What's the meaning of a football transfer?

They are designed to allow the old club to share the benefit of a subsequent transfer of a player by receiving an additional payment in the event the player is transferred from the new club to another club.

Whilst the purpose of a sell on clause is clear, disputes between clubs over sell-on clauses frequently arise and John Shea of Lewis Silkin recently acted for Brighton & Hove Albion FC (“Brighton”) before FIFA’s Players Status Committee and the Court of Arbitration for Sport in one such dispute that Brighton had with Malaga FC.

The decision in the case provides helpful clarification as to the meaning of a transfer in the context of whether a sell on clause has been triggered or not.

Facts

The dispute arose out of a sell-on clause contained within a transfer agreement under which the registration of the player, Jack Harper (“Player”), was permanently transferred from Brighton to Malaga.

The wording of the sell-on clause in the transfer agreement was as follows:

“2.2 Should the Player’s registration be transferred on a permanent basis by Malaga at any time in the future then Malaga will pay to Brighton 12.5% (twelve and a half per cent) of any transfer fee received by Malaga (deducting the amount corresponding to solidarity contribution) up to a maximum sum of €750,000 (seven hundred and fifty thousand euros).”

The Player signed an employment contract with Malaga until 30 June 2019 however Malaga had the option to extend its term for another three seasons. On 20 March 2019, a transfer agreement was concluded between Malaga and Getafe which contained the following terms:

“GETAFE Will pay to MALAGA CF, for the waiver of the right to renew the contract of the PLAYER and as long as the PLAYER is contracted to GETAFE as a free agent with effect from 1 July 2019, the amount of ONE MILLION FIVE HUNDRED THOUSAND EUROS (1.500.000 €) plus VAT.”

The Player’s was subsequently registered on a permanent basis with Getafe on 1 July 2019.

Upon being notified of the Player’s transfer to Getafe, Brighton requested details from Malaga of the transfer fee it received in order to calculate whether any sums were payable under the sell-on clause. In response, Malaga informed Brighton of the fee Getafe agreed to pay, but denied that any sums were payable to Brighton under the sell-on clause because it claimed that the Player’s registration had not been permanently transferred on the basis that the Player’s contract expired on 30 June 2019, so from that day on, the player was a free agent.

Brighton disputed this and lodged a claim with FIFA’s Player’s Status Committee on 3 March 2021 requesting the payment of €187,500 plus interest and costs. Subsequently, on 18 May 2021, the FIFA passed a decision:

a) Partially accepting Brighton’s claim; and

b) Ordering Malaga to pay Brighton €125,000 plus interest.

A copy of the decision by the FIFA’s Player’s Status Committee can be found here.

Appeal to the Court of Arbitration for Sport (“CAS”)

Malaga appealed the decision to CAS and reiterated that it did not permanently transfer the Player’s registration to Getafe because the player was a free agent as a result of his contract expiring on 30 June 2019.

Malaga also claimed that it did not receive a transfer fee because the money it received from Getafe was instead compensation from Getafe for the withdrawal of the option to renew the Player’s contract. This option had an important economic value, since its exercise would prevent the Player from joining Getafe as a free agent.

Brighton’s position was that this was unquestionably a permanent transfer of the Player’s registration. In support of its position, Brighton relied upon the decision in CAS 2019/A/6525 Sevilla FC v. AS Nancy Lorraine which concerned a similar dispute over whether a sell on clause had been triggered after a buy-out clause in the player’s contract had been exercised. The sell on clause in that case was similar in that it was triggered “In case a definitive transfer of the player is signed, and the player is transferred from SEVILLA FC to another club”. Sevilla argued that the exercise of a buy-out clause did not constitute a transfer and, therefore, the sell-on clause was not triggered. The CAS Panel disagreed and held that a transfer did occur and that the sell-on clause was triggered¹. In reaching its decision, the CAS panel in that case provided an helpful explanation as to what constitutes a transfer:

“The Panel notes (as already underlined in CAS 2010/A/2098) that in the world of professional football a “transfer” of a Player means in general terms a change of “registration ” of a player or - to put it in another way -for a professional player it means a “change of employer”. A Player, registered to play for a club, becomes eligible to play for a different club, or, when employed with a club, becomes an employee of another club. The FIFA rules, and chiefly the Regulations on the Status and Transfer of Players, in all their editions, are based on such a concept. In that regard, therefore, a “transfer” can be equated to a “movement” in the registration/employment relation.

While the case of CAS 2019/A/6525 Sevilla FC v. AS Nancy Lorraine related to the exercise of a buy¬out clause, Brighton maintained that the reasoning behind it was entirely applicable to the present case:

a) There was undoubtedly a change of both the Player’s registration and employer which took place in July 2019, when he joined Getafe;

b) The transfer of the Player happened within the scheme of a contract given that Malaga and Getafe entered into a transfer agreement even before the Player’s contract had expired. Whatever Malaga argued, the agreement concluded between Malaga and Getafe was, for all purposes, a transfer agreement, since a significant sum of money was paid for the services and registration of the Player; and

c) Even if the panel accepted Malaga’s arguments, the wording of the sell-on clause - “Should the Player’s registration be transferred on a permanent basis by Malaga at any time in the future” - is sufficiently wide to cover any kind of transfer, even if Malaga decided to put a different “label” on such a deal. This clause was always intended to allow Brighton “to share the benefit of any and all subsequent transfers of the Player to a new club”.

Brighton, therefore, maintained that the Player’s registration was permanently transferred by Malaga to Getafe on 1 July 2019 and, as a result, the first condition established by the sell-on clause was fulfilled. If the CAS Panel agreed with that reasoning, then it must follow that said payment of EUR 1,500,000 from Getafe to Malaga was consideration for the permanent transfer of the Player’s registration and, as such, constituted a transfer fee thus fulfilling the second condition of the sell-on clause.

Decision

The CAS panel concluded that the following issues needed to be determined in order to resolve the dispute:

1. What does the concept of a “transfer” encompass in football?

2. How should the sell-on clause be interpreted?

3. Did the movement of the Player from Malaga to Getafe trigger the application of the sell-on clause?

4. What are the legal consequences resulting from the answer to the previous issue?

1. What does the concept of a “transfer” encompass in football?

To correctly interpret the meaning of the sell-on clause, the panel deemed it necessary to clarify the meaning of the concept of a “transfer” in the legal world of football. According to the definitions chapter of the RSTP, a “transfer” may be defined as follows:

“21. International transfer: the movement of the registration of a player from one association to another association.

22. National transfer: the movement of the registration of a player at an association from one club to another within the same association.”

In addition, the panel acknowledged the reference to the decision CAS 2019/A/6525 Sevilla FC v. AS Nancy Lorraine in Brighton’s submissions and accepted that a “transfer” can be equated to a “movement” in a player’s registration/employment, whether to a different association or to a different club under the same association occurring under a contractual scheme or outside of such a framework.

2. How should the sell-on clause be interpreted?

The Panel concluded that the sell-on clause was undoubtedly a type of clause which is typically used in professional football to allow the club which transfers a player to share in the benefits or profits of a future transfer of said player.²

The wording of the clause referred to the “transfer” of the Player’s registration however no restriction or limitation regarding the meaning of a “transfer” was inserted in the contract except that (1) it had to be “permanent” thus no fees received for any temporary transfer would be able to trigger the sell-on clause and (2) the wording clearly indicated that the parties intended the sell-on clause to be applicable only in those cases in which Malaga received a “transfer fee”. These were the two conditions necessary to trigger the sell-on clause.

No other specific conditions, formal or technical requirements were set by the parties and, as such, the sell-on clause agreed by the parties encompassed transfers concluded without a typical contractual scheme or even with no contractual framework, provided that a fee in exchange for that transfer was due. In the event that both these conditions were fulfilled, Malaga were obliged to pay Brighton the amount corresponding to 12.5% of the fee received up to a maximum of EUR 750,000.

3. Did the movement of the Player from Malaga to Getafe trigger the application of the sell-on clause?

Whilst the panel agreed that the agreement between Malaga and Getafe did not resemble a classic transfer agreement and accepted that its operation raised doubts as to knowing if a transfer in the sense of the sell-on clause did or not occur, there were striking resemblances with a typical transfer agreement:

• Much like in typical transfer agreements, the agreement was signed by the Player, Malaga and Getafe (hence, it was a tripartite agreement);

• When the agreement was signed, the Player was still under contract with Malaga and the possibility of this contract being extended had to be considered;

• By virtue of the agreement, Malaga allowed the Player’s employment agreement to expire at the end of the season (which was only three months away), a situation which is not materially much different from agreeing to the termination of a contract;

• Malaga acted as the party in control of the Player’s registration - the club considered that by not exercising the option, it was allowing the Player to move to Getafe;

• The agreement was conditioned to the signing of a new employment agreement between the Player and Getafe; and

• The Player waived its right to receive any compensation provided for in Article 13.a) of the Royal Decree 1006/85 and in Article 17.3 of the Collective Bargaining Agreement signed between the Spanish Professional League (L.N.F.P.) and the Player's Union (A.F.E.). According to the said Spanish legal provisions, when a player is transferred from a club to another, he is entitled to receive, from the new club, the 15% of the transfer fee.

These characteristics clearly indicated that what Malaga and Getafe agreed was, de facto, a true transfer of the Player. Therefore, the panel was of the opinion that both the form and content of the agreement should be considered as a “transfer agreement”. As a result, the panel unanimously concluded that the Player was indeed transferred and that this operation fell within the wording of the sell-on clause.

In light of the above, it would be against the principle of good faith to consider that the amounts received by Malaga from Getafe did not constitute a “transfer fee” in the sense of the sell-on clause. By considering that the agreement Getafe created a situation similar to a “typical” transfer, the panel would be going against its own rationale if it did not consider that the sum received by Malaga by virtue of such contract fell under the scope of the sell-on clause. Therefore, the total sum of EUR 1,500,000 was considered as a “transfer fee”.

4. What were the legal consequences?

As both conditions of the sell-on clause were fulfilled, the panel held that Brighton was entitled to receive 12.5% of the total sum received by Malaga by virtue of the agreement with Getafe, namely EUR 187,500 plus the amount of CHF 4,000 (four thousand Swiss Francs) as contribution for legal fees and other expense incurred in connection with the arbitration proceedings.

Conclusion

The decision is helpful in that it provides further clarification from CAS regarding the meaning of a transfer following the decision in CAS 2019/A/6525 Sevilla FC v. AS Nancy Lorraine. It is clear that in the absence of any clear wording in a sell-on clause which expressly limits certain occasions when a player moves clubs, the word “transfer” will be given a wide meaning and thus likely incorporate any occasion when a player’s registration is transferred from one club to another.

Given that sell-on clauses are used routinely in professional football, clubs are advised to ensure that the drafting of the clause accurately reflects their intentions. If a buying club does not want a sell on clause to apply in certain circumstances, such as when a club activates a release clause or when a player triggers a buy-out clause, it must expressly say so in the wording failing which the sell on clause is likely to apply. Equally, selling clubs should take care to ensure that the applicability of the sell-on clause is not limited in any way especially in order to avoid situations where clubs may attempt to use creative methods to avoid their obligations under a sell-on clause.

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¹The reasoning at paragraphs 72 to 74 has particular importance and relevance to this case:

“More specifically, and also considering the FIFA provisions, a transfer can be the object and the purpose of the parties ’ agreement. In that case, it can actually be made in two ways: (i) by way of assignment of the employment contract; and (ii) by way of termination of the employment agreement with the old club and signature of a new employment agreement with the new club. In both cases, the old club expresses its agreement (to the assignment or to the termination of the old employment contract, as the case may be) against the receipt of a payment - which compensates for the loss of the player’s services; the new club accepts the assignment of the existing employment contract or consents to enter into a new contract with the player; and the player consents to move to the new club.

At the same time, a transfer of a player can also take place outside the scheme of a contract between the old and the new club, in the event that the player moves from a club to another following the termination of the old employment agreement as a result of (i) its expiration or (ii) its breach. In both cases, the transfer of the player from one club to another takes place without (or even against) the consent of his old club. Therefore, it takes place without a contract, because there is no contract (in a situation in which there is no obligation freely assumed by one party towards the other). In the second case (transfer following a breach), an amount is due to the old club, but cannot be defined as a price paid as a consideration for the consent to the transfer, since it is of a different character and title: it is compensation for the damage caused by the breach.

In light of the foregoing, the Panel notes that the wording of the Sell-on Clause is wide enough to cover every kind of transfer, both in a contractual and non¬contractual framework, for which Sevilla was to receive a payment, whatever label is put upon it. This point marks a decisive distinction between this case and the dispute decided in CAS 2010/A/2098, where the triggering element was not in general terms a “transfer”, but specifically a “resale”. This interpretation is confirmed by the definition of “capital gain ” in Article 3.2 of the Transfer Contract, which simply makes reference to the difference between the amount paid and the amount received as a result of the Player’s transfer(s), without additional qualification, and appears to correspond to the “real and common intent of the parties ”, as it is consistent with the general purpose of sell-on clauses, which, in the absence of specific limitations, call for their application to all cases where the intended purpose (to allow the old club to share the benefit of a subsequent transfer) can be achieved.”

²These kinds of clauses have been deeply analysed by the CAS on previous occasions:

“The Sell-On Clause contains a well-known mechanism in the world of professional football: its purpose is to “protect” a club (the “old club”) transferring a player to another club (the “new club ”) against an unexpected increase, after the transfer, in the market value of the player’s services; therefore, the old club receives an additional payment in the event the player is “sold” from the new club to a third club for an amount higher than that one paid by the new club to the old club. In transfer contracts, for that reason, a sell-on clause is combined with the provision defining the transfer fee: overall, the parties divide the consideration to be paid by the new club in two components, i. e. a fixed amount, payable upon the transfer of the player to the new club, and a variable, notional amount, payable to the old club in the event of a subsequent “sale” of the player from the new club to a third club.” (CAS 2010/A/2098, para. 20).