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APRIL FOOL OR BRAVE NEW WORLD?

Intermediaries and the death of the Agent

It’s here!  It has been talked about in the Industry for years and draft proposals have been with us for many months, but 1st April 2015 sees the implementation of FIFA’s new Regulations on Working with Intermediaries (the “FIFA Regulations”) which replace FIFA’s Players’ Agents Regulations as last updated in 2008.  Those who will be affected by this significant change within the Industry will no doubt have already read the numerous articles which have been produced, will have visited the FIFA and FA websites and will have studied closely the FIFA Regulations themselves.  For those new to the Industry or simply wishing to understand why the change now occurring is so dramatic, I explore below in brief the scope of the FIFA Regulations and consider whether or not they are the death of the agent or the phoenix like rise of something remarkably similar.

Intermediaries in England – The FA Regulations on Working with Intermediaries

In the FIFA Regulations at paragraph 1, FIFA make quite clear that the scope of the FIFA Regulations are to be reviewed and considered by all Associations.  Those Associations are then required to implement and enforce at least the minimum standards, but in terms of implementation, any Association is able to impose more vigorous standards than those in the FIFA Regulations for Intermediaries operating within their jurisdiction, if they so choose.

As a consequence of this, the English Football Association (the “FA”) has now published its own domestic regulations (the “FA Regulations”) supplementing those drafted by FIFA.  As one would expect with the FA, this is a lengthy document and in some respects mirrors the FA Football Agents’ Regulations which have been in force since 4th July 2009.

In essence, the FA Regulations set out details for the operation of Intermediaries in this jurisdiction under the following headings:-

  1. General Principles;
  2. Representation Contracts;
  3. Remuneration;
  4. Disclosure and Publication;
  5. Conflicts of Interest;
  6. Breaches of the Regulations;
  7. Miscellaneous Provisions.

Identical to the FIFA Regulations, the FA Regulations state that only Intermediaries may be used and paid by a player or club in relation to “Intermediary Activity”.  Intermediary Activity is defined as:-

Acting in any way and at any time, either directly or indirectly, for or on behalf of a Player or a Club in relation to any matter relating to a Transaction.  This includes, but is not limited to, entering into a Representation Contract with a Player or a Club…

A Transaction is defined as:-

Any negotiation or other related activity, including any communication relating or preparatory to the same, the intention or effect of which is to create, terminate or vary the terms of a player’s contract of employment with a Club, to facilitate or effect the registration of a player with a Club, or the transfer of the registration of a player from a club to a Club (whether on a temporary or permanent basis).  A completed Transaction is one that has so achieved the creation, termination or variation of the terms of the player’s contract of employment with a Club, the registration of the player with a Club or the transfer of the registration from a club to a Club.

A player or club must not use or pay any person for Intermediary Activity unless that person is registered as an Intermediary and is entitled to act under a valid Representation Contract.

Consequently, an Intermediary will now conduct the type of work which up until 1st April 2015 could have been undertaken by a licenced agent, without the need to pass an exam or take out professional liability insurance (although such insurance is still recommended by the FA).

The FA Regulations, therefore, go further than the FIFA Regulations in that they require Intermediaries to register with the FA in advance of undertaking any Intermediary Activity and indeed in advance of entering into a Representation Contract with either a club or a player.

The form of this registration has not yet been disclosed by the FA but they have advised that as of 1st April 2015, individuals and/or companies wishing to register as Intermediaries will be able to do so via an online application process.  The FA have confirmed that they will publish the link to the page setting out the online application process on 1st April 2015.

I consider it highly likely that the form of the FA’s document will mirror in part the Intermediary Declaration for Natural Persons and/or the Intermediary Declaration for Legal Persons attached as Annex 1 and Annex 2 to the FIFA Regulations (available at the following link http://www.fifa.com/mm/document/affederation/
footballgovernance/02/36/77/63/regulationsonworkingwithintermediaries_neutral.pdf
), but as no preview has been provided by the FA, all interested parties will have to wait patiently for the online process to open.

What this provision of the FA Regulations appears to mean, however, is that once an individual is registered with the FA as an Intermediary, on each occasion Intermediary Activity is undertaken that individual will not also be required to submit to the FA an Intermediary Declaration form as had been envisaged by the FIFA Regulations.

I should add that the FA registration for Intermediaries will only be valid for a period of one calendar year, following which the registration will need to be renewed annually and maintained in order that individuals and/or companies can continue conducting Intermediary Activity.

Further, the FA require a fee to be paid annually for registration.  At present that fee is £500 (plus VAT) as an initial registration fee, with the subsequent registration fee currently being quoted at £250 plus VAT.  The FA have, however, confirmed that the initial registration fee will be waived for those individuals who are FA Licensed Agents as of 31st March 2015, although those individuals will be required to pay the subsequent registration fees thereafter.  The initial registration fee will not be waived in respect of current Registered Lawyers, current Overseas Agents and current Close Relations, as defined in the FA Football Agents’ Regulations.

All this is of course good news for the FA as it provides a constant revenue stream, but not such good news for those who wish to become Intermediaries and those who had acted as agents under the previous regime without holding the title.

In order to obtain or renew registration as an Intermediary, applicants will be required by the FA to confirm that they meet the requirements set out as a “Test of Good Character and Reputation for Intermediaries”.  This Test has also been published in a three-page document by the FA and is available at the following link:-

http://www.thefa.com/football-rules-governance/more/agents/intermediaries-update

Once an individual is registered, they will be entitled to use the designation “FA Registered Intermediary” after their name in all business relations.

All Intermediaries will be required to lodge all of their Representation Contracts with the FA within ten days of those contracts being executed and, in any event, no later than at the time of the registration of a Transaction by the FA.

Representation Contracts

As with Representation Contracts used by agents, prior to undertaking any “Intermediary Activity” Intermediaries must have entered into a valid Representation Contract with either a player, a club or both.  The FA have now produced standard Representation Contracts to be entered into between:-

  1. Intermediaries and Players;
  2. Intermediaries and Clubs;
  3. Intermediaries, Players and Clubs.

(http://www.thefa.com/football-rules-governance/more/agents/intermediaries-update)

These contain the minimum terms required for contracts but, as was the case with the FA Football Agents’ Regulations, the FA will allow parties to add their own terms, so long as they are consistent with the obligatory terms and requirements of both the FA Regulations and FIFA Regulations.

I would advise that any Intermediaries seeking to enter into any form of Representation Contract should consider very carefully including additional terms.  In my experience fully protecting an agent’s position under the old regime required expanding upon the obligatory wording produced by the FA and I see no difference when it comes to Intermediaries and Representation Contracts.  An Intermediary has it in his/her power to protect themselves as best they can from any potential future dispute at the time of drafting and entering into Representation Contracts.  Therefore Intermediaries should not simply accept the FA standard clauses and/or terms demanded by clubs.

Where an Intermediary assigns or subcontracts any Intermediary Activity, duties or services to another Intermediary, the FA must be informed in writing within a single document and that document must be lodged within ten days of it being executed (in any event no later than at the time of the registration of a Transaction).

Entering into a Representation Contract does not prevent a player from representing himself in relation to Intermediary Activity, just as it did not prevent a player under the FA Football Agents’ Regulations from doing so.  However, a club wishing to undertake a Transaction with a player must deal with an Intermediary who has a valid Representation Contract with that player unless the player concerned provides a prior written request to the club.  A copy of that request must be given to the Intermediary as soon as reasonably practicable and in any event prior to the Transaction taking place.

Under the FA Regulations, an Intermediary can only enter into a Representation Contract with a player for a maximum duration of two years, which of course was also the case with regard to the FA Agents’ Regulations.

Conflicts of Interest

Just as it was permissible under the FA Football Agents’ Regulations for an agent to represent both a club and a player within the same Transaction or Contract Negotiation (subject to the completion of various forms and disclosure of any conflict of interest or potential conflict of interest to all parties), the FIFA Regulations now also specifically allow a player and club to engage the service of the same Intermediary within the scope of the same Transaction.  All parties must give their express written consent at the start of the relevant negotiations, confirming in writing which party will remunerate the Intermediary, and inform the relevant Association of the agreement.

The FA Regulations go further, requiring the Intermediary to:-

  1. Have a pre-existing Representation Contract with one party to the Transaction which has been lodged with the FA;
  2. Obtain all parties’ prior written consent in the form prescribed by the Association (this has not yet been released);
  3. Inform all parties (again in an unpublished form prescribed by the Association) of the full details of the proposed arrangements, including the proposed fee to be paid by all parties;
  4. Give all parties the reasonable opportunity to take independent legal advice (or in the case of the player to take advice from the PFA);
  5. Obtain all parties’ express written consent for the Intermediary to enter into a Representation Contract with the other party on the proposed terms (again in an unpublished form prescribed by the FA).

In fact, the terms of Clause E of the FA Regulations headed “Conflicts of Interest”, mirror relatively closely the terms of Section C, “Dual Representation & Conflicts of Interest” as set out in the FA Football Agents’ Regulations.

Duty to disclose

The FA Regulations require an Intermediary to inform the FA of any monies to be paid by that Intermediary (or the Intermediary’s organisation) to a player, club, club official or manager.  It also requires an Intermediary to disclose to the FA any agreement to represent a club official, manager or club.

Breaches of the Regulations

There has been some discussion about FIFA’s role in policing the FIFA Regulations and indeed the FIFA Regulations state quite clearly that member Associations will be responsible for the imposition of sanctions on any party under their jurisdiction who violate the FIFA Regulations.  Associations are also obliged to publish and inform FIFA of any disciplinary sanctions taken against any Intermediary.

The FIFA Regulations say that “The FIFA Disciplinary Committee will decide on the extension of the sanction to have worldwide effect in accordance with the FIFA Disciplinary Code”.  It would therefore appear that the FIFA Disciplinary Committee will take it upon itself to determine whether disciplinary sanctions imposed by member Associations are extended worldwide, although there would not appear to be any currently discernible method for that review to take place.

The FA Regulations state that any breaches of the FA Regulations will constitute Misconduct in accordance with Rule E1(b) and that any charge for Misconduct will be dealt with “in accordance with the Rules of The Association, determined by a Regulatory Commission of The Association”.

Transitional provisions

So what happens to existing contracts and agents’ licences on 1st April 2015?  The FIFA Regulations state that as of 1st April 2015 its previous licencing system will be abandoned and all existing FIFA agents’ licences will lose validity with immediate effect.  They must be returned to the Association which issued them.  The FIFA Regulations are silent about existing Representation Contracts which were valid under the Agents’ Regulations and which the parties had agreed were to continue beyond 1st April 2015.

The FA Regulations are somewhat clearer in that they state an Intermediary can conduct Intermediary Activity pursuant to an existing Representation Contract but only if that Representation Contract had been lodged with the Association before 1st April 2015 and if the Representation Contract is resubmitted to the FA within ten days of the Intermediary registering with the FA.

Registration has, however, been the subject of scrutiny by the Association of Football Agents (“AFA”).  The AFA, as its name suggests, exists to promote the collective interests of member agents and their clients and represents in excess of 300 professional registered agents, being the main representative for registered and licenced agents in the United Kingdom and Republic of Ireland.

The AFA have been meeting over the past few months with the FA and although the AFA has recently emailed its members informing them that progress has been made, no formal announcement as to the outcome of those discussions has currently been published.

What the AFA have suggested, however, is that its members who are registered agents should not refuse to register with the FA as Intermediaries, but that should do so by sending a letter challenging the legality and constitutionality of the new concept of Intermediaries and reserving their position as to any losses or damage caused by the FA Regulations.

So, April Fool or Urgently Needed Reform?

On the face of it, for Intermediaries operating under the jurisdiction of the FA, the FA Regulations are broadly similar to the previous FA Football Agents’ Regulations.  They allow Intermediaries to conduct the same type of work, they allow Intermediaries to act for more than one party to a Transaction (subject to disclosure and consent), they allow Intermediaries to subcontract Intermediary Activity with other Intermediaries and they allow an Intermediary to be remunerated for his/her services.

Perhaps the last of these points is, however, the largest and potentially controversial difference.  Under FIFA’s Agents’ Regulations and the FA’s Agents’ Regulations, neither FIFA nor the FA attempted to impose a cap on the level of agents’ fees.  Under the FIFA Agents’ Regulations, FIFA makes clear recommendations that Intermediaries’ remuneration:-

  1. When acting on behalf of a player, should not exceed 3% of the player’s basic gross income for the entire duration of the relevant employment contract.
  2. When acting for a club negotiating a contract with a player, should also not exceed 3% of the player’s basic gross income for the entire duration of the relevant employment contract.
  3. When acting for a club in order to conclude a transfer, should not exceed 3% of the eventual transfer fee paid.

These recommendations are repeated in the FA Regulations, again as recommendations.

In my experience, many clubs below the level of the Premier League in England have in the past attempted to restrict agents’ commission to 5% of a player’s annual basic gross income, although the larger Championship clubs and clubs in the Premier League have always been willing to pay a higher percentage commission to an agent, quite regularly at least 8%.  Indeed, having undertaken work for agent clients in both the Italian and Spanish markets I have consistently seen clubs willing to pay 10% or 12% commission at the top end of the market.

When considering the huge amount of money at stake, perhaps the concern and anger expressed by former authorised and licenced agents is somewhat understandable.  For example, if a player’s contract was £50,000 gross per week, his gross basic wage for one year would be £2,600,000 and for a four year contract would be £10,400,000.  8% of that 4 year contract would amount to £832,000 but 3% would amount to £312,000, a significant decrease.

The real question, therefore, is whether clubs will seek to enforce the recommendation of 3% and indeed whether that recommendation is lawful.

Tackling the first of these points, in my experience in the past if a top club wished to sign a top player that club will have been prepared to be creative with agents’ commission.  This creativity could have taken the form of paying a higher percentage of the player’s total basic gross remuneration.  That, however, is at the top end of the market where the players and their agents have historically held the balance of the power within contractual negotiations.  At the lower end of the market where the clubs retain the balance of power (usually because a player’s options are much more limited), it has always been possible for clubs to play hardball as to what they are prepared to pay players and their agents.

Consequently, in my view the recommendation within FIFA’s Regulations and the FA Regulations of a cap to Intermediaries’’ commission amounting to 3% of the player’s basic gross income for the duration of his contract is likely to be vigorously enforced for all but the most lucrative negotiations.  This in turn will see a marked reduction in the income of hardworking representatives of lower league football players who had previously been Authorised Agents and are now Intermediaries.

The second question as to whether actually FIFA’s recommendation is unlawful remains unclear.  Obviously FIFA were sufficiently concerned at seeking to cap Intermediaries’ remuneration that it used very careful language.  As set out above, FIFA have said that “players and clubs may adopt the following benchmarks”.  Indeed, FIFA have also stated that account must be taken of relevant national regulations and mandatory provisions of national and international law in determining whether or not the “benchmark” of 3% can be adopted.  The FA has used similar language, “as a recommendation, players, clubs and Intermediaries may adopt the following benchmarks”.

Many lawyers, myself included, are of the view that seeking to suggest a benchmark (although not a mandatory cap) may well be unlawful under both domestic and European competition law.  Indeed, the AFA has submitted a complaint to the European Commission that this restriction infringes Articles 101.1(1) and 102 of the Treaty on the Functioning of the European Union 2012/C 326/01, which deal with the distortion of competition and the abuse of dominant market place positions.  At present there has been no confirmation from the AFA as to the progress of their complaint against what it terms to be unlawful price fixing in the marketplace, but it is possible that this legal challenge may result in FIFA having to rethink this “benchmark”.

There are of course other distinct differences between the old agents’ regulations and both FIFA’s Regulations and the FA Regulations.  For example, there is a requirement for more transparency in that the FA are required to publish details of all commission paid to Intermediaries and that information must be provided to the Association by clubs, players and Intermediaries.  Additionally, there are new rules on dealing with minors and there is now an ability for companies (legal persons) to enter into Representation Contracts directly with players and clubs.

Intermediaries are not required to pass examinations and hold licences.  Consequently, there is a fear amongst some that the level of service provided to players will deteriorate as it is argued an unqualified Intermediary will not understand the industry or understand the regulations that govern it.  This could be detrimental to players and clubs because the shift of onus under the FIFA Regulations passes responsibility onto the clubs and players to ensure that Intermediaries do not breach the FIFA Regulations.  Sanctions can therefore be taken as against players and clubs for breaches by an Intermediary, whereby under the Agents’ Regulations those sanctions, in the normal course of events, would have been imposed upon licenced agents.

So where are we now?

In my view the industry is clearly at a crossroads and it remains to be seen how the FIFA Regulations and the FA Regulations will develop.  It also remains to be seen whether the FIFA Regulations will achieve what FIFA have set out to do, being to harmonise the regulatory approach to third parties acting for clubs and/or players in contract and transfer negotiations.

That said, it is markedly noticeable that the FIFA Regulations enshrine many of the concepts of the old FA Agents’ Regulations which many in this jurisdiction thought worked well and ensured a transparent level of service.  If world football can now be brought into line with the principles enshrined in both the FIFA Regulations and the FA Regulations, perhaps Intermediaries will not be given the same bad press as agents were subjected to in the past and perhaps their value in the game generally will be accepted and recognised.


David Brown is head of the Sports Group at Thomas Cooper LLP and an industry recognised expert in football related issues. Should you wish to discuss the content of this article or any other sports law topics, please contact the sports team at sports@thomascooperlaw.com.

 

 

Disclaimer: The information and commentary provided in this outline is intended to provide general information only and is not a complete statement of the law. It is not intended to be relied upon or to be a substitute for legal advice. This firm does not accept any liability for any loss which may result from reliance upon this publication or the information it contains. Please speak to your usual Thomas Cooper contact if you require specific legal advice. © Thomas Cooper, 2015. All rights reserved. 

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