Does Third Party Ownership in football restrict or enhance a player’s freedom of movement?

Third Party Ownership (Hereinafter: TPO) transfers the economic rights, from the club to a “third party” and means that the club will not 100% own the transfer value of the player. The Third Party, whether it be a company or individual, will have the right to decide if a player moves to another club and for what fee as a result of owning shares in the player.  Jonas Baer-Hoffman describes TPO as the “commercial exploitation of sporting talent” and the “maximisation of profit in the transfer market of football players”.[1]

TPO is most prominent in countries in South America, such as Argentina and Brazil but clubs in Spain and Portugal are among those who benefit from this system the most. This is because TPO allows smaller clubs across the world with less financial power to afford the transfer fees of player that, without Third Party involvement (Hereinafter: TPI).

In South American countries, the player has a basic labour right benefit from his transfer, this would be through a percentage of the profit of his sale. The current FIFA regulations, 18ter of the FIFA Regulations on the Status and Transfer of players forbids the involvement of a 3rd party[2]. As suggested by Reck, should FIFA further this definition of third parties to include the players themselves, this would be a breach of the labour rights owed to the player and FIFA would face issues when trying to implement a blanket ban on TPO.[3]  Once a third party is involved, the opportunity for the players to maximise the benefit to himself is reduced this is a result of the percentage of the transfer value that the club owns and thus restricting the players basic labour rights. Jonas Baer-Hoffman emphasizes the importance for the athlete to offer their services in the labour market in order to “maximise their salary income in what is often a short-lived and precarious career.”[4] This point of view is supported through FIFA making an alteration to Article 18ter which prevents any argument that players are classified as a Third Party when discussing the transfer of players.[5] This is a prime example of employment law in the form of labour rights in South America operating coherently with that of Sports Law in the form of the FIFA regulations.

TPO came into the public domain in England through West Ham acquired Carlos Tevez and Javier Mascherano in 2008. This was the catalyst for the FA to ban TPO entirely in the 2009/2010 season because it would risk the integrity of the game and the player development within the UK.[6] Tevez’ and Mascherano’s economic rights were owned by two different offshore companies and they played a major part in funding the move to West Ham. The reason being, the owner of one of the offshore companies, Kia Joorabchian was also the owner of Corinthians, who both the players were playing for at the time. Once he took ownership of the two players, he arranged the transfer to West Ham. As part of this deal, it would potentially see him take full ownership of the club in the future as well.[7]  It was argued that the influence of the two players, especially Carlos Tevez, was the reason West Ham managed to survive relegation from the Premier League that season and thus, sending Sheffield United down instead. Following an investigation into this transfer, the FA not only fined West Ham £5.5million, eventually raising to £20million, but banned Third Party Involvement in transfers. They created regulations preventing Third Party involvement in regard to player transfers, Section 21 Subsection A.3, but also Third-Party Involvement influencing the clubs policies through Section 21, Subsection A.1.[8] FIFA also took the decision to ban Third Party Involvement through introducing Article 18ter in the FIFA rules on the Status and Transfer of Players in 2015[9].

Carlos Tevez and Javier Mascherano’s transfer to West Ham in 2009 was largely a result of TPO

From this, it is clear to see that the two players were transferred to West Ham to create a shop window effect and attract a further transfer to a better financially capable club, consequently, making the company whom owned the players more return on investment. The issue, despite having to sign an employment contract with the club, how much power did the players have in deciding to move to West Ham. The Policy of Free movement of Regional Citizens is a similar version of the TFEU’s Freedom of Movement that includes various South American countries and therefore their citizens the freedom to seek employment.[10] On this basis, there is sufficient laws protecting the employee’s rights in both the country where they were originally employed and the country to which they are transferring to, to suggest that the Third Party Ownership ban does not coherently operate between employment law and sports law, rather focus’

As soon as a Third Party becomes involved in the economic rights of a person, it becomes an issue of freedom of movement. Once a company, person or agent is the owner of the percentage of the player, it puts at risks the core value of a person; rather than being viewed as a person or employee, one merely becomes a commodity to a company.  With this in mind, once a player starts to be treated as a commodity there is a high chance that the players freedoms set out in the Treaty on the Functioning of the European Union will be at risk. As we saw in Walrave vs Koch case[11], the governing bodies must respect the core freedoms throughout EU law, in this case: freedom of movement. FIFA creating a total ban on TPO through Article 18ter, would suggest that the ban does not restrict these freedoms, and this exemplified through the Seraing Case whereby RFC Seraing were found guilty of breaching Article 18ter and 18bis after receiving £300,000 investment from Doyen Sports Group in return for 30% share in a one of their players and were charged with a 2 year transfer ban as a result.[12] Following this, RFC Seraing appealed the ban to the Belgian courts, the Swiss tribunal and also the Court of Arbitration for Sport. Neither of the courts repealed the bans and the decision was upheld which strengths FIFA’s standpoint for implementing the ban, not necessarily world-wide, but specifically within European Law.

Moreover, the EU courts recognised the specificity of sport through the Treaty of the European Union in 2009 so this must be considered when applying the general law when making decision in order to protect the competition or core values of the sport. However, as Neeraj Thomas points out, the Freedom of movement is not an absolute right in the eyes of the EU, and therefore “If deemed necessary and proportionate, exceptions to free movement rights can and will be permitted.”[13] To put this into context, Bianchi states that the FIFA articles do in fact “restrict the free movement of persons, services and capital” but the “restrictions pursued legitimate aims” based on the specificity of sport. [14] Taking these two points into account, it creates a grey area when analysing the legality of the TPO ban based on the rights of the player. The ban essentially does restrict certain rights but because of the specificity of sport it is allowed to legally stand, shown through the Seraing case.

The issue of TPO is a currently a difficult one to analyse purely based on the rights of football players. The issue is that with FIFA’s approach to banning the entirety of TPO globally rather than regulating it sufficiently has created problems. The TPO ban was not enforced to protect the basic rights owed to a person/employee but more to protect the integrity of football. Considering the Lex Lucida approach to the issue, whereby it governs transparently and coherently with members, as well as the using Lex Sportiva would have been more beneficial, rather than being wholly based on Lex Sportiva. It can certainly be argued that TPO actually increases the player’s right to the Freedom of Movement rather than restricting it due to increasing the chance of the player’s capability to move to a less financially accomplished club. FIFA have made the decision to prioritise the integrity of the sport rather than allow further freedom to seek employment and financial gain for the players. However, with employment law in mind, FIFA has made changes to certain regulations such as Article 18ter in order to encompass laws around the world which gives the governing body sufficient stand-point to ban TPO as a whole.


References

[1] Jonas Baer-Hoffman, 2.5 Third-party ownership of football players: human beings or traded assets?,

[2] https://resources.fifa.com/image/upload/regulations-on-the-status-and-transfer-of-players-2018-2925437.pdf?cloudid=c83ynehmkp62h5vgwg9g

[3] Ariel N. Reck, 2015, Debating FIFA’s TPO ban: ASSER International Sports Law Blog symposiu, Chapter 4 – The impact of the TPO ban in South Amercia, Springerlink.com

[4]Jonas Baer-Hoffman, 2.5 Third-party ownership of football players: human beings or traded assets?,

[5]Roberto Nájera Reyes, 2019, Available at:  https://www.pintoruizdelvalle.com/images/actualidad/prensa/pdfs/2019_Football_Legal_MC_RN.pdf

[6] The FA handbook, Third party interest in players regulations (section a, subsection 1),:

[7] Rosa Lombardi, Simone Manfredi, Fabio Nappo, (2014) Third Party Ownership in the field of professional football: a critical perspective, Business Systems Review.

[8] 2019/20 FA Handbook, http://www.thefa.com/football-rules-governance/lawsandrules/fa-handbook

[9] Jonas Baer-Hoffman, 2.5 Third-party ownership of football players: human beings or traded assets?,

[10] Diego Acosta, (2016), Free Movement in South America: The Emergence of an Alternative Model? Available at:

https://www.migrationpolicy.org/article/free-movement-south-america-emergence-alternative-model

[11] Case 36/74 Walrave and Koch [1974] ECR -01405

[12] TAS 2016/A/4490 RFC Searing c. FIFA

[13] Neeraj Thomas, 2016 , The future of third party ownership and influence in football following the fc Seraing case,  https://www.lawyerissue.com/the-future-of-third-party-ownership-and-influence-in-football-following-the-fc-seraing-case/

[14] Simon Bianchi, 2019,  available at:

http://www.youngicca-blog.com/fifa-ban-on-third-party-ownership-a-pyrrhic-victory-for-fifa-in-front-of-the-swiss-federal-supreme-court/

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