Clubs, managers and scouting teams casting eyes across the pitches of France for talent on display during the upcoming Euro 2016 Championships should think carefully, and budget accordingly, when considering approaching a player – particularly one who is out of contract and under 24. A recent decision of the Professional Football Compensation Committee (“PFCC”) between Liverpool F.C. and Burnley F.C. in relation to England striker Danny Ings has confirmed that signing players ‘out of contract’ does not always mean they will be ‘signed on a free transfer’. Players out of contract may come with a price tag even though they are not employed by a club at the date of transfer. This will serve as a sharp reminder to clubs seeking to sign players under 24 after their contracts expire, and as a warning to players who don’t wish to renew their contracts in order to secure a move elsewhere.
The ‘free transfer’ principle
Since 1995, it has been an established principle of the European football transfer system that players can move between clubs as ‘free agents’ (i.e. without any transfer fee for the player’s services) when their contracts expire. This became known as a ‘Bosman’ move (after the player, Jean-Marc Bosman, successfully challenged his club, the Belgian F.A. and UEFA in the European Court of Justice (“ECJ”)). The underlying principle was that it prevented clubs holding onto players after their contracts expired – a practice that did take place prior to the Bosman ruling. Bosman himself (who has been known as sport’s most famous ‘freedom fighter’) was unable to leave his club (unless another club was willing to pay for him and met his current club’s price tag), and consequently he was left in the reserves with a reduced salary and no chance of earning performance bonuses until someone else would pay the price his club wanted for him. The ECJ agreed that this was an unacceptable restraint of trade and the game’s transfer system changed significantly (rightly so).
Whilst this principle does apply to players and clubs operating in all leagues affiliated with UEFA, the rule operates slightly differently (and, more expensively) in relation to players under 24.
Clubs spend significant sums of money (and invest time, labour and technology) to train and develop youth players and the academies they train in. FIFA, through its Regulations on the Status and Transfers of Players (the “FIFA Regs”) seeks to protect these clubs by granting them a beneficial interest in the value of the player up to the end of the season of his 23rd birthday. Under the FIFA Regs, a player’s training and education takes place between 12 and 23, and this beneficial interest is triggered each time a player’s registration moves between clubs, either by a transfer or on a ‘Bosman’ (as explained above) during this period. The FIFA Regs are implemented in England by the Regulations of the Football League or the Premier League Regulations (together, the “League Rules”), and have been enforced on a number of high profile occasions by the PFCC, notably involving Daniel Sturridge (between Man City and Chelsea) and now Danny Ings (Liverpool and Burnley).
Both the FIFA Regs and the League Rules make it clear that compensation is payable in the above circumstances, and clubs are aware of this. Compensation will, however, not be payable to a free agent’s former club where that club either agreed to a mutual termination of the player’s contract, or offered the player a renewed contract on less favourable terms than his original contract.
What is always more uncertain is the amount of compensation that may be payable.
Under the League Rules, clubs are given the freedom to reach an acceptable figure. Where clubs cannot agree, as was the case here and has been in other cases (such as the dispute over Daniel Sturridge between Chelsea and Man City), they can refer the matter to the PFCC.
Critically, there is no set formula. Quantifying a player’s ability and calculating their value to a club is a fine art. When adjudicating such cases, the PFCC considers:
- the status of both clubs;
- the money spent by the former club on acquiring and whilst training the player (such as training and medical facilities, travel, accommodation and staff costs);
- the time the player spent at the club;
- the terms offered to him by both clubs;
- the player’s playing record (including international appearances); and
- any substantiated interest shown by other clubs in acquiring the player’s services.
In this case, the PFCC (following examination of hundreds of pages ordered Liverpool to pay Burnley £6.5m, rising to £8m – an amount far higher than Liverpool had initially wanted to pay, and is a record fee issued by the PFCC for a player moving clubs after his contract has expired.
An expensive reminder
This case provides a good example to remind all clubs and players of the principles of the transfer system, as set out in the FIFA Regs. In addition to the relevant employment laws that exist in the relevant country, a player under contract with a club can leave that club on expiry of the contract, or by mutual consent. Transfer fees effectively operate to ‘buy’ a club’s consent and permit the release of the player, who is then free to negotiate the terms of his future before his contract expires during the relevant transfer or registration window.
Alternatively, players can decide not to renew their contracts and simply leave their club after the expiry date, and can move to a new club operating within the EU free of charge (provided they are over 24) – the most recent high profile example being Zlatan Ibrahimović and the upcoming expiry of his P.S.G. contract. This was the principle that emerged following the Jean-Marc Bosman case of 1995.
For players under 24 seeking to secure free transfers, any new club they join following expiry of their previous contract prior to the end of the season of their 23rd birthday will have to negotiate a compensation payment with the player’s former club. Any payment will reflect the value of the player at the date his contract expired, based on the criteria listed in this article. Further payments may be due to any other former clubs at which the player was registered as ‘training compensation’.
For players under 24 who move clubs during their contract (for a fee), 5% of that fee must be distributed to all former clubs who contributed to the development of the player between 12 and 23 as a ‘solidarity payment’. The precise breakdown of how the solidarity fees must be distributed are contained in the FIFA Regs.
It is worth reminding players, clubs and agents that contracts between professional players and their clubs must be observed and need to be respected. It can be very costly to remove a player from their contract prematurely, or even after their contract has expired.