The update that no one has been waiting for
There's been a few developments on the transfer system saga since last year. Some of the highlights include:
- The Lucas Ribeiro Costa case - the first test of the new Regulations for FIFA. Ribeiro unilaterally ended his contract with South African club Mamelodi Sundowns, after they rejected a transfer bid from Qatar SC. Ribeiro claims that he has just cause for terminating his contract. Under the old rules, Sundowns could withhold his transfer certificate and sue him for breach of contract at DRC, and Ribeiro would be unable to play until the procedings had completed (usually 2 years in DRC, potentially longer in a national court)
Under the new rules:
Mamelodi Sundowns cannot refuse to issue a transfer certificate. This means that the player is free to leave, and to play for, another club anywhere else in the world.
- The new club cannot face sporting or financial sanctions if they register Ribeiro
- Any dispute about compensation for breach of contract is between the player and the original club alone. To that extent, Mamelodi Sundowns have taken Ribeiro to the DRC to sue for compensation.
[*]Effectively this confirms that clubs can no longer prevent players from moving internationally, and clubs can sign players who have breached their contract regardless of the circumstances. They are free to leave and play elsewhere as they see fit and it is a matter for the club to separately sue the player for compensation after the fact.
[*]The Diarra ruling goes further in the EU. In the EU, the amount of compensation is limited to the remaining value of the player's contract, plus maybe nominal damages and costs for the releasing club. Externals, like transfer fees, are no longer allowed to be included in any calculation of compensation a player might owe a club, because the player is not party to that transaction. Also, a transfer fee was only required under the old system as a payment to stop the selling club from suing the new club; as buying clubs are no longer liable on behalf of players, there is no need for a transfer fee.
[*]In December, UEFA has broken ranks with FIFA and has opened collective bargaining directly with FIFPro, despite FIFA's resistance to do so globally. UEFA is scrambling to prevent the complete collapse of the transfer economy. The j
oint agreement recognises some central principles:
- UEFA should have one consistent transfer system across members, instead of being reliant on national law
- Contracts are necessary for stability for both clubs and players, and must have a 'protected period' where they cannot be breached for any reason by either party.
- A transfer system is necessary to redistrubute money across the football pyramid
- DRC must remain as a low-cost, speedy, accessible alternative to national courts for contractual dispute resolution'
- Clubs and players found to terminate contracts without just cause should face sporting as well as financial consequence.
This last bit is really important because as
@terraloon and I discuss above, the politics of this decision is even more important than the legal details. UEFA's stance wedges its non-EU members (ie. England), because even though the CJEU's decision doesn't apply to them directly, they are now forced to decide between accepting UEFA's rules or losing the cash cows of Euros and the Champions' League. I speculated before that England, Saudi and the Americas could go their own way but this is no longer practical unless they form a viable Super League without other European clubs.
The joint agreement, as well as some chatter on the internet from people familiar with the discussions, indicates a few key changes coming:
- Transfer fees can still exist, but only where a buying club voluntarily agrees to it as a fee is no longer needed to release the player. Practically, this means that transfer fees will only apply where the player doesn't demand a move and instead requests the buying club to pay compensation to the seller.
- The calculation of compensation is still up in the air. The favoured solution is rumoured to be remaining value of player's wages (not the amortised FFP value) + some sort of adjustment made on a case-by-case basis by the Tribunal.
- The joint statement recommends that liquidated damages/penalty clauses (ie. pre-agreed release fees set in player's contract) be the method of contract release 'without just cause'. This is fairly common practice already, but will likely become the default. However, CJEU has already said that excessively high release clauses would likely also be invalid in the EU.
- Players do not need to finalise their dispute before moving. Although the Diarra ruling did not directly apply to Sterling because England is not in the EU, UEFA's endorsement of the joint statement means that any changes will likely apply UEFA-wide and FIFA-wide, and so the club realised it had little legal room to continue the 'bomb squad'. It's likely that 'bomb squads' will be a thing of the past as players can now simply leave and deal with the dispute after the fact.
Do these changes affect Chelsea? Yeah, big time. Fortunately or unfortunately, depending on your view of BlueCo. The 'model' is now surely unviable as players do not need to be 'released' and the total compensation payable is limited where players terminate their contract unilaterally. We are unlikely to get anywhere near the sums of money paid in transfer fees. The new rules for compensation almost certainly favour lower transfer fees, higher wages models. Also, there is a serious financial consequence as FFP/PSR has divorced accounting from real-world finance to the extent that there are clubs in crippling transfer debt to other clubs; if transfer fees are deflated, this will seriously impact the ability of those clubs to repay debts.
Some examples of the effects for Chelsea:
- If Man United want Palmer: If Palmer wants to leave, the club cannot stop him. Palmer can unilaterally terminate his contract 'without just cause'. Compensation is still payable, but will be limited to some fraction of the remainder of his wages payable. Alternatively, Palmer can decline to leave, and request that Man United voluntarily negotiate compensation payable to Chelsea.
- If City also wanted Palmer, there might be a bidding war to driving up the price. However if Palmer decides he only wants City then he can end his contract and the scenario above applies.
- If Badiashile gets sent to a 'bomb squad': Under the new rules, this may be considered 'just cause' and in this case Badashile would be entitled to leave the club during any transfer window for free. Even if it were not 'just cause', Badiashile still has the right to negotiate with a new club. The club cannot prevent him rescinding his contract or from moving. It can sue him for compensation, but the limits above will likely apply.
- If Gittens got good: Signed for a high fee and low wages, Chelsea would get very minimal compensation for him if he were signed by another club.
