What the global ban on Third Party Ownership (TPO) means for football?

December 8, 2015

Commercial, contract, employment, finance

By Joe Nelson – Staffordshire University, BA Sports Journalism Student

Following FIFA’s worldwide ban of Third Party Ownership (TPO) on professional footballer’s contracts earlier this year, it is hoped that football clubs across the globe will now be urged to invest more time into their players, nurturing their well-being and talents to procure better deals for all parties involved.

The new law, introduced in May 2015 by FIFA, put forward by FIFPRO (The Professional Football Players Union) received huge backing, including the likes of Michel Platini, who had likened TPO to ‘slavery’.   Although currently suspended from footballing activity, at the time, Platini explained in a UEFA statement how young players are vulnerable and could be exploited using TPO: “UEFA and FIFPRO therefore call on the European Commission to investigate the practice of third-party ownership and to fully endorse FIFA’s decision to prohibit such arrangements.”

A study in 2014 by KPMG showed that 90% of player’s economic rights in South America were partly owned by third party investors. TPO gained mass coverage when it was announced that Santos, a Brazilian football club would only receive €17.1 Million from the superstar, Neymar’s transfer to Barcelona, where €40 went to N&N, a company owned by Neymar’s parents.

It was also found by audit firm, KPMG, that investors and ‘third parties’ owned stakes in the contracts of up to 1100 professional footballers in Europe. For example, world class talent such as Radamel Falcao has been in the spotlight over the dealings, as two of his previous clubs (Atletico Madrid and Porto) have been found guilty of selling a percentage of their player’s contracts to raise funds. Porto, the Portuguese giants had previously been linked with other TPO dealings, and another recent study showed that as much as 36% of professional football players in Portugal were co-owned by third-party. Most recently publicised was Sporting Lisbon’s William Carvalho, whose transfer to Arsenal was said to have broken down due to the ownership problems.

The first breach in the new law was made by second division Belgian club, Seraing United, who failed in their appeal to FIFA’s ban in court in July 2015. The club have been banned from signing players for two years and fined 150,000 Swiss francs after agreeing to third-party ownership deals. FIFA welcomed this legal win as they stated it was “Indispensable for preserving clubs.” FIFA’s executive committee agreed to the ban in May following the campaign by UEFA and FIFPRO.

FIFA have agreed, due to the vast quantity of players involved in third-party ownership that they cannot prosecute each club, as there will be a natural ‘transitional period’, which may cause unrest within numerous leagues due to the nature of the proposal. Where one team may be severely punished, another club from the same league may not be investigated as deeply, which could cause unrest and numerous cases being appealed. For instance, if FIFA had simply cut all ties, expressing that all third party owners must be bought out immediately, it would have made for a far more straightforward command and consequence: You buy out the third parties, or pay a severe fine and be given a transfer embargo.

FIFA have announced that any deals made before 2015 will be allowed to expire under the current circumstances, and any made between January 1st and April 30th will be subject to a maximum one year time limit.

However, any new TPO deals agreed will be punished immediately, which is explained in more depth here. This ‘transitional period’ means that numerous transfers will still require buying out a ‘third party’ in the coming months due to the clauses still within the contracts. For example, recent Premier League acquisitions such as Eliaquim Mangala, Lazar Markovic and Marcus Rojo all involved an external source receiving funds for the transfers, along with the players’ previous clubs.

Inquisitions into TPO in English football is not a new concept. The Kia Joorabchian case brought a lot of light to the situation nearly ten years ago. In that instance, the  problem arose after Joorabchian was said to have represented four separate companies who owned shares in the Argentinian stars, Carlos Tevez and Javier Mascherano during their moves to West Ham United from Corinthians in 2006 (although Joorabchian has publicly declined to discuss the details of Tevez’s ownership and his buying, loaning and selling of the player, citing confidentiality agreements). The Premier League did however fine West Ham a record £5.5 million, and took steps to outlaw TPO in England in 2008.

Joorabchain later claimed that multiple other Premier League clubs use TPO and conceal their involvement in it. He also defended the use of TPO, expressing that it was: “a way of bringing outstanding players to clubs that would not be able to afford them ordinarily.” The Iranian believed it was a ‘South American model’ being used all over Europe.

These third party agreements are understandable, especially with the poorer clubs in the poorer leagues across the world, who need the revenue badly. However, the change means that football clubs should now become more invested in their sides, and not see their players simply as commodities and potential profits.

This process also means that, when the likes of Barcelona or Madrid come swooping in for the next showstopper from South America, they need not fret about complications in the contact and can focus solely on the player’s footballing ability and what he has to offer, along with paying his club 100% of the transfer price. Santos, in this scenario, would receive the full transfer sum for one of their prized assets, thereby giving them more money to invest in their club.

The ban on TPO now makes the game a fairer playing field for all involved, and will produce happier playing professionals across the world. There are still several cases to be sorted across South America and Europe, and we are bound to see numerous cases involving loopholes in the law crop up in the coming months, but it’s another big step towards making football clubs realise they’re still running a team, not a business.

 

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About Kris

Associate Professor in Sports Law, Staffordshire University; British Gymnastics Senior Coach

View all posts by Kris

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