A Brief analysis of the FIFA ban of TPOs or investment funds

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I already made a few days ago a preliminary analysis of the ban on financing of TPO financing operations agreed by FIFA and contained in its Circular 1464. Taking that into account, todays post, being longer than usual -sorry for that- aims to point out some of the key changes on the new regulations.

According to that, the new system is structured around two prohibitions, namely, (i) the prohibition of influence, extended and strengthened, and (ii) the ban of TPOs financing transactions of any type. In any case, the main reforms included in the new provisions can be summarized as follows:

1) Definition of third party

The definition of third party is a broad concept for the purposes of RETJ, as such consideration includes any «party outside of the two clubs among which a player is transferred, or any of the previous clubs where the player was previously registered».

It has, therefore, third party status not just any economic operator other than clubs and players, but the players themselves, and those clubs that are not the club of origin and destination, or any other earlier club in which the player has been enrolled.

2) Prohibition of influence contained in article 18bis RETJ

Along with the specific prohibition of TPO operations to which Article 18 ter includes, Article 18 bis expressly prohibits that any club that enters into a contract allowing opposing clubs and viceversa or others, «take a position which may influence on labour issues and transfers related to independence, politics or the actions of club teams”.

That prohibition of influence extends to any contract that confers on a third party the faculty of influence on labour, political or club performances issues. It seems that with the difficulties that causes a confuse drafting, this prohibition extends, for example, to typical clauses for the transfer of players between football clubs (Spanish Clubs namely) known as «clause of fear», i.e. the clause preventing the assigned player play against the assignor club.

3) Prohibition of TPOs

Article 18 ter states a ban on TPO financing operations, in a material and extensive sense, so that the prohibition includes any kind of contracts in which funding is granted by a third party under the terms defined above in order to an income by transfers or signings of players. It should be noted that not only is the influence prohibited but also any contract of this nature is prohibited not taking in to account whether it is such contact a real men of influence on the financed. It is, therefore, part of a normative assumption that these contracts will generate an unwanted influence, so that the prohibition extends to any transaction TPO and in any case. Therefore the prohibition includes not only the most aggressive clauses but any that implies the participation in the economic rights, although sometimes do not imply a direct influence on the funded club).

Finally, «in late April 2015,» all existing contracts affected by the ban shall be recorded along with ist attachments of any kind in the FIFA Transfer Matching System (TMS).

4) The Entering into Force of the new measures

The provisions of transitional law of the reform are unclear and confusing in its drafting. It seems that the reform comes into force on January 1, 2015, but that effective application of Article 18 ter is postponed to May 1, 2015, so that a brief «vacatio legis» of just four months is recognized. For the purposes of the new Article 18 ter, i.e. the prohibition of financing of TPO operations, the contracts signed before the entry into force of the reform (up to December 31, 2014), «remain valid until their date of contractual maturity», without being able to «extend its validity» whereas those between the entry into force of the reform and April 30, 2015 can only have a maximum of one year’s extent.

5) A brief valuation of reform

The reform cannot be evaluated positively, since we have always supported a defense of the TPO financing operations subject to transparency, control, through an ad hoc and new regulation. We would have preferred to regulate the phenomenon and not to prohibit it.

Beyond this critical background, the fact is that the drafting of the ban has a confusing wording that could cause problems of interpretation, which inevitably lead to a very undesirable legal uncertainty. The final option is a broad and material ban, which implies that is has been intentionally refused a law-precised drafting in the delimitation of the ban.

In this sense, seems to us imprecise, for example, the scope of the validity and force of TPOS contracts signed before December 31. It is also not understandable why the wording of Article 18bis 2 and 18ter 6, regarding to the possibility of supervision of the FIFA Disciplinary Committee for infringements of both provisions, do not coincide.

Finally, a greater reach problem could raise the new ban from the perspective of Community and National Anti Trust Law, as well as from the scope and effects of sanctions that the FIFA Disciplinary Committee may, that being the case, impose.

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