(5 min read)
Sky high transfer fees have become a huge talking point in football, with clubs trying to maximise their income but reduce their spending to meet financial rules. But what happens when a team is trying to snap up a young player who is out of contract with his current club? The rules vary depending on the situation, what league the player is in and which country they are heading for, but in every case the new club runs the risk of a tribunal deciding the price for them. Here, Erin Grieve looks at the rules from a Scottish perspective and sets out the process to be followed.
Most people will be aware of the eye-watering sums spent by football clubs on players with transfers often being described as "club records" and the larger clubs paying as much as nine figures for some of the biggest names in the game. There has of course been a significant amount of discussion recently concerning the Financial Fair Play rules and the regulations which govern club spending. In addition to signing players in the traditional sense, clubs can also be entitled to payments even when a player's contract has expired.
The 'development fee'
In terms of the SPFL Rules and Regulations "in the event that a Player is Registered to another Club on or prior to his 23rd birthday, the Club to whom that Player was last Registered shall be entitled to payment of a Development Contribution for the youth development of that Player if he was, during all or, where it is the case, part, of any Development Contribution Year in his Development Contribution Period, Registered to or associated with that Club." To summarise, if a player has signed a contract with a club and is contracted with them prior to turning 23, that club will be entitled to a payment from the club he signs for next, even if his contract had expired when the new contract was signed.
Commonly referred to as a "development fee" or "training compensation" this fee is designed to reimburse the club who has invested in the young player's training, education and development. This mechanism was introduced following the Bosman ruling which allowed players to leave clubs at the expiry of their contract and sign for another with no fee payable by their new club. There was a significant, and justified concern, that this would lead to clubs tying players into very long contracts, including a clause to allow them to extend unilaterally and choosing not to sign and develop young players given the expenditure incurred with that which would not be recovered.
FIFA's answer to this issue was to introduce the mechanism set out above whereby clubs would be compensated in order to encourage them to train and develop young players, knowing that they would be reimbursed for at least some of these costs.
In order to be entitled to the compensation fee a club must: -
i. offer the player a new contract;
ii. make that offer to the player in writing sent by recorded delivery post; and
iii. notify the league secretary and the player's new club that compensation is payable.
A failure to comply with the administrative steps can lead to a tribunal determining that no payment at all is due.
How much will it be?
Assuming the process has been properly completed the next question of course is – "how much"? This is not always straightforward with various factors to consider. The professional football leagues are split into different categories for the purposes of assessing how much compensation will be due. For context, the SPFL is a category 2 league with the English Premier League being category 1. Compensation is generally deemed to be payable from the player's 12th Birthday with the sums due for the years when they are between 12 and 15 based on the category 4 figures to account for their young age.
The issue of training compensation in light of EU regulations and whether it was an appropriate mechanism was considered in detail when Oliver Bernard moved from Lyon to Newcastle United. The outcome of that dispute confirmed that although the payment of a development fee is a legitimate means of compensating clubs, no club should be made to pay sums that are in excess of the actual training costs incurred upon termination or expiry of a contract.
The "training period" is usually the years between the player's 12th and 21st birthdays. The relevant period must be considered on a case-by-case basis however, in some instances it is apparent that the player's training had ceased prior to his 21st Birthday. This was addressed by the Court of Arbitration for Sport when Mark Stewart transferred from Falkirk to Bradford City. When considering whether a player's training had ended the panel noted that: -
"various factors are generally included in the assessment of whether a player´s training period must be deemed to have been completed before the age of 21, including the level of talent of the player, whether or not the player is playing regularly with the first team and the value of the player, e.g. reflected in a loan fee achieved for the services of the player."
Once the relevant period has been established the costs which are included in the compensation payment must be assessed. The costs which are reviewed are vast but include salaries, benefits (e.g. pension contributions and medical insurance), accommodation expenses, costs for educational courses or programmes, travel costs for training, matches and tournaments, kit and equipment and the salaries of coaches, medical staff and other professionals. Once these have been determined the FIFA rules also take into account the fact that not all players who train with a club will pursue a career in professional football. Essentially, clubs will not receive a return on every youth player they invest in – the costs associated with producing one professional player will include the costs incurred in the training of several other players who do not become professionals.
The tribunal's decision is final
Once all of the foregoing has been calculated the player's new club may well pay the proposed figure as assessed by the player's former club. However, as is often the case with football transfers clubs rarely agree on the appropriate amount to be paid. In these instances, a tribunal will be convened to assess the amount which should be paid to a player's former club.
In England the sums determined by a tribunal have, on occasion, been in excess of one million pounds (Harvey Elliott from Fulham to Liverpool, Danny Ings from Burnley to Liverpool). If a player moves between clubs in England the fee is assessed by the Professional Football Compensation Committee (PFCC) however it has no jurisdiction to consider cross-border moves so the much lower FIFA rules on fees come into play. For instance, had Danny Ings moved to a Scottish Premier League club or abroad it is estimated that the payment to Burnley would be approximately €270,000. Rangers and Celtic both benefitted from this provision when they signed Joe Aribo and Moussa Dembele respectively.
The compensation due to clubs in Scotland when a young player moves to another team can range from £100,000 to in excess of half a million pounds. The mechanism for calculating compensation payments is not straightforward and must be considered in accordance with the facts and circumstances of each individual case. While young footballers can have an integral role to play within a team it is important for clubs to remember that in the absence of an agreement with the player's former club a tribunal may decide that the sums due to be paid are far in excess of what they deem that player to be worth. A situation where you are essentially agreeing to make payment for a player having not seen "the price" may seem a risky strategy but it is often one which plays out well.
