FIFA has changed its definition of Third Party Ownership. Why has it done so and what are the consequences for players?

FIFA, in its last edition of Regulations on the Status and Transfer of Players (RSTP) published on 1st October 2019, modified the definition of the concept of a “third party”. That modification came into force on 1st June 2019.

One of the intentions of FIFA in modifying this definition is to discount the consideration of football players as third parties in their own transfers and thus to exclude players from the consideration as TPO (or Third Party Ownership, which we will talk about later in this article).

The new definition is as follows: “Third Party: a party other than the player being transferred, the two clubs transferring the player from one to the other, or any previous club, with which the player has been registered.”

Compare this with the definition included in the previous edition of FIFA’s RSTP which was: “Third Party: a party other than the two clubs transferring a player from one to the other, or any previous club, with which the player has been registered.”

Consequences

The main consequence of this change is that the agreements signed between Club and Player that include a clause allowing the Player to have a future percentage of his own transfer have become valid. This is a way to generate an economic benefit for the Player. 

According to FIFA Circular no. 1679, which was released on 1 July 2019 including this modification, the change of the definition was introduced “in order to reflect the jurisprudence of the Disciplinary Committee related to the reiterated practice of clubs, which enter into agreements with some of their players entitling them to receive specific compensation (a lump sum or a percentage) in the event of a future transfer to another club. Such amounts promised to the players should be seen as part of the remuneration due to the players under their employment relationships with their clubs and sich agreements should not be considered a violation of FIFA’s rules on third-party ownership of players’ economic rights.”

Despite this change, article 18ter of the Regulations which deals with these operations, is still written in the same way:

“No club or player shall enter into an agreement with a third party whereby a third party is being entitled to participate, either in full or in part, in compensation payable in relation to the future transfer of a player from one club to another, or is being assigned any rights in relation to a future transfer or transfer compensation.”

This article was announced by FIFA in its Circular no. 1464, dated 22 December 2014, communicating its introduction in the Regulations and its effective application on 1st May 2015 (this inclusion was confirmed in 2016 by TAS-CAS in its award TAS 2016/A/4490), achieving one of FIFA’s objectives: the prohibition of the so-called “Third Party Ownership” (more commonly known as TPO).

this change opens a new horizon for players relative to their own transfers

TPO can consist of football agents, investments funds, bank entities and investors outside of football clubs whose main responsibility is to fund transfers of players to football clubs that cannot afford these operations. Before considering TPO, we have to remember the difference between “federative rights” of a player and “economic rights”. Federative rights have their origin in the moment that a player is registered with a club in the Football Federation to which the club belongs, giving him the right to represent said club and not another one. These rights are indivisible: only one club can be their holder at any given time. Economic rights are the ones that have economic value to the player. These kinds of rights can be divided between two or more parties. Here is where TPO comes in, because they can share the ownership of the economic rights of a player with the club at which the player is registered (or with other parties, not necessarily a football club). 

Conflicts

The main problem with these type of entities happens when a conflict of interest arises between the actual owners of full or part of the economic rights of the player (TPO) and the theoretical “owner” of said economic rights (the club with which the player is registered i.e. the ownership of his federative rights). In these cases, “the owner of the destiny” of the player is the TPO, so it decides when and where to transfer the player, trying to find the best economic benefit without necessarily taking into consideration the sporting future of the player. 

Hence, in the case of transferring a player using a TPO, the club does not own all the economic rights of the player in question (however, it owns the federative rights, as mentioned), so the club loses the right to receive 100% of the corresponding amount in a future transfer of the player. 

The player also loses certain powers of decision over his own career, because it depends on the economic viability determined by the TPO. 

The first known case funded by TPO was that of Carlos Tévez and Javier Mascherano:

Media Sports Investments (MSI) was an investment fund that, in 2004, bought in 51% of the shares of Sport Club Corinthians Paulista, a Brazilian football club. In addition to this operation, MSI acquired for more or less €34 million the economic rights of the players Javier Mascherano and Carlos Tévez, giving their federative rights to its own club (i.e. Corinthians). 

Notwithstanding this, on 31 August 2006 both players were transferred to West Ham United, a football team based in England for €30 million, according the website Transfermarkt. This movement was a little bit suspicious because West Ham was a club that, season after season, struggled to keep their place in the Premier League. 

Both transfers were investigated by FA (the English Football Association) and it concluded that a third party (in this case, MSI) could oblige the football club to sell players, if the TPO owned the economic rights of the player, and they receive an attractive offer for them.

Compromise

This case was really important because jurisprudence was determined regarding the validity of transfers funded by TPOs and their subsequent consequences, such as the obligation of the football club to “obey” the TPO when they want to transfer the player. 

As a result, FIFA itself decided to end these types of signings, because it considers that the integrity of the competition was compromised. 

It is clear that this change opens a new horizon for players relative to their own transfers and subsequent agreements relative to those transfers with the possibility that they can share in future transfer fees and this will become part of the negotiations for high profile players. It may appeal to clubs as well – they will be able to offer a percentage of the transfer fee in return for a lower player salary. However it may be that clubs and agents shy away from such deals – Manchester United reportedly pulled out of signing Erling Braut Haaland because of the demands made by Mino Raiola, his advisor and Alf-Inge Håland, the player’s father, around the share of any future transfer fee.

Carlos Garcia

Enjoyed this? Here are some similar articles:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s