Matt Scott: TPO ban is welcome, but now the hard work begins

“There’s not any other profession in the world where investors can buy stakes in a human being.” Theo van Seggelen, FIFPro

Football, said the former England striker Jimmy Greaves, is a funny old game. But so too is the business of it. In no other sector than the sports industry do men willingly agree to become the tradable chattels of others. It is true that the football transfer market has come a long way from the time decades ago when players were instructed to move to a specific club with no input at all into the trade. But the fact that any man should have a price on his head recalls the days when billposters were stuck on 19th Century Texan telegraph poles.

And the worst of the Wild West practices must be third-party ownership. In the general transfer market players can at least be compensated for the disruption in their lives with the promise of continued employment, at times even on improved terms. There seems little point recapitulating here on what is the worst of TPO as this column, which has long campaigned against it, has frequently pointed out its intrinsic dangers [please see related articles below]. Besides, it seems the argument of TPO’s detractors has been won.

But it is undoubtedly pleasing to know that FIFA has had the courage to grasp this nettle. The decision to ban the practice took moral leadership that many have doubted FIFA to be capable of. There is strong backing for the practice of TPO in the Iberian nations and South America in particular but by bringing in the ban against TPO it is clear that ethical considerations have trumped FIFA’s political prerogative, and that is to be applauded.

So FIFA’s new rules will stipulate the following:

· For no club to enter into any new third-party arrangements from 1 May 2015

· That arrangements entered into between 1 January and 30 April 2015 to have a maximum of only 12 months’ duration

· That existing agreements may run the course of current contracts but must not be renewed

This has all been agreed after due process, which reinforces the legitimacy of the decision. A Working Group On Third-Party Ownership of Players’ Economic Rights was first set up, featuring members from Portugal, Brazil and England, to consider the implications of TPO. The executive committee took the decision to ban TPO at the September executive committee meeting and refined it at the exco in Marrakesh last week.

Watching what unfolds now is going to be very interesting indeed, and it feels like the hard work is only just beginning. Announcing a ban against a practice and eradicating it altogether are two very different things. And it does seem FIFA has some very specific challenges here. Principally the biggest question is one of jurisdiction, the world governing body though FIFA is.

FIFA, through its International Transfer Certificate, can control the cross-border movement of players. Without an ITC, a player may not register to play at a club in a new country. FIFA has used this leverage to oblige every international transfer to be processed through the electronic FIFA Transfer Matching System. One of the several benefits of TMS is its ability to scrutinise transfers for compliance with FIFA regulations. As TMS explains, this involves: “Monitoring the use of the system to ensure that the transfer process is being completed in accordance with the applicable FIFA regulations. This includes the management of a compliance process which can ultimately end in the pursuit of sanctions under FIFA’s disciplinary code where there is evidence that the regulations have been breached.”

This kind of electronic scrutiny is to be welcomed as it allows FIFA to keep a track of the movement of players and of the movements in cash associated with the transfer. But the scrutiny brought about by TMS ends at national borders. It is only where the ITC applies – necessarily in international transfers – that FIFA can oversee the TPO element.

National associations such as England, France and Poland have introduced unilateral bans on TPO, but every other country has hitherto permitted the practice. Will every nation enforce FIFA’s will? There can be no guarantees, as a senior source for FIFA told me, but there is a very clear intention within FIFA to demand compliance: “They have a responsibility to FIFA and we’ll police the national associations.”

The source admitted that, as with all regulations, there remains a threat to their integrity through offshore tax havens where ownership structures may be obfuscated by sophisticated TPO investors — and there is much at stake for them. According to a report by Bloomberg Financial Markets last year that quoted Julio Senn, an adviser to TPO investors at the law firm Senn, Ferrero, Asociados Sports & Entertainment, between them only eight TPO funds had plunged $500 million into player-transfer rights. Some lobbied FIFA to bring in a register of licensed or approved investor funds whose activities could survive the ban but they were refused. “It was talked about in the Players Status Committee,” the source added. “But it came to the conclusion that the decision to ban [TPO] was right and it is our job now to enforce it.”

Whether or not those funds lose money is not football’s problem, but their attempts to protect their investment might be. Footballers are necessarily illiquid properties: a club cannot sell its players outside of the transfer windows. But the funds could very well seek to liquidate their investments by disposing of their player portfolios very quickly. This would increase the pressure on clubs to sell mid-season to repay their investors. A flood of player sales could depress the market value of those players, further reducing the returns available both to investors and the clubs who own the remainder of the players’ “economic rights”.

Moreover, as a lack of external cash from TPO percolates through the transfer market, transfer fees for all but the most desirable players will logically fall (see third related article below). Faced with these risks, there will be a strong incentive for the funds to keep the music playing and if they push things offshore with the complicity of clubs there will be little FIFA can do.

But the ban certainly sends the right message to clubs and if it brings about an extension in the reach of TMS then in time life will become harder for those bent on breaching it. Several national associations have already trialled and introduced the FIFA system for their own intranational player trades. If this is extended worldwide then it could become a very important backstop against TPO and any other financial irregularities as it would ensure every single player transfer must pass through TMS. All national associations should be urged to adopt it, and if they refuse, then secondary legislation from FIFA should be introduced that would oblige them to do so.

Then, perhaps, football’s strange economic anomaly, where financiers can invest in humans as if they are horseflesh, will end.

Related articles:

1. http://www.insideworldfootball.com/matt-scott/13267-matt-scott-player-trades-boost-third-party-balance-sheets

2. http://www.insideworldfootball.com/matt-scott/13844-matt-scott-faceless-offshore-funds-and-the-mafia-funding-football-s-have-nots

3. http://www.insideworldfootball.com/matt-scott/15289-matt-scott-third-party-ownership-don-t-bet-your-house-on

Journalist and broadcaster Matt Scott wrote the Digger column for The Guardian newspaper for five years and is now a columnist for Insideworldfootball. Contact him at oc.ll1558654795abtoo1558654795fdlro1558654795wedis1558654795ni@tt1558654795ocs.t1558654795tam1558654795m.