Phil Parkinson, Head of Commercial law at Blacks Solicitors, recently shared his insights into what key things sports clubs and athletes need to be aware of when it comes to signing contracts, especially prior to player transfers. The exclusive interview follows.
Question: What are transfer fees?
Answer: When clubs and teams are preparing to sign new players, they must pay a transfer fee which is typically paid in instalments. High cost transfer fees are often associated with football contracts, but a transfer fee can be applied to all sports athletes moving between clubs or teams.
Transfer fees may also include additional charges, also known as ‘’percentages’’ that are added to the total sale price of a sports player to cover both management fees and any additional expenses. These fees are ultimately determined by a contractual agreement whereby the exact terms are negotiated between parties.
Additional fees
Athletes can also be faced with large additional costs such as travel, accommodation and expenses which must be negotiated between all parties. Athletes are advised to negotiate a ‘signing bonus’ with the prospective new club or team. It’s also important for athletes to be aware of negotiating loyalty bonuses, which are typically paid on a specified date provided that the athlete is still employed by a particular team or club.
Transfer fee clauses should also be considered and negotiated when signing a sports contract, and even though players do not directly receive a percentage of this fee, there are various other payments and bonuses that can be agreed between the parties for the benefit of an athlete.
However, as well as transfers, clubs and teams should consider sell-on clauses which can be included within contracts. This will enable third parties to receive a percentage of the agreed transfer fee, for example, a ‘new’ club must pay compensation to the previous club that trained a player between the ages of 12-21.
Wage increases or reduction clauses
When signing a sports contract, athletes should consider negotiating a wage increase and reduction clause, for example if a football club is promoted or relegated. Athletes and their manager should also discuss narrowing grounds for a reduction in fees, for example, if their fees are reduced due to an injury. Clubs and teams should alternatively be ready to suggest various ways in which to save money by insisting that there are numerous instances that could result in reducing pay.
Winning bonuses and appearances
Consideration should also be taken to negotiate appearance fees and winning bonus clauses, which should be completed prior to the signing of a contract when both parties define what they determine as an ‘’appearance’’. This is typically defined as a set number of minutes an athlete appears, plays, or participates. Depending on the agreed contractual terms, an athlete’s salary may qualify for an increase by appearing ‘x’ amount of times.
A one-off bonus may also be awarded to an athlete for reaching a milestone or target, for example the number of appearances, goals, wins or times played for their national team. Consideration should be given to the inclusion of additional payment clauses being included in contracts. Clubs and teams are likely to seek to protect their interest by introducing performance based payments to increase an athlete’s motivation. Athletes on the other hand should bear in mind the perceived risk and uncertainty of this type of payment structure.
A balance therefore needs to be struck in the interest of all parties when negotiating these clauses.
Image rights
Typically, clubs or teams will demand exclusive rights to control how the image of a sports player appears in various forms of advertising, media and publicity. Athletes should consider any potential conflict of opportunities that their new club or team’s sponsor may present in both a performance and personal capacity.
How to be released from a contract
Release clauses detail a mutually agreed and non-negotiable fee which, when paid, automatically releases a player from its contract. Whilst release clauses are typically subject to qualifying conditions, for example football transfer windows, such clauses automatically require a club to accept a transfer bid offer of a predetermined amount.
An alternative to Release Clauses, which are common in Spain, are Buy-Out clauses. These clauses state the amount of money an athlete can pay to terminate their contract.
Negotiation of agent fees
Athletes will want to appoint an agent who will organise their personal transfer fee and are the first point of contact between the two teams or clubs. It is typical that the managing agent will receive a percentage of the transfer fee for their services. Sports players should consider negotiating the associated fees relating to their agent, with a percentage of the transfer fee having the possibility of being split between the player and the agent.
Clubs and athletes must not only consider these provisions but also additional factors such as transfer fees, grace periods and time frames established by regulators and in accordance with national laws.
