Do players have a right to buy out the last year of their contract?

Now that the transfer window is finally closed, it’s probably the best time to discuss a pertinent issue that has always been interjected into the transfer debate in that period. This is the issue of a player’s right to buy out the last year of his contract. As usual, there are loads of misconceptions involved in the discussion. Though it is generally reported in the press to be contained in “the new FIFA Regulations”, the truth is these are no new regulations. “FIFA Regulations for the Transfer and Status of Players” is a product of negotiations between the body and the European Commission in order to keep it in line with the European body’s Competition rules to a certain extent (sports have a special dispensation under EC law).

The Regulations have been in force since September 1, 2001, but have been revised once in 2005. This revision is what is erroneously called “new FIFA rules” when indeed it affects nothing of substance in the original Regulations except minor and procedural parts. The substantive provisions are the same as in the 2001 Regulations although under different articles. Thus the law has been there all this while, but in the wake of the transfer disagreements that placed players in opposition to clubs (for instance, in the case of William Gallas versus Chelsea), the press in trying to be too clever by half, began to interpret the minor revisions which have no substantive effect on the original position as new and, worse still, began a systematic misinterpretation of the provisions to give the impression that a new era of freedom for players has dawned. Needless to say, many football aficionados have so far fallen for it.

What I want to try and do here therefore is to look at these provisions, interpret them and explain why it is difficult for players to actually take advantage of the provisions in practice. Till date, no player is on record to have successfully ‘bought out’ the last year of his contract in spite of the provisions. The ongoing Andy Webster case from Hearts to Wigan is a test case and we can already see how difficult, inconveniencing and costly this is for the player, prospective new employers and agents. As we speak FIFA’s Players Status Committee is yet to make a decision. Meanwhile, the season is in full swing already and the player can’t train with or play for Wigan, his prospective new club, while lawyers are having a field day going back and forth. This is hardly great encouragement for any other player to test the waters.

The first thing to understand is that these Regulations are usually to be read in conjunction with FIFA Circular Letters and Annexes which are meant to clarify the interpretation of the provisions of the Regulations. For our purpose, below is a link to “Circular no. 769” which is relevant for our understanding of the applicable provisions. The part to note is Part 3 “Contractual stability” (pp10-15). This will clarify a few things when we’re looking at the provisions themselves:

Circular no. 769: Revised FIFA Regulations for the Status and Transfer of Players

The main provisions that deal with the issue of the so-called players’ ability to ‘buy out’ their contracts are under Article 17 of Chapter IV (MAINTENANCE OF CONTRACTUAL STABILITY BETWEEN PROFESSIONALS AND CLUBS). Article 17 talks about “Consequences of Terminating a Contract Without Just Cause”, the point being that contracts are meant to be fulfilled and where terminated would usually be by mutual consent of parties. However in circumstances where one party (player or club) unilaterally terminates a contract (“Without Just Cause”), the provisions here apply.

In order to further understand the relevant provisions of this article, we need to scroll up to Page 4 and read the “DEFINITIONS” to get the meaning of certain terms used. For instance, one of the key terms is “Protected Period” (7):

“Protected Period: a period of three entire seasons or three years, whichever comes first, following the entry into force of a contract, if such a contract was concluded prior to the 28th birthday of the Professional, or to a period of two entire seasons or two years, whichever comes first, following the entry into force of a contract, if such contract was concluded after 28th birthday of the Professional.”

With this in mind, we can then go on to read Article 17 (1), bearing in mind also what we’ve read earlier from the relevant portion of Circular no. 769. We can see that what that provision is saying is that in ALL cases of a unilateral breach of contract, compensation will be paid by the party in breach. In other words, for our purpose, a player who before he’s 28 years old decides to ‘buy out’ the remainder of his contract must have a contract of at least four years (since the first three is “Protected Period”, which in principle is the period the contract is irrevocable unless there is just cause or sporting just cause). If the player is over 28, the contract in question must be at least three years for him to be eligible to exercise this right (since the first two years is “Protected Period”, which in principle is the period the contract is irrevocable unless there is just cause or sporting just cause). Compensation (or buy out price) must then be paid for the remainder period using certain criteria set out by Article 17(1). Such compensation for breach shall be calculated with due consideration for:

(i) the law of the country;
(ii) the specificity of sport and
(iii) any other objective criteria, which shall include IN PARTICULAR (but not only):

(a) the remuneration and other benefits due to the player under the existing contract and/or the new contract;
(b) the time remaining on the existing contract up to a maximum of five years (the maximum duration for contracts) and
(c) the fees and expenses paid or incurred by the Former Club (amortized over the term of the contract) and
(d) there will be a consideration of whether breach falls within the Protected Period.

Article 17(2):

(i) Entitlement to compensation cannot be assigned to third parties, which means where the player is in breach, only the club would be entitled and where the club is in breach only the player would be entitled.
(ii) Where the Professional is required to pay compensation, he and his New Club shall be held jointly and severally liable for such payment.
(iii) The amount can be stipulated in contract (e.g. via a buyout clause).

Article 17(3):

(i) IN ADDITION to the obligation to pay compensation, sporting sanctions shall also be imposed on any player found to be in breach of contract during the Protected Period. These sanctions are:

(a) a restriction of four months to play in Official Matches;
(b) in the case of aggravating circumstances, six months (e.g. where there had been a previous breach) and
(c) in ALL cases, these sporting sanctions shall take effect from the start of the following Season of the New Club;
(d) disciplinary measures may be imposed outside the Protected Period for failure to give due notice of termination (i.e. within 15 days following the last match of the Season) and
(e) Protected Period starts again when, while renewing the contract, the duration of the previous contract is extended.

Article 17(4):

IN ADDITION to the obligation to pay compensation,
(i) sporting sanction shall be imposed on any club found to be in breach of contract or found to be inducing a breach of contract during the Protected Period;
(ii) it shall be presumed, unless established to the contrary, that any club signing a Professional who has terminated his contract without just cause has induced that Professional to commit a breach and
(iii) any club found to have induced breach shall be banned from registering any new players, either nationally or internationally, for two Registration Periods.

Article 17(5):

Any person subject to FIFA Statutes and FIFA regulations (club officials, players’ agents, players, etc.) who acts in a manner designed to induce a breach of contract between Professional and club in order to facilitate the transfer of the player shall be sanctioned.

To see how these provisions work, let us apply them to a hypothetical situation in order to understand why this has proved and will continue to prove difficult to achieve. Let us consider the Gallas situation as speculated by the press. First, for Gallas to qualify, he needed to be in at least a four year contract, because though he’s now 29, he signed his last Chelsea contract (a four-year extension) when he was almost 25. The Protected Period of that contract would therefore be between 2003 and the end of 2006 season. But to activate his right under this provision, he ought to have given a notice of his intention to ‘buy out’ the remainder of his contract “within 15 days following the last match of the Season”. The last game of the season was the away fixture against Newcastle on Sunday, May 7, 2006. So, Gallas’s notice would need to have been delivered to Chelsea between May 7th and May 22nd. In reality, of course, we know that by May 11th when Jason Burton of the Independent was reporting (erroneously) that Gallas intends to buy out the last year of his contract, nothing of the sort was happening. If indeed, there was such notice, Chelsea wouldn’t have had the expectation of Gallas coming to the pre-season camp in the US and the crisis obviously wouldn’t have taken the dimension it took. In any case, not giving due notice of termination wouldn’t have automatically ruled out his right to buy out his contract, but he would expect some disciplinary measures to be imposed on him in line with the provisions of Article 17(3) and as explained in Circular Letter no 769.

But there are more formidable minefields ahead. For instance, under the requirements of Article 17(1), the compensation (money to pay to the club with whom he has this contract, in Gallas’s hypothetical case, Chelsea) would be calculated based on English contract law, including any provisions made by the governing body of the sports in the country. They would need to consider in particular (but not only) those four objective criteria listed in Article 17(1) above. So, it isn’t just a question of paying the cost in terms of salary and benefits of the one year remainder in Gallas’s existing contract with Chelsea, the compensation package must take into account the value of the contract offered and the over £6m paid to Marseille by Chelsea as well. The parties may need to go to arbitration to sort out the appropriate compensation based on these criteria and others enumerated in Circular Letter no 769.

More crucially, after meeting these conditions and having apparently bought out himself, Gallas wouldn’t exactly be free once he’s seen thereafter to be joining another club, e.g. AC Milan or Arsenal. For the sake of our analysis, let’s say AC Milan, since they were the ones Gallas claimed he’d agreed personal terms with before the end of last season when the latest chapter in the crisis began. The provisions of Article 17(1) states that a consideration would be made whether the breach occurred during the Protected Period. Chelsea need not report Milan before this can be considered, since Gallas and his agents had already spoken of meeting the Milan directors within the Protected Period and have agreed personal terms. In that case, the sanctions under Articles 17(3) -17(5) would apply to Gallas (suspension for at least 4 months in Official Matches with Milan, his new club) and Milan themselves would be banned from registering any new players, either nationally or internationally, for two Registration Periods. This means between now and January 2008, Milan cannot bring in any new players (though they would be free to sell). Also, the club officials and agents involved shall be separately sanctioned, including any player who aided in the breach, e.g. a close friend acting as a go-between in the deal.

Furthermore, it should be noted that even where such a prima facie case of breach as in the Milan situation above does not exist – that is where the New Club have nothing absolutely to do with the situation until the player buys himself out – such a New Club under the provisions of Article 17(4) shall be presumed to have induced the player to commit the breach! In other words, the player immediately assumes a pariah status, because any club he then moves to will first be presumed guilty of inducing him to leave until the contrary is established! In Andy Webster’s case, for instance, it means Wigan are presumed guilty of an offence that even Hearts are not accusing them of until they prove otherwise – a case of guilty until you prove your innocence! If Gallas had therefore done it by himself, the moment he approaches Milan or Arsenal to resume his career, the club he approaches would immediately be under obligation to prove that they did not induce a breach. And all this would apply in addition to paying the compensation, for which the player and his New Club are jointly and severally liable.

Now, considering all these obstacles, why would anybody want to go through with it? Why would any club encourage any player, no matter how good, to buy out the last year of his contract when it is far easier to simply let the remainder run out and take him for free the next season? What club would get involved when they actually do not need to know what the player or his agents are doing to be guilty? Obviously, as it works out, these are more like punitive measures to stop players leaving within their contracted period, rather than offering them a way out and one can safely say it’s been pretty effective so far. That is why there was no surprise that FIFpro, PFA and other professional footballers’ associations worldwide opposed the provisions, because they believe they make things worse for the players who wish to exercise their rights under the provisions, including potentially ensnaring others such as prospective new employers, agents and other players.

So, when next you hear journalists waxing strong about a player’s right to buy out the last year of their contract, think of the obstacles the Regulations have placed in front of them, think of the fate of Andy Webster, his agents and Wigan still being given the runaround this far into the season. Think of the player sitting at home without training, without a contract with his prospective new club, with lawyers running around everywhere and everything at a standstill. And they are supposed to be the ones who’ve done it by the book! They call his case the new Bosman. Let’s just hope unlike Bosman, he somehow manages to return to his career after this is all over.