Football has been significantly affected by the health and economic crisis caused by Covid-19. Competitions have been suspended almost everywhere and, since football is naturally international, the situation was made even more complicated by the fact that the pandemic affected countries in different periods and intensity.
Certain leagues (Belgian Pro League, Eredivisie, Primera Division in Argentina and Ligue 1) have already declared the respective championships terminated. Others (Bundesliga, la Liga, Premier League, Serie A) resumed competitions following the implementation of strict testing protocols.
This disruption has obviously caused a number of complex regulatory and contractual issues: what will happen with contracts expiring on 30 June 2020, in the countries where the season was extended beyond that date? On the other side, what is to be made of the agreements supposed to be entering into force on 01 July 2020? Are clubs authorized to modify, suspend or terminate employment contracts and unilaterally reduce salaries?
To date, it is also still uncertain whether all competitions which are now resuming will be completed, when and in which conditions. Also, while at this time of the year clubs and players normally start to plan the next season, the dates of transfer windows are still to be determined in most of the countries.
FIFA – the worldwide governing body for football – is responsible for regulating some of these aspects and intervened in the matter.
The intervention of FIFA
On 3 April 2020, FIFA published its “COVID-19: Football Regulatory Issues” (“CFRI”) which, included certain temporary amendments to the FIFA Regulations on the Status and Transfer of Players (“RSTP”), mainly aimed at tackling three urgent issues: first, how to deal with expiring agreements (i.e. agreements terminating at the end of the current season) and new agreements (i.e. those already signed and due to commence at the start of the next season); second, how to deal with agreements that cannot be performed as the parties originally anticipated as a result of Covid-19; and third, the appropriate timing for registration periods (“transfer windows”).
On 11 June 2020, after thorough discussions with the football stakeholders, FIFA also published the “Frequently Asked Questions” (“FAQ”) which brought clarity on a number of matters addressed by the CFRI and introduced certain additional amendments to the RSTP.
The amendments included by the CFRI and the FAQ were finally codified into the June 2020 edition of the RSTP, published on 17 June 2020.
If you are wondering whether the CFRI and the FAQ jointly contain an answer to all of the intricate situations generated by the pandemic, let’s set it clear from the beginning that the answer is unfortunately no.
The reason for that is, first, that not all of the complex legal aspects posed by Covid-19 fall under the responsibility of FIFA, whose regulations mainly govern the status and transfer of players; and secondly, that despite the good-will and efforts of FIFA, certain issues cannot be resolved with a global “one-fits-all” approach, since countries have been affected by the pandemic in different manners; the CFRI has repeatedly recognized the importance of national law and the role of national associations in deciding on the resumption of football activities as well as on amending the dates for transfer windows. Furthermore, the situation is constantly evolving and the documents issued by FIFA may be updated according to future developments.
The approach of FIFA goes in two directions.
From one side, FIFA aims at maintaining the stability of the football transfer system and the integrity of some of its core principles. As such, parties are not excused from complying with their respective obligations since it is generally recognized in FIFA and CAS jurisprudence that financial problems cannot justify the failure to respect a contract.
FIFA specifically clarified in the FAQ that clubs will not be entitled to reduce or delay payments of the transfer fee or salaries that they agreed to pay to former clubs and players for transfers occurring at the start of the next season. The only exception to this is – in relation to international transfer agreements – for payments that contractually fall due prior to the new commencement date of an agreement, which FIFA clarified should be delayed until the new start date of a new season or its first registration period.
FIFA also already confirmed that it will continue to execute decisions passed by the FIFA judicial bodies, irrespective of the potential financial impact of Covid-19. As such, no exceptions will be granted in respect of the application of articles 15 of the FIFA Disciplinary Code and article 24bis of the RSTP.
Likewise, the implementation of the new FIFA rules regarding the prohibition on bridge transfers and the application of the solidarity mechanism at a national level is maintained (bridge transfers in force as of 1 March 2020; solidarity mechanism at a national level as of 1 July 2020). For the moment, only the amendments to the RSTP regarding international loans have been postponed until the current situation within the international football market is clarified.
From the other side, and where strict adherence to the rules already in place is not possible or desirable, FIFA introduced certain mechanisms which innovate and grant the football stakeholders a welcome degree of flexibility.
FIFA thus established measures which are extraordinary for the football transfer system as we know it, such as the possibility of a third registration period during one season; the possibility for a player to play for three different clubs during the same season and, under certain circumstances, even the possibility for a club to unilaterally reduce the salaries of its employees.
Rationale Behind the CFRI and FAQ
Three fundamental legal principles help to explain the rationale behind the intervention of FIFA as well as its limits.
The first is that only the relevant parties may amend the terms of a contract. This means that neither FIFA nor a national association or a league may enact regulations that amend the content of agreements, unless the applicable law and/or an existing collective bargaining agreement (“CBA”) allows it.
FIFA does not have the authority to unilaterally amend the terms and conditions of agreements. National associations and leagues are only encouraged to issue “non-mandatory guidelines” reflecting the terms of the CRFI and FAQ.
The prevalence of contractual autonomy means, for instance, that, if a season is extended, a club may selectively decide to prolong only certain expiring agreements (and let others terminate). Although this implies that a club might complete the season with a reduced squad (think, for instance, of clubs virtually relegated who do not want to incur in further expenses in relation to the current season) and thus the integrity of competitions might be jeopardized, a general extension against the will of the parties cannot be forced.
The second is that the concepts of (i) the validity of an employment contract; (ii) the registration of a player with a national association and (iii) the player’s eligibility to play, although normally correlated in practice, remain distinct under a legal perspective.
For instance, if a loan agreement expires on 30 June 2020 and the registration period in the country of the parent club is not opened, the player’s employment relationship with the latter might resume on 1 July 2020 without, however, the possibility to register him. The same concept applies to players becoming free agents as of 1 July 2020, whose new contract may enter into force on the said date but not necessarily be registered if the relevant transfer windows is closed.
Registration also differs from eligibility: even when a player is registered, it might be that he remains unable to play; for instance when the deadline to file the list of eligible players is closed under the relevant competition regulations; or when a federation makes use of the possibility now included by FIFA into art. 6.2 of the RSTP that the “first” registration periods of the new season opens concomitantly with the final rounds of the previous one (up to a maximum of four weeks), where players may be validly registered, but would only be eligible to play as of the start of the next season.
It is for this reason that FIFA strongly recommends parties to adjust existing agreement as needed, possibly giving priority to the previous club to complete the season (i.e. extending the loan beyond the originally agreed date; extending the employment contract of the “free agent” beyond 30 June 2020 and thus postponing the entry into force of his contract with the new club).
The third is the re-affirmed importance given by FIFA to one of the fundamental principles of football: the protection of the integrity of the competitions.
Although we may take it for granted, football is uniquely structured that it allows for rules to exist which limit, to a certain extent, the possibility for an employee to cease working on a given date with an employer and then immediately begin employment with a different one on the following day.
In situations such as those seen above, where players may not be registered and/or eligible to play, despite having a valid contract in place, FIFA chooses to prioritize this principle over others, such as the players’ rights to effectively practice their profession in all of its aspects.
In this respect, it may be questioned whether further flexibility of this principle may have been desirable, particularly in those leagues where a significant period of time has passed from the last transfer window, and where the “original” squad may no longer be the same, in light, for examples, of contracts expired and not extended, or of players having suffered injuries or anyway being no longer available.
The CRFI: main principles
The first aspect addressed by FIFA in the CRFI is how to deal with expiring agreements and new agreements where a season is extended.
As a guiding principle, FIFA recommends that, where an agreement is due to expire at the original end date of a season, such expiry should be extended until the new end date of the season; similarly, where an agreement is due to commence at the original start date of a new season, such commencement should be delayed until the new start date of a new season.
In case of overlapping seasons and/or registration periods, FIFA recommends that priority be given to the former club to complete their season with their original squad, in order to safeguard the integrity of a domestic league and national association competition.
FIFA, however, recognizes the priority of the determinations of the applicable law and the contractual autonomy of the parties.
Translated into practice, the reality is therefore that, when a contract expires on 30 June 2020 and the current season will go beyond that date, the contract will terminate on said date, unless the parties agree otherwise or the national law provides for a different solution.
FIFA likewise recognizes the primacy of the relevant law and of the parties’ agreement in relation to the second main issue addressed in the CFRI: agreements that cannot be performed as the parties originally anticipated as a result of Covid-19.
Here, FIFA lists a series of guiding principles on how clubs and their employees (players and coaches) should address variations to an employment agreement during any period when a competition is suspended.
First of all, FIFA encourages parties to work together to find appropriate collective agreements on a club or league basis.
Such agreements should address, without limitation: remuneration (where applicable salary deferrals and/or limitation, protection mechanisms, etc.) and other benefits, government aid programs and conditions during contract extensions.
If this is not possible, FIFA will recognize unilateral decisions to vary agreements only where they are made in accordance with national law or are permissible within CBA structures or another collective agreement mechanism.
Clubs may thus in the alternative resort to the application of measures such as the “furlough” in the United Kingdom, the “chômage technique” in France, “ERTE” in Spain and “layoff” in Portugal – always within the limits and under the conditions established the applicable law, as otherwise clubs may risk to be in breach of contract.
Depending on the specific circumstances of the matter, concepts such as “force majeure” or “frustration” might also apply if existent under the relevant national law, excusing a party from complying with its contractual obligations when it may prove that this has become impossible due to unforeseen events.
Where not even national law addresses the matter and collective agreements are not found and/or applicable, FIFA anticipates that it might consider unilateral decisions to vary contracts, provided that they were made in good faith, and are reasonable and proportionate.
In this respect, whether any such decision is deemed reasonable or not will be assessed taking into account, inter alia, the economic situation of the club; the proportionality of any salary amendment; the net income of the employee after salary amendment; whether the decision applied to the entire squad or only specific employees; and whether the club in good faith had attempted to reach a mutual agreement with its employee(s).
As a final alternative, FIFA mentions the suspension of contract during the period when competitions are suspended, provided proper insurance coverage is maintained, and adequate alternative income support arrangements can be found for employees during the period in question.
Regarding the third aspect dealt with in the CRFI – registration periods – FIFA made temporary amendments to the RSTP granting national associations a high degree of flexibility in fixing or amending the dates for the upcoming transfer windows.
From one side, national associations were authorized to extend the finishing date of the current season by simply notifying FIFA.
On the other, FIFA allowed them to extend, amend or postpone registration periods (whether already commenced or not), provided that their duration complies with the maximum limit (i.e. sixteen weeks in total, twelve for the first registration period, four for the second) established in the RSTP.
Within the possibilities granted, there is that of starting the first registration period before the end of the current season, for a maximum of four weeks, although players registered during this “overlapping” period will only be eligible to play in the next season (art. 6.2 RSTP).
Alternatively, FIFA may also approve, under certain circumstances, a third registration period during a season: for those associations following a dual-year calendar (2020/2021 season) this would mean splitting the “summer” registration period in two parts; conversely, associations following a single-year calendar may, where the start of 2020 domestic season has been interrupted by Covid-19, split the “second registration period” in two parts, with the first part before the resumption of football and the second one in the middle of the domestic season – a possibility already relied upon by the Swedish and Norwegian associations.
Furthermore, as an exception to article 6.1 of the RSTP, FIFA opened the possibility for a professional to be registered by an association outside a registration period, when his contract has expired or been terminated as a result of COVID-19, regardless of the date of expiry or termination.
This might apply, for example, to a player whose employment contract was unilaterally terminated because of the crisis; or, in case the natural expiry of an employment contract or loan agreement is either anticipated or postponed in light of the cancellation or extension of the relevant football season.
Finally, due to all these modifications, FIFA also introduced an exception to article 5 paragraph 4 of the RSTP in that players may be registered and be eligible to play official matches for a maximum of three clubs – in relation to seasons 2019/2020 or 2020/2021 for associations following the dual-year calendar and the season 2020 for associations following the single-year calendar.
Specific Legal issues for Clubs
Several clubs at a worldwide level saw their income decreasing following the inception of the Covid-19 crisis, as a consequence of the diminution or even lack of match-day revenue, delayed or reduced payment of sponsorship agreements or TV rights.
Similar consequences might last, at least in part, for the next seasons. Many of those clubs have therefore looked at alternatives to reduce costs – starting from wages which normally account for the majority of clubs’ expenses.
The first step is, as said, collective negotiation at a league or, preferably, club level. Negotiations are normally conducted through the club’s captain, and clubs may propose a reduction, postponement or a combination of both for fixed and/or contingent payments.
It is known that collective negotiations failed in a number or leagues or clubs, although successful examples (Juventus, Real Madrid, AS Roma) exist; the key aspect seems to be the club’s capacity to make the players integrated into a long-term project and that the temporary measures may be not only needed – avoiding for instance the risk of the club going bankrupt – but even beneficial to both – when the resources saved are wisely invested.
On the other side, players will be less keen to accept restrictive measures when their club is actively pursuing other players in the transfer market – even more so when the payment of significant transfer fees is reported – or plans not to count on them for the near future, such as when a club demands a significant salary cut or contractual suspension while not offering the player an extension beyond the expiry of the current season.
As a further alternative, when a club can prove that it could not reach an agreement with its players and that its national law or CBA do not provide a viable alternative, it might seek to resort to unilateral payments reductions – applied thus without the consent of players – provided that they are reasonable when taking into account of number of financial criteria and the good-faith of the parties.
In this context, clubs should keep in mind that FIFA refers to the principles of non-discrimination and equal treatment and that employees should be treated as equally as possible when considering variations to employment agreements.
Besides this, clubs ought to make sure that they are documented and in a position to prove that the measures applied are reasonable and proportionate (ex. financial records attesting the decrease of revenue between 2019 and 2020, documentation showing that the club attempted in good faith to negotiate collective agreements, etc.).
Also, if a club resorts to the measure of suspending players’ contract, it must ensure that employees are provided with adequate insurance coverage and that they assist employees in obtaining adequate alternative income support, such as government support mechanisms or reimbursement to the club for the salary or benefits to be paid to the employee.
It shall also be kept in mind that the consequences of suspending an employment contract are not restricted to the interruption of salary payments while a player is not participating in official matches, since other contractual terms are likewise suspended; such as, for instance, the player’s obligation to train and, possibly, the right of the club to make use of his image rights – which may be problematic when clubs may, in their turn, have entered into sponsorship agreements counting on the use of player’s image, or may be using such image in other contexts (ex. social media campaigns).
Clubs should therefore be prudent in the process of reducing payments or suspending contracts, following the determinations included in the CRFI and FAQ and paying attention not to go beyond what is strictly necessary.
FIFA will not accept situations where Covid-19 is invoked as an excuse to avoid the respect of obligations and, as is known, such failure to pay outstanding payments due to employees may lead to the imposition of sanctions under the FIFA RSTP, the denial of a license to participate in competitions or even represent just cause for a player to terminate his contract with the club.
On a different level, clubs will need to evaluate whether to prolonging expiring agreements, if the end date of the current season is extended and they do not intend to finish it with a reduced squad. In the case of loans, the parent club might request the payment of an additional loan fee. If a club faces a shortfall in registered players to complete the season, FIFA indicates that those clubs shall be permitted to register their contracted youth or academy players.
Specific Legal issues for Players
As we have seen, FIFA recognizes several alternatives for a club which had its finances impacted by Covid-19 to reduce its costs, including under specific circumstances, the application of a unilateral reduction to players’ salaries.
FIFA requires parties to act in good-faith and gives relevance to the mutual discussions eventually held between them. Considering this, and that a number of clubs may indeed find objective difficulties to comply with their obligations, players might be expected to also give their contribution in order to find a mutually agreed solution.
Players shall also consider that, where the season is extended beyond its original expiry date, they might risk remaining ineligible to participate in football matches for a significant period of time, if they do not agree to modify the agreements as originally executed – such as, for example, when a free agent signed a new contract with another club effective as of 1 July (or a player returns from a loan) and the relevant registration period has been amended or postponed due to Covid-19.
Thus, although a player may not be forced to extend his contract (he may for instance refuse out of fear of jeopardizing a new deal due to the occurrence of unforeseen events such as an injury), this might not be the best solution under a sporting point of view, since he might remain unable to participate in organized competitions for a prolonged period.
Another interesting question in relation to players is whether a disciplinary suspension imposed for a specific long-term period of time (e.g. a four-months long sporting sanction), shall be considered as served during period when football-related activity has ceased, or if rather the counting shall be “paused”.
The French Football Federation for instance “froze” the six-month ban imposed on the Portuguese player Gelson Martins of AS Monaco in the period between March 13 and June 30 and thus effectively extended it until November 2020.
The author believes that a similar decision is manifestly wrong since a suspension imposed in relation to a pre-determined period of time applies, per definition, irrespective of the number of matches effectively played (would a similar sanction be, conversely, reduced, if for any reason a high number of matches is played during the suspension period?). It also seems unacceptable that a player is subject to a longer suspension because of an extraordinary event such as the Covid-19 pandemic of which he (also) did not benefit at all.
In this regard, FIFA clarified in its FAQ that it does not have the regulatory authority to extend or amend sanctions issued in disciplinary cases; and, in particular, that FIFA does not have the regulatory authority to pause a sanction and recommence it at a later stage.
This suggests that, if any such decision is taken at a national level, the sanction might not be extended by the FIFA Disciplinary Committee to have worldwide effect in relation to the “additional period” of suspension, meaning that, theoretically, that part of the sanction might only apply in the relevant country and not in other federations, which would be relevant, for instance, in case the player is transferred abroad.
Specific Legal issues for Intermediaries
The crisis caused by Covid-19 has also brought uncertainty in relation to the activities performed by intermediaries and affected them in a variety of manners.
Contrary to payments due to football players, commissions are not “protected” under the RSTP or accounted for licensing and financial fair-play purposes. Consequently, payments to intermediaries were one of the first expenses delayed, reduced or cut by football clubs.
In this sense, while intermediaries have a legitimate expectation to timely receive what is owed to them, the other side of their profession is based on relationships with football clubs which they have an interest in safeguarding.
Generally speaking, lump sum payments remunerate intermediaries for a service already provided and shall thus normally not be subject to reduction.
On the other side, FIFA recommends that where an intermediary commission is calculated on the basis of the remuneration earned by the employee, that amount should be recalculated to consider any reduction or deferral of the remuneration that may have taken place.
Conversely, if an employment contract due to expire at the original end date of the current season is extended, it is reasonable that the representation agreement will also be prolonged and the commission thus adjusted proportionally.
The uncertainty regarding the dates when registration periods will be held in each country is also a reason of concern for intermediaries. FIFA clarified that no deadline exists for national associations to modify the relevant dates and that a 10-days period of notice before the original date will be considered as reasonable.
Finally, disputes may arise in relation to buy-out clauses or option rights (for the extension of an employment contract or a buy-option included into a loan agreement) which need to be exercised within a specific date which, in light of the modification of the season and/or registration periods, now falls in the middle of a season or when the transfer window is anyway not opened.
Similar situations were not addressed by FIFA in the CRFI or in the FAQ. Needless, to say, the ideal solution is that the parties jointly address the situation whenever possible, amending the dates as required to adapt to the current situation.
When this is not feasible, the exact terms in which the clause is drafted (e.g. whether the relevant clause needs to be triggered within a fixed date or is rather set in relation to a certain event, such as the end of the season, qualification to a competition, etc.) and the applicable law will need to be considered.
Also, the distinction made above between the validity of contracts, registration and eligibility shall be kept in mind, meaning that a similar clause may validly be exercised, although it might be possible to register and/or field the player only at a later stage.
The Covid-19 pandemic has been a dramatic event at a worldwide level, with long-lasting consequences in our society in general and football in particular.
From an economic perspective, essentially the whole football sector has been affected. It is thus reasonable to expect that, to a certain extent, the negative consequences of the pandemic will be shared between all different stakeholders, although the losses may not be simply “shifted” from employers to employees, also considering that risk is an inherent feature of business.
It is likely that litigation will increase. In France, for instance, where competitions were closed in advance due to a governmental decision, ordinary courts have annulled the relegations of Amiens and Toulouse from Ligue 1, thus opening the way for a league with 22 clubs on the next season.
Also, in certain situations there might be no “right” or “wrong” but simply a loss to be shared; mediation (for instance, before the Court of Arbitration for Sports) might thus represent a viable alternative to find a swift and equitable solution.
The recommendation is to act with prudence and reasonableness, while seeking legal advice whenever appropriate in order to make sure that proper measures are taken which do not go beyond what currently permitted under the existing legal framework.
WWL Thought Leader Global Elite 2020 (Sports)
Attorney-at-Law at Bichara & Motta Advogados
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