PtG Article 17.10.2014

Controversies over how to enforce TPO ban

Most parties welcome the announced ban on third-party ownership of professional football players’ rights, but disagreements on how the ban is best implemented and enforced exist.

The controversial third-party ownership of players’ rights is finally about to be killed off after FIFA caved into pressure from UEFA over the issue but significant differences remain on how the ban will be implemented and what the consequences will be.

Third-party ownership (TPO) involves the rights of players being taken up by another person or persons, rather than the actual player or their club. What began as a system that enabled poorer clubs to raise cash from outside agencies to help develop players that could be re-paid with a later sale has changed significantly.

TPO has become a financial instrument with investment funds taking stakes in players for the sole purpose of raising money from a sale that UEFA president Michel Platini says “raises questions about human integrity.”

Only recently, an investigation by British newspaper The Guardian claimed that Jorge Mendes, one of Europe’s most powerful agents, and the former Manchester United and Chelsea chief executive Peter Kenyon were advising five funds in the tax haven of Jersey on the investment of more than £100 million in buying “economic rights” in players.

The prospect of a ban was partly forced by UEFA’s executive committee, which met on September 19 and again re-iterated its intentions to ban TPO if FIFA did not act first. A week later, FIFA confirmed its intention to ban the practice.

After the ban was confirmed, Platini said: “The ban is very positive news for player freedom and for the integrity and transparency of the game. There will have to be a transition period for the implementation of the ban, but I have faith that the working group that has been established will find the best rules and regulations to eradicate TPO from football as soon as possible."

Establishing a framework for TPO regulations

How the ban is enforced remains unclear. Most agents feel the existing system can be used. European Football Agents Association’s lawyer Roberto Branco Martins said: “EFAA believes that regulation could be possible within the current framework.”

But research on TPO by the International centre for Sports Studies (CIES) for FIFA found that few national associations have established systems for registering players or the economic rights held by third parties.

FIFA only began investigating TPO earlier this year and a working group led by the Englishman Geoff Thompson met for the first time on September 2 and took evidence from international players’ body FIFPro and stakeholders in Brazil, England and Portugal. FIFA expects its own transfer matching system (TMS), which has been in place for international transfers, to play a part.

A FIFA spokesperson said: “The matter is now back in the hands of the TPO working group for the respective technical regulations to be elaborated. The relevant draft will then be submitted to the competent FIFA bodies and finally to the Executive Committee for approval.”

The transition period will be difficult and after FIFA announced the ban, FIFPro general-secretary Theo van Seggelen gave the world body until the end of the year to come up with “very clear measures on how to make the transitional period as short as possible."

He added: “While there must be a transitional period for the ban to take effect it must be implemented as soon as possible. A ban must also ensure that no similar practice is allowed to appear in any way, shape or form, that all loopholes are closed and that the transition process has to start immediately."

What emerges from the working party’s deliberations remains to be seen but FIFA presidential candidate Jérôme Champagne has warned that a blanket ban on third party ownership without adequate compensation would bankrupt a swathe of professional football clubs overnight.

“I am glad that FIFA has banned TPO, but we have to ask why clubs use TPO and what will replace it?” says Champagne. “I believe that the clubs should control the assets. It’s a very important part of the pyramid but we need to understand why TPO has surfaced. We need to analyse the consequence and the cause, which is lack of money. If we decide TPO is banned then I am sure a lot of clubs will be bankrupt overnight.

“And what will it be replaced by? A lot of lawyers will look for another form [of TPO]. I am convinced that very creative lawyers are already thinking of a way to circumvent the ban. We have to support the clubs and think of the dignity of the players, where they are owned 5% here and 10% there.”

TPO behind 9.7% of transfer compensations paid in 2013

The CIES study showed that in 2013 the ‘overall economic weight’ of TPO was around U$D 360 million a year, which represents 9.7% of the amount of transfer compensation paid in international transfers. The bulk of this figure was derived from just two of the six FIFA confederations: Europe (U$D181.5 million) and South America (U$D 168.3 million). The next largest amount of third-party revenue from TPO was North America (U$D 8.5 million).

The CIES found that Bulgaria, England, France and Serbia want TPO banned worldwide. So far, the practice is only out-lawed by England, Colombia and Ligue 1 in France, although in Argentina, Chile, Uruguay, Italy and South Africa only clubs can hold players’ economic rights.

An earlier study by consultants KPMG for the European Clubs Association (ECA) found that the market value of the 18,000 professional players in Europe was €19.4 billion. KPMG’s report claimed that the total market value of players in countries where TPO was allowed was €14.8 billion. Their research suggested that between 27% and 36% of the market value of players in Portugal’s Liga ZON Sagres is held under TPO. A more recent investigation by Portuguese newspaper Diário de Notícias found that Porto, Benfica and Sporting Lisbon only owned a 100% stake in 22, 10 and six players respectively.

KPMG’s report also suggested that TPO was common practice in more less-resourced leagues, including Albania, Bosnia, Bulgaria, Croatia, Hungary, Macedonia, Montenegro, Romania, Serbia and Slovenia, where TPO was estimated to be more than 40% of the market value of players.

Nikola Prentic is general secretary at leading Montengrin side FK  Buducnost Podgorica, which is a member of the ECA. Prentic says: “This year we have already several times at meetings of ECA discussed this issue.  [Our] region of Europe is perhaps ideal for TPO because the clubs are still in a difficult situation when it comes to finances, and then are forced to agree on various combinations.”

TPO ban could stifle player development

Outside Europe, TPO is less common and the CIES study showed no evidence of transfers involving the practice in Africa or Oceania during 2013. However, agents working in countries where funds at club level are increasingly scarce and corruption can be endemic, claim that banning TPO could stifle player development.

Faizal Khan is licensed as an agent by England’s Football Association but of Guyanese extraction and his ESM agency operates across the Caribbean. “I have seen in developing countries, exceptionally talented young football players all come to a football field to train with a club without boots, shin pads or even money for a drink or the bus fare home after the session,” says Khan.

“This is because these players families are simply not able to afford these basic football necessities which we take for granted. Why? Because these areas are poor, unemployment and crime is high and if it wasn't for football, I dread to think what they would be doing each afternoon. Now, there are entities that fund these poorer clubs [and] one thing is clear, without this money the club otherwise wouldn't be able to coach and develop players in the hope that one or two are sold later.

“However, I have seen instances of [TPO] being exploited because FIFA hasn't set out rules for total transparency. Is a total ban the answer? My view is no. What I feel is required is total transparency and TPO more tightly regulated with FIFA overseeing and setting requirements that will keep the good and rid football of the bad elements of TPO.”

The CIES report had three solutions: elimination, enforcing TPO through regulation to promote transparency or no regulation. FIFA has now promised that the latter is not an option.

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