Welcome to Mills & Reeve’s Sports score shorts, our sports law podcast. I'm Carol Couse, head of the sports entertainment and media sector, and I'm joined by Phil Hutchinson and John Shea sports, regulatory and dispute experts in our sector. In this podcast, we'll address live industry issues, shine a light on the legal and regulatory reality behind the headlines.
We'll be covering a range of commercial, corporate, regulatory, and contentious topics across different sports in our podcast series, but we thought we'd kick off with something really topical, which is football transfers and player contracts, something that we as a team specialise in.
So, starting from a really high level, the big global picture, do you think we've seen a shift in the balance of power between players and clubs to an era of player power? I'm thinking if we look back to the Summer 25 transfer window, there were a number of players pushing hard for moves at that point.
Probably the standout one was Alexander Isak. He went to the point of issuing a public statement criticising his then employer Newcastle United, and obviously he eventually got his move to Liverpool, but Newcastle did hold firm and reportedly ended up securing a record-breaking fee of £125 million.
So, John, who do you think came out on top on this one? And what does this tell us about the balance of power between players and clubs? I think, generally speaking, I think players have gained more leverage compared to the past. But I'm probably going to give a classic lawyer's answer and say, it really depends, because each player's situation is different.
And there are usually a number of factors which influence the power dynamic. So, for example, if a player is nearing the end of their contracts, they obviously hold more power because the club risks losing them for free. If the player has negotiated a release clause, that will obviously give them more control and potentially a clear exit route.
The very top level players, for example, in Mbappé, Haaland, et cetera, can probably dictate more terms given their status whilst players at a slightly lower level, perhaps have less leverage unless they're in demand or the club for whatever reason needs to sell them. Clubs who are perhaps under financial strain, financial pressure, maybe they're up against the PSR restrictions, perhaps are more likely to agree a transfer whilst the more wealthy clubs the likes of Paris Saint-Germain, Manchester City can obviously afford to hold players longer. So, for example, if you've got a situation where the player is nearing the end of their contract and the club needs the money, then that's a situation where the player's going to be in the driving seat. With Isak specifically though, I think he had three years left on his contract and Newcastle, not a club in a position where they needed to sell the player for financial reasons.
And so, they were well within their rights to say, ‘he’s our player, he's under contract for another three years, and he's not being sold unless we receive a huge fee’. So, I think in Isak’s case, Newcastle, were probably in the stronger position overall. And that's perhaps why the player and his agent resorted to using other tactics such as public statements to perhaps try and force the move. Ultimately though, as you say, everyone got what they wanted in the end. Isak got his move. Liverpool got their player and Newcastle got their fee.
So, when we're talking about transfer strategy, it's all case by case, isn't it?
But what do you think about players actually pushing for a move, and actually putting in the so-called transfer request that often is reported about during the transfer windows?
Yeah, it's a question I get asked quite often. Look, players need to tread very carefully when it comes to transfer requests, beyond the obvious risk of upsetting fans or damaging relationships, which are important considerations as well. But the biggest risk I think for a player handing in a transfer request is probably a financial one, because it almost always means the player forfeits any loyalty bonus and or signing on fee that would've been payable to them.
And these fees can be quite significant. So both the player and their agent really need to understand the implications before making any or putting forward any transfer request, even public statements by an agent about a player wanting to leave can perhaps trigger similar consequences.
And the agent's own commission might also be affected as well. So, in short, it's a very risky tactic in my view, and should only be used when absolutely necessary.
I guess it goes to the importance of having the right people around you advising you on that and understanding the legal and regulatory consequences of that thing that in the heat of the moment making those sorts of decisions, it's yeah, the repercussions can be significant, can't they?
I suppose probably moving on a stage from potentially threatening to request a transfer. What about the players that actually go as far as terminating their contract? If I think about the recent Diarra case, obviously we're not going to go into the full detail of it here, that's probably a full episode in itself. But there was some speculation on the back of the Court of Justice decision in that case that players like Isak could use the Diarra judgment to put pressure on clubs, potentially even walking away from contracts with minimal compensation paid.
What's your view on that?
Yeah. The Diarra judgment obviously caused quite a lot of speculation. But it doesn't mean that players can just walk away from their contracts and pay minimal compensation. What the European Court of Justice actually said was that, yes, certain FIFA rules were unlawful, contrary to European competition law, such as the automatic joint and several liability for a new club signing a player who has terminated his contract unlawfully. And also, parts of the criteria for calculating the compensation payable in such circumstances. It also removed automatic sporting sanctions and registration blocks and, and made clear that the compensation payable must be fair and proportionate.
But the judgment upheld the principle that if a player terminates a contract without just cause, they still owe compensation and if there's evidence to prove that a new club has induced that breach of contract, they can still be held jointly liable, or the payment of that compensation. So, it's not the end of the transfer market, and it's definitely not a three pass for players to exit a contract legally without payment of any compensation.
A player still needs to have just cause to do so. Otherwise, they'll face a hefty compensation claim if they simply walk away from their contract. And domestically speaking, the Diarra judgment is unlikely to have much of an impact here in England in any event because clubs already include detailed compensation provisions in their player contracts.
And these clauses typically spell out that if a player simply walks away from their contracts, unlawfully, compensation will be payable, and that compensation will factor in things like the transfer fee that the club paid the cost of replacing the player, the potential loss of revenue, even the loss of a future transfer fee.
So, in practice, the contractual framework in England already addresses these issues, meaning Diarra doesn't give players an easy escape route as some have suggested.
And even in the provisions of the FIFA regulations themselves, they specifically reference what the parties have contractually provided for, so there is clearly weight that is given to that, that contract. But I think perhaps players and their advisors will now maybe pay a bit more attention to those schedules that are attached to the backend of the contracts because they are pretty extensive in terms of setting out all of those provisions around compensation.
But yeah, something that is sure to develop over the next the next years, and as we progress. Okay, so moving on to the player contract itself. One thing that can lend clarity to a player looking to leave is a release clause. I think John mentioned it that they're not standard in Premier League contracts, unlike Spain, where you might have buyout clauses, which are similar, albeit slightly different. But we do see these release clauses as being negotiated and they can be a bit of a legal minefield. So, Phil, can you talk us through these?
Yeah, sure. Thank you, Carol. I suppose the general point is whilst they're not in every single contract, they're more common than they used to be.
We primarily see them in the Premier League or the top-end EFL clubs rather than further down the EFL system. In terms of the circumstances when we see them and the scenarios tends to be where there's a promising player moving to a club or signing a new contract at a club and they want to guarantee a future move if there's sufficient level of interest in them in the future, or a scenario where player may agree a longer contract.
Then they may ordinarily want to, if there's a release clause that can apply for the duration of the contract and he's got a potential out during that term. Or even if a player is looking to join a team who's just been promoted or is at risk of relegation, they may want to release clause in there. A security for a future move if things don't go so well, and this probably goes without saying, but the bigger the release fee, and the numbers around it, the more detailed these clauses tend to be when the lawyers get involved in it. So what do we see in terms of the release clause themselves and the key constituent elements? Well, does the release clause have a number of variables? So, does it have a different value based on divisional status?
Whether the player or the club are competing in the Premier League or the EFL? Does it change based on the length of the contract? Or the age of the player at a given time of the contract? Or does the release clause stay the same throughout the contract? Each club will have different approaches to that.
The main issues we tend to see around them, and which are probably most heavily litigated and drafted, is around confidentiality of the clause. Again, different clubs have different approaches, but what would be the first question is who can be made aware of this clause? And when is it completely confidential?
Is there a period of time where an agent or a player can notify clubs of this clause? Is it exclusive to certain clubs and not others? Does the clause become invalidated, for example, if it's disclosed in breach of confidentiality? These are all the questions that clubs will need to consider when preparing these from an operational and practical perspective.
Is it only valid for certain periods of a transfer window? Normally we'd see for certain terms that a club will want a release clause valid at the start of a transfer window because they'll be in a position to determine whether or not they've lost the player and complain accordingly for the rest of the window.
It gives certainty to the club and to the player as well. And what would happen if there was a breach of confidentiality. So, we've seen scenarios where players are actually worth more arguably on the open market at the time. A release clause is exercised, or a potential transfer is taken place and the club that that player's at has looked to sue the player or his agents or even the new club because the clause have been disclosed in breach of confidentiality. Really difficult to show the true market value of a player without using football experts, be that economic or finance experts, or even lawyers. But, where would a claim lie in those scenarios? Would it be the player and the agent who may have leaked a completely confidential clause?
Has the potential buying club induced the player or the agent to breach the confidentiality? The elements of the clause in order to try and acquire the player. I mean, it might be an easier case against all the parties if a confidential release clause results in a bid exactly at the level of the clause.
But each case will turn on its own facts. In terms of the real life examples, we had Suarez a number of years ago. I think he had a £40 million release clause. It was reported, and I think, Arsenal allegedly went in one pound over. The release clause I don't think he was sold under that release clause and Liverpool dug their heels in a more recent one.
At the time of recording is again, based on, on press reports that Antoine at Bournemouth allegedly has a release clause that's active for the first part of the transfer window, which goes back to the point around certainty and, and future planning for a club. Yeah, absolutely. I mean, it goes to the wider point of the increasing complexity around the, the player contracts, especially at the, the elite level.
So if we move on to a player sale, and I'm thinking in the scenario where the selling club doesn't have the player in its immediate plans, but knows that the player's high potential, probably a younger player, is there anything that the club can do to protect its position there, Phil?
Yeah, there's a couple of examples that we've seen develop in recent years, and the first one to talk about is probably the matching rights provision, which is effectively used more and more in that scenario, Carol, for younger players leaving a club who are on a good trajectory but just aren't quite there yet in terms of having the game time at their current club.
Again, like all these types of clauses: very tightly worded. We usually see the imposition of obligations on the selling club to inform the club with the benefit of a matching rights clause when an offer comes in and give them preference over any of the bidding clubs. Again, dependent on the player and the club agreeing terms, unless they already did that as part of the original contract, and there's often obligations on the selling club to facilitate a transfer as quickly as possible and to the exclusion of all other clubs when a club has a matching rights provision. Just something to point out, I suppose on these is the clubs need to be very careful when they're drafting them that these contracts and these clauses don't go as far to be considered as third party influence. And what I mean by that is ensuring that the independence of an employer to deal with their own players is not unduly affected by the influence of a third party club. So a really important consideration.
We've also seen scenarios where agents who know of a matching rights clause drive the price up of a bidding club to increase the sums, ultimately payable by the club with the matching right benefit that can impact player salary commission.
There are all sorts of things like that that go on. Another example tied into a matching rights clause, I suppose, is a buyback clause. Good from a PSR perspective, it allows a club to sell a player at a certain point in time, immediately bank the book profit on that player and have them off the books for one, two, three, maybe four years, before buying back at a fixed rate.
I think what's really good about a buyback clause is you set the price at the time of the original sale. This removes uncertainty around potentially inflated fee if that player goes on to become an absolute superstar. And, obviously, if the player doesn't hit the heights you'd have expected, then the club doesn't have to exercise the buyback clause.
So it seems like a real win-win for the club to have. The benefit of one of those, it gives that club long-term oversight and an interest of the player's career without having to worry about giving them game time immediately. I think one example, again, based on reported press reports is perhaps James Trafford, who was at Manchester City and left to join Burnley. Manchester City allegedly had a buyback clause that they exercised, which was potentially less than Newcastle was, again reportedly, willing to pay on the open market. So a really good example of one that that's worked in practice. Real Madrid seemed to be really good at these types of moves as well. Alvaro Morata is one who was sold to Juventus and then resigned for £30 million a year or so later, which was significantly below the market rate of the player at the time. Danny Carvajal, who believe was sold to by Bayer Leverkusen for around €5 million with a clause that enabled Madrid to repurchase that player at a predetermined date with a set fee, depending on whether it's one or two years later. So, I think they're really good clauses.
As I say, they work well for clubs who've trained and developed promising players to share in the success. And yes, ultimately it does depend on whether the player actually wants to come back if they haven't already agreed the terms of a future contract. At the point of sale, the player will hold the power as to whether he wants to go back, but we often see buyback clause as the players who've developed through an academy have gone away and want to come back and prove themselves.
So most of the ones we've been involved in would be players who actually want to return.
Yeah, there's the sense of they know what they're going back to in that regard, isn't it? Okay, so if we then move on to transfer agreements then, John, can you talk us through sell on provisions, which are probably more common than not?
Yeah, sure. And another mechanism that allows clubs to protect their position in the event of a player's value increases after they sell the player, is essentially a provision in a transfer agreement that entitles the original selling club to an additional payment if the buying club later sells the player.
And it's usually calculated in one or two ways. The first way is simply a percentage of the whole of the future transfer fee. So, for example, if the player is sold for £30 million, the selling club is entitled to a percentage of that £30 million that the buying club receives. Another way, which is perhaps increasingly common, is a percentage of the profit only.
So, if the player was bought for £10 million and sold £30 million, the original selling club only gets a percentage of the £20 million, not the full £30 million. Sometimes clubs have tried to agree what's called variable sell on clauses, which with different percentages depending on the destination club or particular leagues.
I think that's principally designed to try and capture higher value from the more wealthier clubs or the more wealthier leagues. Clubs need to though tread very carefully with those types of clauses because I think, as Phil mentioned earlier, they can fall foul of the restrictions on third party influence under the FIFA regulations, particularly if the actual intention of the clause is to try and discourage the club or prevent the club from selling them to a direct competitor. That can lead to the clause falling foul of the regulations. In the past, they have ruled that variable selling clauses are not automatically unlawful, provided they don't materially influence a buying club's decision and serve a clear commercial purpose, like rewarding trading investment, for example.
So look, if a club's I think in agreeing a variable sell on in some way, it's really important to draft it very carefully and to ensure that it doesn't fall foul of the third party influence provisions in the regulations sell on. Clauses can be a common source of disputes, so drafting them correctly is really crucial. The key considerations when drafting a sell on clause, I think include, like I said, the structure of the payment, so is it based on the whole fee or just the profit? So it's important to that the drafting reflects that what's the triggering event.
Does it apply to loans or player exchanges, or is it just applying to permanent transfers? What's the basis for the calculation? Is it based on the gross transfer fee or is it based on a net fee? If it's a net fee, what deductions need to be made to the transfer in order to calculate the percentage? Are contingent payments included, for example, or excluded?
Does a time limit apply? Does it apply for the player's entire stay with the club or only for a fixed period? Usually, the payment's tied to receipt to the transfer fee. Yeah. But that can be changed. Does the club want a non-circumvention provision?
I think many of the disputes involving sell on clauses usually involve some attempt by the club to circumvent the sell on fee through some clever arrangement. Including a non-circumvention provision can help prevent that potentially. Interestingly, players are not considered to be third parties under the FIFA regulation, so we're now seeing more players negotiating set on clauses for themselves.
So, it's something I think that players and agents also need to need to understand as well.
Yeah, it's definitely a trend that we've seen evolving. I mean, it's not commonplace that you'd get those player sell-on provisions, but certainly where you get the top level players and the well advised, it's potentially on the table, isn't it?
So, if we drill down into the playing contracts, then obviously the bulk of the contractual rights and obligations between player and club are generally centrally negotiated between players, union, employee and representatives. And then it's the so-called personal terms to be agreed between the player and club. Obviously there the key provisions are going to be the term, the remuneration and any exit is contemplated. But could you talk us through some of the important points from a legal or regulatory perspective, maybe the loyalty payments or bonuses? Signing on fees?
Yeah, I can start with signing on fees.
Signing on fees are essentially a lump sum payment made to a player when they sign a new contract. So that's either with a new club or when renewing their contract with their existing club for free agents. These fees can be actually quite significant because the club hasn't paid a transfer fee, so the player often captures more of that value upfront under the Premier League and EFL rules.
Signing on fees must be paid in equal annual instalments over the term of the contract. And if the player is transferred while any part of the signing on fee remains unpaid, the unpaid balance must be paid to the player unless either the player has requested a transfer handed in via the transfer request as we discussed before, or agreed to waive the balance. For example, just on waivers, I think it's really important for players and agents to check the fine print because clubs do attempt to build in waivers into either the clause, the signing on fee clause itself in the playing contract, or within settlement agreements when a transfer is been being agreed so missing that detail can cost the player a lot of money, so it's really important to check that.
Yeah. And on the fine print point, John, you talked about, I suppose bonuses are another element where disputes can often crop up, and it's really important to understand what the wording of the bonus schedule or system is.
Now, lots of different clubs have completely different positions on bonuses, and again, we often see the higher the profile club, the more different types of bonus we see. It can be anything from goal bonuses, for players assist bonuses clean sheet, bonuses for goalkeepers and defenders, bonuses for awards, so perhaps player of the season, PFA player of the season, all the way up to national team appearances, either at senior level or an underage level.
Now often these bonuses will be well drafted and have triggers or are defined terms built in, but stripping it right back, for example, what is an appearance? Does it need to be a starting appearance? Do two substitute appearances equal one starting appearance? We've seen various ways of this being defined.
Does it depend when a player enters the field of play? Is it before 60 minutes or 75 minutes, or 80 minutes? Different clubs will have different accepted standards on those. We often see reference to data companies, so if there's an assist bonus, which data company do you rely on to determine whether an assist has been made?
Often it goes that granular the scenarios where a player may have accrued, say three quarters of the appearances needed to trigger a pretty substantial bonus, and that player then transfers, what happens at that point? Is there a pro rata payment made to the player or is it the fact that he hasn't completed the requisite number of appearances that no payment is made at all?
Obviously higher up in the football pyramids, the sums you're talking about can be really significant. Just linked into that, I suppose, is the date for the payment of these bonuses. We've seen clubs refuse to pay bonuses completely on the basis that a player has left the club on the due date for a bonus.
Even though those bonuses accrued in the previous season, we've seen arguments around loyalty payments, I think is one that you mentioned at the start, Carol, as well. Now the rule under the Premier League and EFL rules is you can't pay a loyalty payment within the first year, which I suppose makes sense if given the wording of loyalty.
And it always almost needs to be the case that the player is employed by the club on the due date for a payment. Now we normally see that the first loyalty payment will become due outside of a transfer window, but that's not always the case. So, if you’re a player and you sign for a club within a transfer window, it could be that you move the following window and the loyalty bonus relates to your preceding year as a player. But because you've left, that loyalty that you showed has effectively gone because you're no longer registered with the club on the due date for payment. Again, like signing on fees, it'll be split across the length of your contract.
Normally, sometimes more heavily weighted at the start, but it's important to be really careful in reviewing those and what happens if a player goes on loan. I mean, the loan system is as active as the permanent transfer system. Some clubs will refuse to play a loyalty if the player is away from the club on loan and will have wording in the contract around that.
It's unusual, but it's important to make sure that players are protected in all those types of scenarios.
That's fascinating. I really appreciate your time today and the deep dive into playing contracts and transfer agreements. There's so much more that we could cover but time's against us.
That’s it for today's episode of Sports score short. Hopefully it's given you a helpful steer on some of the legal issues arising out of football transfers. In future podcasts, we'll be taking a deeper dive into the football transfer system, agents, sports disputes, as well as image rights and employment related issues.
You can find other episodes on Spotify, Apple Podcasts and YouTube. But thanks for listening. If you've got any questions, feedback, or topics you'd like us to cover in the future, please feel free to get in touch.