New Regulations on Working with Intermediaries in Ukraine: Football Federation of Ukraine adopted a new regime
Article was published on 21 April 2015 on website UA-Football (in Russian) »»»
Anton Sotir, international sports lawyer will talk about recently adopted Regulations on working with intermediaries, in drafting of which he was directly involved. New Regulations will change the whole system of providing intermediary services to clubs and players in line with new requirements of FIFA.
The adoption of the new Regulations on Working with Intermediaries («FFU Regulations«
) by the Football Federation of Ukraine (“FFU
”) will lead to a complete change of the entire system of intermediary / agent services. Since FIFA has identified only a framework of a new system, allowing national associations to self-regulate such activity in more detail, starting from 1 April 2015 in many jurisdictions various regulations came into effect, which now differ from each other. In Ukraine the Regulations were adopted only on 17 April by the Executive Committee of the FFU.
Many people from football society (especially players’ ex-agents) are interested in knowing what to expect during the upcoming transfer period as far as agents’ licensees have no legal effect anymore, and the FIFA Regulations on Working with Intermediaries («FIFA Regulations»
) speaks only in general terms how the system should work.
FIFA plans and their implementation
The fact that players’ agents will be "removed" was known for a long time. Back in April last year FIFA issued a Circular No.1417
, which notified that the system of licensed agents will be cancelled, and it will focus on transactions that occur through “intermediaries”. Such transactions (conclusion of an employment contract with the player or transfer between the clubs) will be subject to mandatory registration by national associations with disclosure of the amounts that intermediaries will receive from their clients.
Therefore, in 2014 FIFA adopted and published the Regulations on Working with Intermediaries, which came into force on 1 April 2015. The aim was never to “deregulate” the profession, but on the contrary, to seek broader control over individuals who represent players and/or clubs in the negotiations of employment contracts and transfer agreements, and enhance the overarching framework with a view to greater transparency. The regulations no longer attempt to regulate access to the activity, but instead control the activity itself: players and clubs should be able to choose any parties as Intermediaries, but would have to respect certain minimum principles.
The FIFA Regulations, which are aimed at services of Intermediaries used by players and clubs to conclude employment contracts or transfer agreements, define the following minimum standards/requirements that the member associations had to implement and enforce:
- Players and clubs must act with due diligence when selecting an Intermediary
- For the sake of transparency, a registration system for Intermediaries shall be put in place at member association level, whereby Intermediaries shall be registered for every transaction they are involved in
- Mandatory Intermediary Declaration for natural and legal persons (as annexes to the regulations)
- Provisions on prerequisites for registration
- Enhanced transparency provisions (requirements for disclosure and publication of financial aspects of transactions involving Intermediaries)
- Indications for the payments to Intermediaries (benchmarks for fee calculation, no payments if player is a minor, etc.)
- Conflicts of interest (e.g. proper disclosure of information by parties)
Importantly, FIFA has set a recommended amount of commission for Intermediaries being 3%, and the ability to sanction clubs and players for not notifying that the transaction involved an Intermediary or for concealing any other information.
On this basis the FFU adopted its Regulations. In contrast with the FIFA Regulations, our provisions have a number of particularities that are different from FIFA’s.
FFU Regulations on Working with Intermediaries
Who is this “Intermediary”? The Intermediary is considered natural or legal person who, for a fee or free of charge, represents players and/or clubs in negotiations with a view to concluding an employment contract or represents clubs in negotiations with a view to concluding a transfer agreement. Remarkably, the conclusion of employment contracts with the coaches does not fall under the concept of Intermediary activity. Moreover, previously legal entities were not able to be players’ agents as such or to receive licenses. Now participation of companies or firms would be possible (thus to organize tax optimization of intermediary activity will be much easier).
An important concept will be the Transaction, which implies the conclusion, modification or renegotiation of an employment contract or a transfer agreement with involvement of the Intermediary. In other words, any contract (either transfer or employment), which had been concluded using the services of the Intermediary will be considered as Transaction, and will be subject to mandatory registration at the FFU. FFU Regulations describe in detail the whole procedure of Transaction’s registration and documentation that is required to be submitted by the Intermediary / Club / Player in the FFU for registration of such Transaction.
As mentioned above, the players and clubs shall act with “due diligence” while choosing an Intermediary. This implies that they shall use reasonable endeavours to check the reputation of the person (or relevant firm, company), to ensure absence of the possible conflict of interest, to enter into correct Representation Contract and to make sure that Intermediary has signed the Intermediary Declaration (the text of which is contained in Annexes 1 and 2 to the FFU Regulations).
Another interesting requirement is that a person being within the scope of football system and being under the jurisdiction of FIFA and FFU, shall compulsory notify the FFU of the Transaction, which is committed in violation of the FFU Regulations. In other words, if someone somehow learned that the club or football player signed a contract with the participation of the Intermediary, but have not registered such Transaction at the FFU, or that the Intermediary received the money beyond the rules, such person is obliged to report such violation to the FFU. Otherwise, FFU Regulations provide for disciplinary sanctions for “concealment” of such information by any person.
Requirements for the Intermediaries and their preliminary registration
FIFA’s requirement that national associations shall make sure of impeccable reputation of the Intermediary caused a lot of questions. In fact, to know about already concluded Transaction the federation could only post factum, i.e. after it has been concluded. Cancelling the Transaction only because Intermediary, who was involved in it, had "no ideal" past, seemed too radical. It is better to prevent a breach rather than to sanction for its commission. Therefore, in order to ensure that the Intermediary is a bona fide, acts in good faith and he can be trusted with the Transaction, the FFU has decided to introduce the institution of preliminary registration of Intermediaries (for example, the similar system that operates in England).
Preliminary registration will resemble the previous system of issuing licenses, but with a number of particularities. Instead of obtaining agent’s license to be allowed to the activity as was in the past, since now there would be two special regimes: regime of the Permanent Intermediary and Temporary permission for conducting intermediary activity.
If a person wants to become a Permanent Intermediary, he should apply at the FFU within established periods (probably June and December) and be certified by the FFU. The advantage of this title will be that on the FFU’s website it will be published a list of people who have been certified, passed the exams successfully and are considered as having “impeccable reputation” to be involved in intermediary activity. Also, for each individual Transaction Permanent Intermediaries will not be required to ask every time the FFU to give them permission. This status will have no expiration. Nevertheless, the presence of Permanent certificate will not exempt from compulsory registration of each Transaction at the FFU. In any case, the parties (Intermediaries and football players / clubs) will be required to submit to the FFU a representation agreement with Intermediary, Intermediary Declaration and a copy of the contract being subject of the Transaction.
Regarding the second regime, the persons who do not want to take exams at the FFU (which will be only in Russian/Ukrainian) and who do not want to be a Permanent Intermediary, but at some point who need to assist the club or the player to negotiate a contract, will be able to apply directly to the FFU to obtain a Temporary one-time permission for a particular Transaction that is expected. After providing the necessary documents to the FFU and after being tested for their “impeccable reputation”, the FFU will issue a Temporary permission for such Intermediary, details of which should also be published on the FFU’s website. This option is especially useful to foreign intermediaries who may not know Ukrainian or Russian language, but who may represent foreign players in the transfers to Ukrainian clubs.
In addition, the intermediary activity may be conducted by close relatives of the player without the need for prior authorization from the FFU.
To combat with the “dishonest” Intermediaries who have committed serious violations of procedural rules and who acted not in good faith a separate list will be created with persons who are banned for a certain time to conduct intermediary activity. This list will be published on the FFU’s website, and all the clubs and the players will be able to “verify” a potential representative checking information on the website. Transactions with involvement of such “forbidden” persons will be subject to disciplinary sanction.
The Representation Agreement and payment conditions
Specific requirements are set forth for the agreements to be concluded between the intermediary and his client (club or player), which will be subject to mandatory registration at the FFU.
New generation of Ukrainian players will be working not with agents but with intermediaries
Unlike FIFA, which has established the recommended amount of compensation to intermediaries in the amount of 3% of the contract amount, FFU decided to establish a possible limit (“cap”) for such remuneration / commission. Now Intermediaries for their services cannot receive more than 10% of the contract amount (from gross income of the player during the whole period of the contract or the overall amount of transfer fee between the clubs). The Parties may set a lower amount in the Representation Agreement, but the excess of 10% will be considered invalid. According to international experience in such matters, the agents sometimes abused its monopoly position with respect to certain players or clubs, and the amount of their fees could exceed the salaries of the players they dealt with or the amount of the transfer to be received by club. Therefore, for a more transparent and fair regulation of such relations, to prevent excessive enrichment of Intermediaries was set the maximum amount of their possible remuneration / commission.
An innovation for the Ukrainian football has become the norm of late payments of the intermediary’s commission. If the club or the player has not paid the intermediary’s commission on time, for the period of delay until actual payment interest at rate of 5% per annum will accrue. This regulation will “motivate” clubs and players to pay intermediaries in a timely manner, because previously without applicable interest the debt was not different as of the moment it occurred or payment date. Therefore some clubs and players were interested in abusing this loop in order to delay payments for intermediaries.
Regarding minor players the FFU Regulations (like the FIFA Regulations) prohibits the payment of intermediary’s commission in Transactions with minors are involved and the duration of the representation agreement with minor shall not exceed 1 year.
Publication of information
A surprise for our Intermediaries (ex-agents) may be a requirement that all information about the Intermediary will be public. Now FFU would be required to publish a list of Intermediaries who provide their services, with reference to specific Transactions (but without specifying the transfer fees and intermediary’s commissions). Also, the overall amount of fees paid by each club individually and by all the players together will also be published.
The new FFU Regulations also provides for the disciplinary sanctions to players, clubs or intermediaries who violated Regulations (failure to register the Transaction, paying intermediary more than reported, etc.).
By registering the Transaction at the FFU Intermediary may expect to be able to defend properly his rights as disputes between club / player and Intermediary will be resolved either by the Control-Disciplinary Committee of the FFU or directly at CAS (if the parties have expressly provided so in the contract).
What should we expect in the future?
As can be seen, conducting intermediary activity will be difficult for some persons, while for others – much easier. On the one hand, for people who are constantly engaged in this activity (ex-agents) more routine and paper work will be added (subsisting a package of documents at the conclusion of each Transaction). But others with have a chance to make Transactions without taking exams (that previously were held twice per year) and without having a license, but just receiving a Temporary permit. Nevertheless, Intermediaries from foreign jurisdictions will be required to engage experienced sports lawyers to understand the new system and to assist to fill in all required documents, declarations and to register the Transaction properly.
How will the new system - it is a matter of time. Ukraine, like other jurisdictions, just adopted new regulations, and questions about their practical implementation and the “test of strength” will be made already during the upcoming summer transfer period.
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