Ago 11, 2019

FIFA’s Clearing House: the future of solidarity mechanism and training compensation

Last July 25th FIFA announced[1] the opening of the tender process for the establishment and operation of the new «Clearing House» (CH), a central element of the reform package of the transfer system endorsed by the Football Stakeholders Committee in September last year[2] (and subsequently approved by the FIFA Council on 26 October).

The ultimate aim of the CH is to centralise ALL payments associated with football transfers (including agents’ commissions), but in a first phase it will be reduced to the calculation and automatic distribution to the training clubs of the amounts due as solidarity contribution and training compensation[3].

While the request for proposals is essentially addressed to companies wishing to participate in the tender process[4], the document allows us to know what the future CH will look like and, most importantly, how the training reward mechanisms provided for in the RSTP will work after its creation.

What is the Clearing House?

1.- The CH will be set up as a separate entity with oversight control of FIFA. FIFA will have the ultimate power to decide and run the operations of the CH, as well as to appoint all of the Board of directors’ members and the members of the share capital.

2.- The legal form of the CH and its jurisdiction are to be proposed by the bidders.

3.- The CH will act as a simple intermediary in payments, receiving the amount from the engaging club and distributing it to the training clubs, and shall not aim at gaining any profit from the assets and transactions controlled. The CH shall ensure that all national and international financial and money laundering regulations are complied with.

4.- The CH will require access to banking services to manage the flow of payments and money. Currency conversions shall be executed directly by the CH through its bank. Currency conversions and banking fees shall be borne by the CH and included in transparent way in the CH’s accounting.

5.- The CH will be subjected to an annual audit by FIFA or its partners, on top of the statutory financial audit.

6.- The deadline for the establishment of the CH is set at 1 July 2020, although the date for the start of its operation is yet to be determined.

How will the solidarity mechanism and the training compensation work once the CH is up and running?

1.- When an international transfer or the first registration of a player as a professional occurs and it is entered in the TMS, a «Preliminary Player Passport» will be created with the information that FIFA has retrieved from the different member associations’ registration systems, and the payments and amounts due to the different training clubs for solidarity contribution or training compensation will be calculated (by FIFA, not the CH).

2.- This preliminary Passport must be reviewed and validated (or disputed) by the relevant National Associations (not by the training clubs) where the player was trained.

3.- Once the preliminary Passport is validated, FIFA will communicate the payment instructions to the CH in the form of an allocation statement. This includes contact and banking information of the clubs and associations involved.

4.- The CH issues an invoice to the engaging club of the player according to the allocation statement and the latter shall pay it to the CH. Once the money has been received, the CH shall distribute it to the training clubs. The CH must confirm and validate the banking details of the involved clubs and associations, ensure that the money is distributed to the training clubs and perform follow-up and dunning processes in case of outstanding payments.

5.- Finally, FIFA receives information about paid and outstanding payments from CH for further monitoring of the clubs’ compliance with their obligations in respect to the regulations, and will be in charge of imposing any sanctions in case of non-compliance.

First conclusions

1.- The first conclusion can only be to congratulate FIFA – and especially its Chief Legal Officer, Emilio Garcia Silvero – for setting up this automated process (which, all must be said, should have been in place many years ago) in order to allow training clubs to receive ALL the money they are entitled to for their training efforts, thus putting an end to the current system which, paradoxically, encourages purchasing clubs not to pay the training ones the amounts foreseen in the Regulations, as we already had the opportunity to report in the past[5].

2.- The new Player’s Electronic Passport[6] is configured as the key element on which the correct functioning of the whole system depends. Consequently, the responsibility for the success or failure of the project lies with the Member Associations, which are responsible for uploading information of all the players into their respective domestic registration systems.

3.- One of the positive aspects is that the engaging clubs will no longer be obliged to calculate and distribute solidarity and training, and training clubs won’t have to deal with them anymore (friendly or before the DRC), so that with the automation of the system in principle the litigiousness should practically disappear, which is undoubtedly for the benefit of all the legal departments of clubs, associations and of FIFA itself.

4.- On the other hand, the work of the FIFA Administration and of the different National Associations will be considerably increased as they will have to validate each and every one of the operations affecting their affiliated clubs (validation of passports, confirmation of bank details, monitoring of each operation, etc.).

According to FIFA’s own estimate, we would be talking about an average of almost 16,000 clubs affected per year, and that only taking into account the fixed payments and not the variable payments that also trigger solidarity contribution (sell-on fees, bonuses for matches, goals, titles, etc.).

If we take into account that, in the near future, domestic transfers with an international component will also trigger solidarity, we can easily speak of 30,000 payment orders per year.

5.- At least a year and a half remains for the new automated payment distribution system to come into force. Unfortunately, until then, the training clubs will have to carry on as before: chasing and suing the debtor clubs.

Some doubts that still need to be cleared up

1.- What will happen in cases of exchange of players? How will FIFA calculate the solidarity contribution due in such transfers?

2.- The document indicates that it is up to the member Associations to dispute, where appropriate, the preliminary passport. What will this process be like and before which body? Will also the affected clubs be able to attend the process?

3.- What happens if the training clubs do not agree with the amounts calculated by FIFA? How will be the process to claim? Who will be the respondent in such cases, the engaging club, FIFA itself, both?

4.- What will happen in those cases, consistently authorised by CAS[7], where clubs agree to net payments and decide to change the responsible for the payment of the solidarity mechanism?

5.- What happens if the engaging club does not pay on time? Apart from any disciplinary sanctions that FIFA may impose, will default interest automatically accrue in favour of the training clubs? What if it is the CH that, for some reason, does not distribute the money within the 30 days provided for in the Regulations[8]? Will it also be obliged to pay default interest?

6.- Will training clubs have to issue an invoice to the CH?

7.- When calculating the amounts due, will FIFA take into account the applicable taxes (VAT and others) that may increase the final amount to be paid by the engaging club?

8.- Finally, the triggering of training compensation in case of first registration as a professional still raises some concerns, as everything depends on the engaging club indicating that they register the player as a professional. What happens in cases where, despite being a professional (in the terms of art. 2.2 RSTP), the club registers the player as an amateur, thus depriving the clubs their right to claim training compensation? Who shall be responsible for checking whether the player is really an amateur or a professional, FIFA or the National Associations?

A completely new and objective criterion of delimitation between professional and amateur players should be established in the Rules, one that does not depend on a “case by case”, that provides greater legal certainty to the current one of «is paid more for his footballing activity than the expenses he effectively incurs» and, above all, that prevents clubs from registering professional players as amateurs.

Toni Roca

Lawyer

 

[1] https://www.fifa.com/about-fifa/who-we-are/news/fifa-takes-the-first-step-for-the-establishment-and-operation-of-the-fifa-cleari

[2] https://www.fifa.com/governance/news/y=2018/m=9/news=football-stakeholders-endorse-landmark-reforms-of-the-transfer-system.html

[3] As provided for in articles 20 and 21, and Annex 4 and 5 of FIFA’s Regulations on the Status and Transfer of Players.

[4] Accessible here: https://img.fifa.com/image/upload/nwa4pef272hssbgcefpo.pdf

[5] https://www.lawinsport.com/content/articles/item/fifa-s-proposed-solidarity-mechanism-reforms-an-effective-solution-or-a-lost-opportunity

[6] The process to link electronic registration systems of all member associations to create this Electronic Player Passport was started in March 2019 with regulations coming into force in October 2019 (cf. FIFA circulars no. 1679 of 1 July 2019 and 1654 of 26 November 2018).

[7] Among others, CAS 2016/A/4519 FC Porto v. Hellas Verona & Club Cerro Porteño.

[8] Art. 2.1 Annex 5 RSTP.

Despacho de abogados en Palma de Mallorca

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