Third Party Ownership

Third party ownership of players refers, in short, to a situation where the economic value of a player’s registration belongs not only (or even not at all) to the club but to one or more third parties. Questions associated with third party ownership of players were initially raised in connection with the transfer system, which was examined in Chapter 9, and in fact the currently applicable rules which govern third party ownership are to be found in the FIFA Regulations on the Status and Transfer of Players.129 However, the evolution of the phenomenon of third party ownership and the associated mutation of the rules that apply to it means that the matter is more sensibly addressed as part of a general inquiry into the pattern of governance in the game which is the preserve of this chapter.

Simply put, third party ownership allows clubs to acquire players who are better than they could otherwise afford. It is a means to attract investment in labour. The consequence is that if a player is transferred to another club, then the fee that is received is shared between the parties that own the economic rights attached to the player’s registration—which, in formal terms, is what is the subject of the transfer. So the third party invests in talent in the hope that the player in question will improve and add value by becoming an attractive commodity in the market for labour. The club wins, by acquiring better players; the player wins, by getting the opportunity to play for a higher profile club than would apply in the absence of this source of investment; the third party investor wins provided it is smart enough to identify players whose ability can be improved and clubs which are able to assist in such development. This model has been used widely in Europe, although rules differed among national associations. Clubs in Portugal in particular are noted for use of such arrangements, though by contrast they have been banned in England since 2008.[1] [2]

So what is the problem? The problem lies in the risk that the third party owner may seek to influence the club’s decision-making on sporting matters. The third party owner has an interest in its player being picked for the first team as often as possible; it may have an interest in pushing for the sale of the player, in order to realize profits on its investment.

Third party ownership is a problem because the transfer system itself exists and therefore creates incentives which are awkward from the point of view of the integrity of the game, contractual stability, and team building. So the problem with third party ownership is that it may lead to economic incentives subverting the integrity of the sporting competition.

Until April 2015 the FIFA Regulations asserted supervision of what is termed ‘Third-party influence on clubs’. It was provided that:

  • 1. No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.
  • 2. The FIFA Disciplinary Committee may impose disciplinary measures on clubs that do not observe the obligations set out in this article.

This does not forbid third party ownership, but it, in short, seeks to relegate the third party investor to a purely passive role. Sporting decisions must be strictly walled off from economic motivations. But this is hardly realistic. It is, moreover, plainly very hard to police a rule of this type.

A clutch of instances of alleged interference in sporting decisions by third party investors eager to provoke the transfer of ‘their’ player to another club prompted UEFA to change the rules.i3i With effect from May 2015 a much more restrictive regime has been imposed. The current rules in full are as follows:

  • 18bis Third-party influence on clubs
  • 1. No club shall enter into a contract which enables the counter club/counter clubs, and vice versa, or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.
  • 2. The FIFA Disciplinary Committee may impose disciplinary measures on clubs that do not observe the obligations set out in this article.
  • 18ter Third-party ownership of players’ economic rights

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.

[plus transitional arrangements governing agreements entered into before May 2015] 6. The FIFA Disciplinary Committee may impose disciplinary measures on clubs or players

that do not observe the obligations set out in this article.

So this removes the commercial incentives underpinning third party ownership which are conducive to harming the sporting integrity of the game.

There are obvious practical questions about whether this regime can be effectively policed. But there are questions of law too. There are transitional questions about whether existing agreements between clubs and third parties are even valid in the light of their arguably anti-competitive effect and in particular their impact on the individual player, as well as questions whether the restrictions on third party ownership which applied prior to May 2015 are lawful. But the main question for the future is whether the restrictive regime that has been in force since May 2015 is itself compatible with EU law. After all, it amounts to a restriction on the demand- side of the market for players, and has the consequence of reducing competition. It risks being condemned as an unlawful restriction on free movement and/or as anti-competitive. The question would arise whether sport is so special as to require such a rule: does it, in the terms of Article 165 TFEU, fall within ‘the specific nature of sport’ as a rule necessary for its organization.

In determining whether the rules are compatible with EU law, the most significant question appears to be whether they are really necessary to achieve their ends or whether instead a less restrictive version would be adequate.[3]^ This is another instance where governing bodies would doubtless appeal to the sporting margin of appreciation presented in Chapter 7.4. The argument would be that room should be permitted to shape the lex sportiva according to the special concerns of preserving the integrity of sport from the corrupting influence of shortterm economic pressures. EU law is, as has been consistently shown, capable of accommodating such motivations, and therefore the rules which govern third party ownership, though restrictive of competition in the market for players, are open to defence as representing a genuine need in the governance of the sport. As devices designed to protect sporting integrity, they are probably compatible with EU law.

  • [1] This was in consequence of a dispute concerning Carlos Tevez, then a player registered to WestHam: FAPL v West Ham, unreported, see A Lewis and J Taylor, Sport: Law and Practice (3rd edn,Bloomsbury 2014) ch H4.39. See also D Geey, ‘Third Party Investment from a UK Perspective’ (2016)16 Intl Sports LJ 245.
  • [2] eg ‘Rojo Deal Prompts Third-party Revolt: Sporting Lisbon’s President Calls for Action overOffshore Funds with Stakes in Players’ The Guardian (London, 11 September 2014).
  • [3] 32 cf C Duve and F Loibl, ‘Why FIFA’s TPO Ban is Justified’ (2016) 15 Intl Sports LJ 248. Fora contrary view, see J Lindholm, ‘Can I Please Have a Slice of Ronaldo? The Legality of Fifa’s Ban onThird-party Ownership under EU Law’ (2016) 15 Intl Sports LJ 137; and (arguing for a less restrictiverule) La Liga, ‘FIFA must Regulate TPO, not Ban It’ (2016) 15 Intl Sports LJ 235. Also on law andpractice, see A Duval, ‘Unpacking Doyen’s TPO Deals: The Final Whistle’ Asser International SportsLaw Blog, 20 April 2016 accessed 29 November 2016.
 
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