The transfer period has opened
For several weeks now, sports newspapers and football websites have been buzzing with transfer rumors. The Belgian transfer market opened on June 15. Until September 2, Belgian teams can strengthen themselves with new players or let go of redundant players.
Over the years, the purchase and sale of football players has become a multi-million dollar business on which many clubs base their revenue models.
This contribution briefly discusses some legal aspects of the current transfer system.
Employment contract between club and player
The relationship between a player and a club is governed by an employment contract. In the football context this is usually of a fixed duration. After all, an employment contract of indefinite duration can be terminated at any time, resulting in only a limited severance payment.
Instead, clubs work with fixed-term employment contracts that are extended where appropriate. Such an extension will always take place before the end of the term of the employment contract. As a result of the Bosman case, a club can no longer request a transfer fee after an employment contract has expired. The club then runs the risk that a player can leave ‘transfer-free’.
Transfer concept
A transfer is the transition of player A from club X to club Y. A footballer can make a transfer both nationally and internationally. We speak of an international transfer when a transfer takes place from one national football association to another.
As mentioned, a transfer fee is often paid between clubs following a transfer. A transfer fee is legally qualified as a compensation agreed between the old club and its player following the termination of the employment contract by mutual consent. In theory, the transfer fee is payable by the player himself, but in practice it is agreed between the player and the new club that the latter negotiates and pays the transfer fee.
The amount of the transfer fee can be recorded in advance in the employment contract by means of: An buy out clause or a release clause. However, in the majority of cases, the transfer fee is determined on an ad hoc basis based on the player’s market value.
Applicable regulations
At national level, the employment relationship between a player and a club is mainly governed by common labor law. In addition, however, one must take into account the law of 24 February 1978 regarding the employment contract for paid sportspeople (Paid Sportsperson Act). The infamous ‘Law of 78’ contains a special dismissal scheme for paid athletes. Based on this law, the terminating party is liable to pay a termination fee equal to the salary for the remaining term of the contract. However, the legislator has set a maximum, namely double what would be due if it were an employment contract of indefinite duration.
Football clubs generally wish to avoid the application of this law. In the event that a player wants to leave, it is preferable to negotiate with the new club about a transfer fee to be paid. The compensation that, in accordance with the law, paid sportsperson, is due as a result of the player’s termination will be much lower than a transfer compensation.
The Paid Sportsperson Act has thus evolved into a tool for players to exert pressure on their club when the latter does not cooperate in a transfer.
At international level, FIFA regulations apply in the event of a transfer. Including the Regulations on the Status and Transfer of Players(RSTP) apply. For example, Art.17 RSTP contains the criteria on the basis of which the compensation payable in the case of the employment contract is determined ‘without just cause’ was broken. FIFA regulations and national regulations are not complementary. A compliant termination in accordance with the law of 24 February 1978 may not be accepted by FIFA. This has already led to various legal proceedings.
Criticism of the transfer system and the transfer fee
The current transfer system arose after the Bosman case. Previously, transfer fees were also charged when a player was transferred after the expiry of his contract. However, this was considered by the Court of Justice in the Bosman case as an unjustified restriction on the free movement of workers. Since then, transfer fees can only be payable if a player makes a transfer during the course of his contract.
The current system is also not unchallenged. The transfer system has already been challenged on the basis of both free movement of persons and European competition law.
In 2015, FIFPRO, i.e. the international players’ union, filed a complaint with the European Commission against the transfer system. It was argued that free competition is limited by the dominance of rich clubs on the player market. The complaint was eventually withdrawn after FIFA made some commitments to FIFPRO regarding player rights. However, it shows that the current system is also not legally watertight.