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Footballers bid to shake up outdated transfer system

Falling prices? £85m Gareth Bale could move clubs for nothing. Adam Davy/PA

Footballers, it turns out, want the same rights as everyone else. If you or I want to move jobs, our new employer doesn’t have to pay anything. Should football players be any different?

To gain this freedom of movement, FIFPro, the international federation of football players, recently declared its intention to challenge the football’s transfer system by “all necessary means, including legal action”.

Let’s briefly remind ourselves of why the transfer system actually exists. All players need to be registered to a particular team in order to be able to participate in competitions, and the football transfer system is the method by which the registration of players can be changed when they move employers.

For many players, particularly elite performers, when a transfer takes place during a contractual term their former employer will demand the payment of a “transfer fee” from the proposed new employer before they agree to release their registration. These fees peaked at the reported £85m paid by Real Madrid to Tottenham Hotspur for Gareth Bale in the 2013 summer transfer window.

The problem is, these transfer fees potentially infringe European Union (EU) law. All workers within the EU have the right to freedom of movement; an Italian is free to work in Manchester or Berlin, just as a Welshman can move to Madrid. However in football, especially at the top level, this clearly isn’t the case.

For an elite player, transfer fees narrow down the options. If Christiano Ronaldo wished to leave Real Madrid he should technically be able to work anywhere in the EU but only a handful of clubs in just a few countries have the have tens (or hundreds) of millions it would take to buy him before his contract runs out. His chances of moving back to Portugal, for instance, would be remote and even if he were to forgo most of his wage demands Real would still want their £100m fee.

The nature of these transfer fees also means that smaller clubs are less able to compete for the best players. This in turn is a possible breach of EU competition law as the system limits the access of smaller clubs to the market for elite players and, as a result, their ability to challenge for the top honours in the sport.

According to the Court of Justice of the European Union (CJEU), such infringements of EU law can be justified for two reasons: when there is a legitimate aim being pursued, and when the means being used to achieve it are appropriate.

FIFA and UEFA have long argued that the system rewards those clubs that develop young players and the fees provide a financial lifeline for the smaller clubs. They argue that this in turn redistributes wealth from the bigger clubs and means that the smaller ones are more able to compete in competitions against them.

Bale, for instance, began his career at Southampton, then in the English second tier. When Tottenham bought him in 2007 for an initial £5m, it provided Southampton with much-needed cash.

The CJEU has accepted the legitimacy of these aims in a number of sports cases, not least the Bosman case of 1995 (which outlawed the payment of transfer fees for players whose contracts had expired). So breaching EU law can be justified, so long as the transfer system fosters competition and rewards smaller clubs for developing young players.

After a legal challenge by the European Commission, a reformed transfer system was introduced in 2001 which allowed players to breach their contract as long as they paid compensation to their previous club. However the Court of Arbitration for Sport (CAS) ordered a series of very high compensation awards that essentially reintroduced transfer fees under the post-Bosman system.

In one example the Brazilian midfielder Matuzalem unilaterally breached his contract with Shaktar Donetsk to join Spanish club Zaragoza. CAS took into account the “market value” of the player when determining compensation payable and made Matuzalem and his new employer liable for almost €12m in compensation. As a result of this and other cases, FIFPro became increasingly frustrated with its failures to improve free movement of its members.

It seems that a European Commission report into the workings of the transfer system which was published in January 2013 was the final straw for FIFPro. The report revealed serious – although not unexpected – shortcomings in the system’s ability to achieve its “legitimate aims” of encouraging investment in youth player development and increasing competitive balance between clubs.

The report suggested that the amount of money that was actually redistributed to the lower league clubs who were developing the elite players was tiny, in comparison with the large amounts being paid to mid-level and top clubs. And rather than making football more competitive, the system was actually reinforcing the dominance of the top clubs.

For football players wanting freedom of movement, the EC report may prove to be crucial. It means that a legal challenge to the existing system under either free movement or competition law would be likely to succeed.

A formal complaint to the Commission may lead to the system being declared incompatible with EU law, although since 2001 the EC has been reluctant to challenge player regulation. A second route would be for FIFPro to find and support a “new Bosman”; a player willing to challenge the transfer system for impeding his freedom of movement. If such a case made it all the way to the CJEU, it could dwarf Bosman’s impact on the football industry.

The most likely outcome is a negotiated compromise between FIFPro and the governing bodies which would grant more rights for players to unilaterally breach their contracts and would also ensure that more of the money filters down to clubs producing the elite players.

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