIFA’s recently introduced FIFA Intermediaries Regulations (the “FIFA IRs”).

Only a registered Intermediary can be used by a club or player (unless a player represents themselves). The Intermediary must have a valid representation contract with a club or player that has been executed before undertaking the work (which usually involves the negotiation of a player contract and/or the transfer of a player’s registration). Contracts are required to be lodged with the FA within 10 days of being executed.

2. Registration:

Intermediaries are required to be registered with the FA at a cost of £500+VAT in return for a one year period of registration (albeit this fee is waived for individuals who were FA Licensed Agents as at 31 March 2015). An Intermediary will need to renew their registration on an annual basis for a fee of £250+VAT. In addition, a company, not just an individual can now be an authorised FA Intermediary.

Whereas previously, the FA made each agent pass an exam and take out indemnity insurance, under the new regulations no exam or professional liability insurance is required. The UK based Association of Football Agents (the AFA) are reported to be proposing a possible ‘kite-mark’ to ensure additional professional and regulatory standards are met which will go beyond the FA requirements. There is however a Test of Good Character and Reputation (TGCP) declaration that each Intermediary must sign (explained in more detail below) in order to become FA registered.

3. Reputation Test: 

The FA’s TGCP for Intermediaries is very similar to its Owners and Directors Test (ODT) and the equivalent Premier League and Football League ODT’s. The applicant has to sign a declaration confirming they are not subject to a number of the below disqualifying conditions when first registering as an FA Intermediary and then each time the Intermediary is involved in an employment or transfer related negotiation on behalf of a player and/or a club. The disqualifying conditions include:

  1. Having an unspent conviction anywhere in the world for any violent, financial or dishonest crime;
  2. Being currently prohibited from being a company director;
  3. Being currently subject to a:
  4. suspension or ban from involvement in the administration of a sport;
  5. six month sports participation ban; or
  6. current ban from working as a sports agent from any national or international sports association;
  7. Being subject to bankruptcy proceedings;
  8. Being suspended, disqualified or struck-off by a professional body;
  9. Being required to undertake certain obligations under the Sexual Offences Act; and
  10. Failing a criminal record check in relation to working with an under 18 player (which only disqualifies the Intermediary from acting for an under 18 player).

An applicant who fails the TGCP because, for example, the FA becomes aware about an unspent conviction for fraud which was not declared at the time will likely also be charged for providing false or misleading information. All such steps taken by the FA can be appealed.

4. Commission Cap (FA Regulation C11): 

The FA IRs has followed the FIFA IRs (Regulation 7(3)) by recommending that the total amount of remuneration for each transaction when an Intermediary acts for:

  1. either the club or player does not exceed 3% of the player’s basic gross income for the entire contract or
  2. a club does not exceed 3% of the actual transfer compensation paid.

This FIFA 3% commission benchmark provision is currently subject of a complaint by the AFA before the European Commission. They are arguing that the 3% recommendation is akin to price fixing by FIFA limiting the compensation available to Intermediaries in a free market. The Commission has the power to reject the complaint or open a formal investigation. Relatively recently, the Commission chose to reject a Financial Fair Play complaint on the basis that the Belgian national courts had such competency to deal with the matter at hand.

The FA has taken a more liberal approach to the 3% recommendation, making clear in its Guidance Notes that the figure is “non-binding” and that Clubs and Players are free to pay Intermediaries as they wish, so long as it is in accordance with the Regulations – which could be viewed as creating a circular approach depending on whether the 3% “recommendation” does indeed end up becoming a “cap” in reality:

5. Minors: 

An Intermediary can enter into a representation contract with a 16 year old player so long as it is also signed by the player’s parent or legal guardian (FA IR B8/ B9). However, the FIFA IRs (Regulation 7(8)) state that an Intermediary cannot be paid for services provided if the player is under 18 years of age. This leads to a situation as described by Nick de Marco in his excellent Intermediary article whereby:

“an Intermediary cannot be paid any sum with respect to activity carried out in respect of a minor until he has reached his 18th birthday. So, for example, if a 17-year old player has the chance of entering a lucrative contract with a Premier League football Club, the Player is unable to have the benefit of an Intermediary negotiating the terms of such a contract on his behalf unless the Intermediary is prepared to do so for no commission at all. This makes little sense.”

It may be that an Intermediary’s commission could be back-dated to only crystallise once the player turns 18 as suggested by Dan Lowen here  but that may depend on whether expiry or renegotiation of a player’s subsequent employment contract or representation contract makes it difficult to receive a back-dated fee.

6. Two Year Contract: 

The FIFA IRs does not prescribe a maximum period for an Intermediary/player representation contract. However, under the FA IRs (B10), a representation contract can only be for a maximum of two years.

Problems may manifest where Intermediaries in other countries have signed young players (including say a 15 year old) to a five year contract. When that player is 18 and, for example, transfers to a Premier League club, that contract with the Intermediary would be over the two year permitted maximum period. It is unclear, as Nick De Marco points out, whether the Intermediary would be required to sign a new FA compliant two year representation contract with his player in order for the transfer to proceed or alternatively whether the FA would enforce such a restriction for foreign representation contracts over the two year maximum.

7. Disputes:

The FA classifies “any breach” of its IRs as misconduct for the purposes of its wider Rules of Association (FA IRs F.1). A condition of the above explained registration process is that an Intermediary submits to the FA’s jurisdiction and a consequence of such a process is that the FA has the remit to sanction an Intermediary (or a Player and/or a Club) in breach of the FA’s IRs. An Intermediary misconduct charge will be determined by a Regulatory Commission.

8. Disclosure: 

The FA has the ability to publish:

  1. the names of all Intermediaries who have registered with the organisation. This list can be found here; 
  2. a list of each transaction the Intermediary has been involved in;
  3. an aggregated total payment amount made by all players and clubs to Intermediaries; and
  4. FA disciplinary decisions made against Intermediaries.

9. Conflicts of Interest:

There are various FA requirements to ensure potential or actual conflicts of interest are managed and disclosed appropriately. This includes player and club consent to dual/multiple representation (FA IRs E.2). Other provisions (FA IRs E.4) include restrictions on:

  1. an Intermediary or an Intermediary’s company owning more than 5% or exercising material influence over the affairs of any club; and
  2. a player, club, club official or manager owning more than 5% or exercising material influence over the affairs of an Intermediary or an Intermediary’s company..

Further, there are provisions placing obligations on a player, club, club official or manager to disclose to the FA any informal or formal arrangement that exists whereby an Intermediary pays any money to a player, club, club official or manager and a more general duty to disclose any actual or potential conflict of interest to the relevant parties and the FA.

10. Approaches to players under contract: 

Whereas the previous FA regulations prohibited an agent approaching a player already under contract with another agent, the new FA IRs do not prohibit an Intermediary from approaching a player under contract. Although this is unsatisfactory from a regulatory perspective and the FA would appear unable to be able to sanction an Intermediary for such behaviour, if such a situation arose, it is likely a claim could still be brought against the agent ‘tapping up’ the player in question, under, for example, common law breach of contract principles. This would be all the more likely if there is an exclusivity clause in the Representation Contract, meaning that if the player is “tapped up” by another intermediary, that intermediary may be liable for procuring a breach of contract and have to pay damages (by way of lost commission) to the previous intermediary.

First published by

Monday, June 22, 2015

FIFA’s suspension of Indonesia shines spotlight on years of mismanagement

By John McBeth, Jakarta

GIVEN THE CORRUPTION scandal that has engulfed FIFAquestions abound over the circumstances of its executive decision on May 29 to suspend Indonesia from international competition for government meddling in its domestic league.

Such interference would normally be frowned on. But in their push for reform, President Joko Widodo and Sports Minister Imam Nahrawi clearly believe the Indonesia Football Association (PSSI) is as crooked and mismanaged as the world’s governing body.

Indonesians might even be tempted to find echoes of former president Suharto’s rule in the way FIFA’s leadership spread largesse around to ensure the lasting loyalty of the majority of football associations in Africa and Asia.

“The governance crisis at FIFA highlights the problems with FIFA statutes that prohibit so-called political interference,” says Brendan Schwab, the Asia chairman of FIFpro, the global players’ union. “Football is not above the law and administrators have to be held to account.”

Despite months of pressure from FIFA, Nahrawi refused to lift a freeze imposed on the PSSI last April for failing to fully implement administrative changes aimed at improving transparency and governance among the country’s far-flung clubs.

“It doesn’t matter whether we are absent from international competition for a while as long as we can win big in the future,” Widodo said in a move that drew wide support, despite it meaning the cancellation of the PSSI’s 18-team Indonesian Super League.

"It doesn't matter whether we are absent from international competition for a while as long as we can win big in the future."
        - President Joko Widodo

The PSSI has for years been riven by corruption allegations, leadership tussles and claims of malfeasance in the disbursement of money to clubs that have seen Indonesia’s most popular sport descend into chaos and mediocrity.

Things came to a head in 2011 when self-styled reformers finally succeeded in a campaign to oust the entrenched PSSI leadership. But the coffers were empty and they soon found they were without any of the key officials needed to get the job done.

In what descended into an ugly proxy war, oilman Arifin Panigoro was left backing the PSSI’s Premier League, while rival tycoon Aburizal Bakrie funded a breakaway Super League, tied to the programming boost it gave his two television stations.

FIFA and the Asian Football Confederation (AFC) threatened sanctions and a deal was eventually hammered out that left Bakrie’s people in charge with the Super League as the main competition and a revamped PSSI agreeing to undertake wide-ranging reforms.

One was for all clubs to become incorporated under their local municipalities. Another was to address concerns about player welfare: many clubs being notorious for not paying their players or taking care of their medical needs.

When the PSSI ignored warnings that two of the clubs were failing to meet those conditions, the Sports Ministry in mid-April announced it would disband the association and start afresh with a 17- man transitional board.

The PSSI responded by suspending the Super League in early May. In doing so, it took the questionable step of authorising the scrapping of all player contracts, including those of 40 foreigners, and allowing clubs to pay only 25 per cent of their value. “Once again,” says Schwab, “the players – like the fans – are being treated with contempt.”

More than that, the ban raises additional questions over the ability of players to transfer in and out of Indonesia, possibly denying them the opportunity to play in the World Cup qualifiers.

Football in Indonesia is a mess, even if it does still draw huge crowds. The financial crisis in the late 1990s sucked most government money out of sport and post- Suharto decentralisation removed the all-important nexus between sport, education and health.

Since then, the PSSI has done next to nothing to foster junior development, with naturally gifted kids not getting the necessary mentoring in physical fitness, nutrition, strategy and teamwork – all the things that are missing in today’s national team.

The record speaks for itself. After holding eventual winners the Soviet Union to a scoreless draw in the 1956 Olympics and taking the bronze medal at the 1958 Asian Games, Indonesia has failed miserably to take advantage of its potential.

It has held the Southeast Asian Games title only twice, in 1987 and 1991, has never won the ASEAN Football Championship. It sank to a new low in 2012 by losing 10-0 to Bahrain in a World Cup qualifier. It was the exact number of goals Bahrain needed to go through.

“The PSSI can’t hide behind FIFA,” Schwab said. “It, together with the government and all key stakeholders, must now put the interests of Indonesian football first by embracing fundamental governance and business practice reform to achieve a lasting solution.”

Good luck with that.

First published as "Indonesia Loses on Penalties" in The Edge Review, 12-18 June 2015 

See also: "The business of Indonesia football and the hopes of players and fans," 1 April 2007