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Friday, October 19, 2007
 
Sports Agency on the other side of the Pond

Marc Edelman recently posted on the subject of Sports Agencies representing both Players and Ownership. Conflict-of-Interest or Common Sense? Mark asked. The same question is pretty much on the European agenda at the moment. The new FIFA Players' Agents Regulations are currently being discussed by sports regulating bodies and even the EU has taken an interest in the issue.

General perception is most soccer deals in Europe are made in the following manner: an Agent is approached by, or approaches a, club regarding an offer for a player and his prospective transfer. Somewhere along the line, club and agent discuss payments to be made to player (salaries, bonuses, etc.) as well as payments to be made to agent (commissions, fees or other). In the end, the player seldom pays anything to his agent and clubs pick up the tab for the representational work undertaken by the agent on behalf of his client. In fact, I don’t think most players would react well to an agent presenting an invoice for his services, which is testimony to the current state of affairs and to the amount of work to be done in terms of avoiding conflict of interest.

1. Illegal Payments and Dual Representation
FIFA Players’ Agents Regulations (which are superseded by National Law on the subject but are basically accepted by Football Associations all over and can be regarded as the legal framework when dealing with agency issues, hereinafter the “Regulations”) set forth that "[t]he contract shall explicitly mention who is responsible for paying the players' agent's fee, the type of fee and the prerequisite terms for the payment of the fee" (article 12.3). In addition, the Regulations establish that “[o]nly the client engaging the services of the players' agent, and no other party, may remunerate him” (article 12.4).

The foregoing provisions do not preclude agents from being engaged and remunerated by clubs. In fact, article 11.4 of the Regulations clearly states that an agent has the right “to take care of the interests of any club which requests him to do so”. In this case, the agent “shall be remunerated for his services by payment of a lump sum that has been agreed upon in advance”, as per Article 12.9 of the Regulations.

A holistic interpretation of both articles 11 and 12 necessarily concludes that agents must be remunerated by the party they are representing while they must represent only one party in any given deal. However, available evidence suggests this is hardly the practice amongst European licensed agents. Illegal payments (known as Bungs in the UK) and dual representation threaten to become established traits in the trade. Ian Blackshaw, a distinguished law professor, reports that an investigation into the bung allegations commissioned by the FA Premier League in 2006 and lead by Lord Stevens undertook the review of all 320 Premier League transfers that had taken place since January 2004. Lord Stevens identified 39 transfers as requiring further investigation, while one unnamed football manager submitted that the figure should be multiplied 4 or 5 times.

The FA has been very reactive to the troubles of agency and a transfer clearing-house has been put in place, requiring clubs to submit a declaration of payments form, provided by the FA, to the Registrations departments along with the player's contract, registration form and, where necessary, transfer form. In turn the transfer funds must be forwarded to the Finance department where they are then checked and cleared to the authorized banks and only after this process can the registration be finalized. Other Associations have taken no such measures and we can only guess that Lord Stevens would have had a lot more work had he looked into transfers all over Europe.
Let's take the example with which I started this post. That same agent has two offers for his player: club A has submitted a proposal of USD 500.000 and an agent fee of USD 100.000. Club B on the other hand, is offering the player USD 350.000 whereas the agent gets USD 150.000. Guess who will end up securing the player’s signature? This may be a touch to simplistic, but it illustrates the bottom-line.

2. Cross Ownership and Conflict of Interest

Globalization has changed the face of Soccer, and in no other area is this more apparent than in ownership of players’ transfer rights. 20 years ago players’ transfer rights were the clubs exclusive property. With much more significant amounts of money coming into the sport, and with many clubs struggling to balance their accounting sheets, we’ve reached a point where clubs, individuals and funds are owners of players’ transfer rights. Nowadays, a club wishing to engage the services of a player is likely to have to negotiate the transfer with an investment fund.

This has opened up the door for obscure situations. Club managers, directors and agents are sometimes the people behind these funds. Again, how can club managers be expected to act in the club’s interest if they have a personal stake in a deal? How can an agent faithfully represent the interests of a player when his own personal interest in on the table?

Current Regulations are silent on this matter but the word is the new draft Regulations will contain provisions specifically addressing the issue. But there is no point in having legal provision if there is no monitoring of compliance.

Control seems to be the ominous solution. People need to go on record as to their status in any given transfer and cannot be afforded the chance to represent themselves and third parties at the same time. It all sounds a bit draconian. But can anyone truly disagree with the assumptions and suggested solutions?





5 Comments:

Luis,

Excellent post. The problem as I see it is that there are good agents and bad agents, and unions have set up a system in which: (1) players are expected to figure out on their own who the bad ones are and then pick out a good one, and (2) the union then permits the agents to be grossly overcompensated based on some percentage of the player contract. It's a formula for disaster! If unions truly want to be looking after the players' best interest, they need to have more direct involvement in the process.

The British union (PFA) has been proactive in this regard and established an internal player management agency in which it employs 9 agents that provide players with player management services: http://www.givemefootball.com/pfasection/PMA.html.

Blogger Rick Karcher -- 10/19/2007 7:12 AM  


Rick

Thank you very much. I obviously agree with you. Your's is a very american proposal, and one that makes absolute sense. But I'm not sure how Players' Agents Unions/Associations would react to this.

I was unware of the initiative by the PFA in Britain. It is true they have one Players' Agents Association in England as well and seemingly, things have gone well with what seems to be an excellent idea. I'm thinking how well it can translate into other countries though, where the unions are still relatively weak institutions (any League other than Italian, Spanish and English).

It would be great if the Portuguese Players' Union came up with something like this...

Thank you.

Blogger Luis Cassiano Neves -- 10/19/2007 11:00 AM  


It's an interesting system indeed, but I wonder if it is not better suited for leagues that have a natural monopoly (NFL, NHL, MLB, NBA).

The problem to me is that the agent is supposed to look out for the players best interest. In europeean leagues (Soccer, Hockey and even team handball) talent often moves from counrty to country, league to league. Where is the players best interest here? One agent from one league claiming this, an agent from another league claiming that, etc... in that situation the player would need an advisor to figure out where to go... sound like an agent to anyone else?

I dont know, maybe I'm missing something here. Are the agents from the PFA allowed to negotiate with other leagues? It just sounds like the agents would be biased toward a certain league, which wouldn't be in the players best interest.

Any clarifiacatiowould would be much appreciated.

Blogger Jimmy H -- 10/22/2007 7:49 PM  


Jimmy

Excellent points raised. To the best of my understanding, the PFA agents would be able to negotiate with other leagues as well. They seem to be best equipped to deal on behalf the players because of the institutional status, which places greater pressure on them to adhere to the rules put in place by leagues.

But good point on the bias. It all comes down to the human quality of the people engaged in the business. But Agents from unions do seem like a step forward.

Blogger Luis Cassiano Neves -- 10/23/2007 5:04 AM  


Luis, Rick and Jimmy: Great topic!

Jimmy has a very good point. We have seen that, when the player moves to another country, the compromise of the new country player´s union is not that strong with the foreing player as with a national player.

Regarding the payment of the agent´s fees, the FA regulations (contrary to the FIFA regulations) incorporated in the guidance notes (September 2007) a “DUAL REPRESENTATION & CONFLICTS OF INTEREST” chapter (access at http://www.thefa.com/NR/rdonlyres/0F41539B-05CC-4B24-94D7-5D6F931BB3F3/120799/GuidanceNotes.pdf)

Finally and regarding the 3rd party ownership of player´s rights. We might say that this is our not-to-be-proud-of invention, here in Argentina. The first CAS awards about this issue are from Argentinean clubs. In Español de Barcelona c/ Velez Sarsfield and Club Atlético Lanus c/ RCD Mallorca, the CAS defines the notion of economic rights, opposed to federative rights and recognized the validity of a co-ownership of a player´s economic rights between to clubs. I still don´t know if the CAS recognized the ownership of a third person or company that´s not a club.

In my experience, those funds always have a club under their control that they use as a masquerade to register the player in order to avoid any federative obstacle. But that´s just another future conflict focus. ¿Is the co-ownership of a player between clubs valid, even if the player actually never played for one of the clubs?

In Argentina, after a bunch of judicial decision against the validity of the 3rd party ownerships of those rights, because they where contrary to the regulations of the Argentine Football Federation, the federation passes a new regulation in December 2005 admitting the 3rd party ownership. There’s a limitation, the club that owns the federative rights of the player must own also a 30% minimum of their economic rights. Also, the private owner can´t sell those rights to another person or club but to the holder of the federative rights (except if he gets the clubs consent).

Anonymous Ariel Reck -- 10/23/2007 5:44 PM  


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