The New FIFA Agent Regulations – Some Initial Thoughts
By Daniel Geey and Alex Harvey
With FIFA publishing its new Agent Regulations (FFAR) in early January, many agents, lawyers and industry professionals alike have been reading the small print to understand the potentially seismic changes impacting the industry. Whilst this isn’t a comprehensive note on the FFAR, it highlights some of the pressing issues for agents, lawyers, national associations and FIFA to consider.
It’s worth noting at the outset that the FFAR relates to cross-border international player and manager transactions. For domestic transactions, the relevant national association regulations will apply. For more detail, check out this video explainer on the FFAR and a recent podcast I recorded with 21st Group’s Omar Chaudhuri.
Intermediaries to Agents: It’s a small win but a relief that we don’t have to type (and say) intermediary anymore. Agents are back to being called agents. Phew.
Commission Cap: Perhaps the most controversial aspect of the FFAR is the introduction of a commission cap. In summary, FIFA are restricting an agent from earning more than 6% of a player’s annual remuneration if the agent works for both the player and buying club on a transaction. This is a significant reduction from an industry-standard that ranges from 3%-10% which agents tend to earn when acting for both player and buying club. Further, if the agent only works for the player or only works for the buying club, they are limited to 3% of a player’s annual remuneration. Note that if the player’s annual remuneration is less than or equal to $200k, the cap is increased to 10% if the agent works for both the player and buying club. Lastly, if the agent acts on behalf of the selling club, they can earn up to 10% of the transfer fee.
It would appear more lucrative at first instance to work for selling clubs rather than represent players. Critics of FIFA’s approach believe it is anti-competitive and question why it is agents that are restricted in what they can earn. By the same logic they say, why aren’t club chief executives’ salaries capped? Agents and managers across the wider entertainment industry can receive up to 20% commission on deals. Some may ask why football is special or any different. FIFA believes agents can have too much negotiating power, earn too much, and take too much money out of the game.
Legal challenges appear imminent in various countries including Switzerland, Germany and the UK. FIFA will no doubt be ready for the barrage of legal actions. The fascinating strategy will be the approach of the agents. It is likely they will ask the court for an injunction to stop FIFA in their tracks. The question is whether they will request an injunction solely in relation to the commission cap provisions or whether they will request that the entire FFAR is suspended. Things will be ramping up in the coming weeks.
Players to Pay their Agents: Based on our experience of working with Champions League, Premier League and Football League players, they don’t tend to pay their agents. Instead, as a benefit to the player, the buying club usually pays the agent’s commission on the player’s behalf. This tends to get more complicated as the buying club also pays the agent for club services too. It means, historically, the buying club will pay the player’s agent 50% of the commission for player services and 50% for club services, and the player would only need to pay tax on the 50% for player services as a benefit in kind. You can read about how this works in practice in more depth here.
However, FIFA has now prohibited clubs from paying agents for player services and, as such, players will now be required to pay their agent themselves. What this will likely mean, in practice, is that clubs deduct the players’ commission to their agents from the players’ net salary (meaning the players are effectively paying, rather than the club). Many wouldn’t be surprised if this FIFA requirement is challenged in the courts too, or perhaps clubs and agents will simply find a work-around by increasing the players’ salary to cover the additional cost. I wrote in more detail with Rhys Linnell from Safferys on this issue here.
Passing an Exam: Pre-2015, all agents had to pass a difficult multiple-choice exam based on questions about the various FIFA and national regulations. This is being re-introduced. Individuals that wish to become licenced agents will need to get 15 out of 20 multiple choice questions right. Prospective agents will have 60 minutes to answer twenty relatively detailed questions. Three minutes per question will be challenging. Only those who previously passed the exam pre-2015 will be spared the process. Whilst few believe the exam is a bad idea, the timetable and scheduling appear challenging to many. There are two registration periods, the first ending 15 March 2023 to sit the first agent exam on 19 April 2023. For the second exam, prospective agents will need to apply between 1 May - 31 July 2023, with the exam on 20 September 2023. The FIFA exam study materials run to 528 pages. There will be a portal where further resources including some mock questions will be made available.
This will be a daunting exercise to many. Even established agents face the ultimate risk that if they don’t pass the 75% exam threshold in March or September then they cannot become a licenced FIFA agent until they can retake the exam in May or November 2024. Many in the industry feel that only two opportunities each year and six months between each exam is too restrictive. It may be that national associations can arrange for quarterly exam sittings.
What if the Worst Happens? It’s likely that a number of established agents who represent many elite players and who have worked on significant deals are going to fail the exam. If an agent doesn’t pass the exam and therefore doesn’t receive a FIFA agent licence, then they cannot undertake football agent services. That means they won’t be able to represent a player where they have an existing representation contract. Additionally, in the FA’s template representation contract between player and agent, there is a clause which states:
“The Contract shall be automatically terminated with immediate effect if the Intermediary’s Registration expires during the term of the Contract and the Intermediary does not renew his Registration within 14 days of being requested to do so in writing by the Player.”
This clause is required by the FA. Therefore, if the agent is not licenced from 1 October 2023 because they have not passed the exam, there is a real risk that all of their player representation contracts could be automatically terminated and their players will be forced to look for alternative representation elsewhere.
Perhaps even more alarmingly for agents, if they don’t pass the exam in April or September 2023, there is a possibility that they may not be paid ongoing commission on previous deals that they’ve done. This is because, when an agent is acting for player and buying club in a transfer, all three parties will usually enter into what’s called a ‘tripartite agreement’ and, as part of that agreement, the agent will usually agree to provide ongoing services to the buying club. However, if the agent doesn’t have a FIFA agent licence then they’re not permitted to undertake football agent services and clubs may therefore refuse to continue paying commission. Most tripartite agreements will also contain termination provisions which state that the club can terminate the contract (with no further commission payments payable) if the agent isn’t licenced.
Future-Proofing Contracts Now: In Enclosure 1, FIFA have explained that: “Any new representation agreements or renewals of existing representation agreements concluded after the FFAR are approved must comply with the FFAR as from 1 October 2023. In other words, where necessary, contractual terms will have to be amended to be in compliance with the FFAR as per 1 October 2023, to avoid possible sanctions.”
The concern for agents (and lawyers alike) is that if a transfer or renegotiation occurs in the January 2023 or summer 2023 window (before 1 October 2023 implementation), significant amendments to representation contracts may be required. For example, if a club agrees to pay the player’s agent 50% player services and 50% club services, that contract will need to stipulate that from 1 October 2023 the club can no longer pay the player’s agent on the player’s behalf and that the player will have to begin paying their agent accordingly. It would be more straightforward (but more time consuming) to do the drafting changes upfront, but because the FFAR are so new, it may be that clubs will want to continue with their current structure, agents may not want to explain to their players that they will have to pay them, and few will want to wait for the lawyers to delay the deal by drafting the necessary futureproof changes.
Regulating Commercial Deals: FIFA have also broadened quite considerably the scope of their regulatory oversight. This appears to be the case because FIFA is concerned that with the commission cap coming into force in respect of on-field transactions, agents may sidestep that restriction by charging more commission for sourcing commercial deals instead. FIFA define this as “Other Services”, which includes “legal advice, financial planning, scouting, consultancy, management of image rights and negotiating commercial contracts”. FIFA will presume that in the 24 months prior to or following a transaction, where “Other Services” are being performed on behalf of the selling or buying club, the services were in fact in relation to the transaction (i.e. the transfer or contract renewal). Agents will need to prove that this wasn’t the case, otherwise any commission earned from the commercial deal will be treated as commission from the transaction (and may take them above the permitted commission cap). This could lead to severe sanctions. In addition, there are also significant disclosure obligations that agents will need to comply with. For example, any agreement which relates to Other Services must be disclosed to FIFA within 14 days of signature. That will be a significant task.
How Much? Many rightly believe that greater transparency is required, especially when it comes to significant amounts of money circulating at the top of the football pyramid. The FA for example have for some time published aggregated commission amounts paid to agents on a club-by-club basis. They have also published the details of each transaction that occurred so that anyone can see who represented the player and club on a deal. However, individual commission amounts were not disclosed.
From a review of the FFAR, it appears that FIFA: “shall make available … details of all Transactions involving Football Agents, including the service fee amounts paid to Football Agents.” Several agents have expressed their concern that the amounts paid to them would be made publicly available. They say it is sensitive, confidential information. There is also a real risk that such disclosures could be contrary to relevant data protection laws in particular territories.