On 9 January 2023, the new FIFA Football Agent Regulations (the Regulations) came into force. These undoubtedly represent the most significant change to the work of football agents since the much-maligned de-regulation of 2015 and comes on the back of significant challenges to agents' business models, following steps taken by HMRC in recent years. In this article, we summarise six of the key changes that agents, clubs, players and other interested parties will need to know as we enter a new era of the regulation of football.
1. The agents' exam is back
Before the deregulation of agents in 2015, agents had to pass a multiple-choice exam on the FIFA regulations and relevant national regulations. This is being reintroduced by FIFA.
Under the Regulations, would-be agents will need to achieve 75% (being 15 out of 20 multiple choice questions in an hour) to pass.
The first exam will take place on 19 April 2023 with a second on 20 September 2023. Resits will take place the following year. Those who previously passed the pre-2015 exam, will not be required to sit another exam.
This will be a daunting process for many would-be agents, particularly given that the previous exam had a pass-rate of less than 35%.
Where existing or would-be agents fail the exam: (i) they will not be permitted to carry out football agent services, which could lead to their representation contracts being terminated; and (ii) they may lose their right to be paid commission in respect of previous deals.
2. Prohibition on multiple representation
There have been significant changes to the rules relating to multiple representation by agents.
Agents will only be able to represent one client in a transaction. However, dual-representation (but not triple-representation) is permitted when acting for a player and an engaging club (i.e. a buying club) in the same transaction, provided that both parties give their prior written consent.
As a result, agents are not permitted to represent: (i) the player and the releasing club (i.e. the selling club); (ii) the releasing club and the engaging club; or (iii) the player, the engaging and the releasing club.
FIFA has introduced anti-avoidance provisions to prevent the limits on representing multiple parties in a transaction from being circumvented. In particular, connected agents cannot work for different clients on the same transaction. This is primarily targeted at agents that work for the same agency, have a certain family connection (such as marriage or parent and child) or any formal or informal contractual or other arrangements to co-operate or share revenue or profits for providing their services.
On a related note, a "Football Agent" must be a natural person (i.e. not a company or an organisation), which may make it harder for an Agency (now defined in the Regulations) to retain players where one of its agents wants to move to a rival. This ultimately may increase in the number of disputes between agents and makes it vital for agencies to ensure that they have appropriate legal protection when it comes to the agents that operate under their umbrella.
3. Cap on agents' fees
By far the most controversial issue is the introduction of a universal, worldwide cap on the fees that football agents can charge their clients. The level of the cap depends on who the agent represents and the annual remuneration of the agent's client. In summary:
|
Client
|
Service fee cap |
|
Individual’s annual Remuneration less than or equal to USD 200,000 (or equivalent)
|
Individual’s annual Remuneration above USD 200,000 (or equivalent)
|
|
Individual (Player or Coach)
|
5% of the Individual’s Remuneration
|
3% of the Individual’s Remuneration
|
|
Engaging club
|
5% of the Individual’s Remuneration
|
3% of the Individual’s Remuneration
|
|
Engaging club and Individual (permitted dual representation)
|
10% of the Individual’s Remuneration
|
6% of the Individual’s Remuneration
|
|
Releasing club (transfer compensation)
|
10% of the transfer compensation
|
Despite the previous regulations including a suggested benchmark on how much agents can charge their clients, this was not compulsory and agents typically earned around 3-10% of a player's gross salary – with fees generally being split between the player and engaging club.
It is highly likely that established football agencies, or associations of football agents, will challenge the service fee cap, on the basis that it is anti-competitive. However, as things stand the cap will apply from 1 October 2023 in respect of any representation agreement concluded or renewed after 16 December 2022.
One surprising new addition is that the service fee cap will potentially include payments to agents arising from other commercial revenues that they generate for players in respect of "Other Services", such as sponsorship deals. However, this is a rebuttable presumption.
On a more positive note, it now appears that agents may be open to structure deals to ensure that they are able to be remunerated for performance-related bonuses that a player earns. This was outlawed under the previous regulations, although, FIFA has confirmed that agents will not be entitled to recover sell-on fees as part of a future transaction that the agent is not involved in.
4. Players now have to pay their agents directly (the client-pays principle)
Another key change in the Regulations, is the introduction of the client-pays principle, where players/coaches themselves (rather than through their clubs) will be responsible for paying agents.
Payments of service fees must now be exclusively made by the client of the agent unless the client earns less than $200,000.
Previously clubs could (and usually did) pay the agent for the services the club received as well as for the services the player or coach received on their behalf. This would often then trigger a P11D tax liability for the player as this would effectively be seen as a benefit-in-kind to the player. It was then customary in many transactions for this additional tax exposure to be paid for by the club on behalf of the player through a further loyalty bonus. We predict that these will be consigned to the history books and instead any additional amounts due to HMRC will need to be paid directly by the player or coach.
The Regulations contain other significant restrictions on the payment of agent's fees, such as: (i) service fees must be paid every three months (unless the playing contract is less than six months) – which appears to be aimed at stopping agents from being paid as a lump sum upfront; and (ii) service fees are only payable in respect of amounts actually received by the client – meaning where the club fails to pay the player or the player moves to a new club, the agent will not be entitled to commission (irrespective of what the representation agreement says).
5. Players can represent themselves (and potentially not pay their agent where they do so)
Previously, it was fairly common to include restrictions in representation agreements which stated that where a player did not use the services of an agent, such as where they represented themselves in a transaction, they were still obliged to pay the agent a commission.
Under the new Regulations, any clause in a representation agreement which: (i) restricts the ability of an individual for not using an agent (such as clauses which restrict players from representing themselves); or (ii) penalises an individual for doing so, are deemed null and void.
There is significant ambiguity over what is meant by "penalises". However, it would appear that if a representation agreement states that the agent will be paid a commission regardless of their involvement, then this will be deemed to be a breach of this provision.
This is an area which is ripe for disputes. For example, what happens where an agent identifies a club for a player and starts negotiations but once negotiations have started, the player decides he no longer requires the agent's services and wishes to represent himself?
6. Representation of minors
Given the historic issues in this area, FIFA has revised its rules to increase protection for minors.
An agent must: (i) not approach minors or their legal guardian until six months before the age at which the minor can sign their first professional contract (which is determined by national laws); (ii) before approaching a minor, obtain written consent of the minor's legal guardian; and (iii) successfully complete the designated Continuing Professional Development course on minors before acting for the minor or a club on a transaction involving a minor.
Importantly, agents may not receive commission when representing a minor, unless the minor is signing their first or subsequent professional contract.
Any breach of the regulations on minors will result in the agent receiving at least a fine and a suspension of their FIFA licence of up to two years.
Additionally, if an agent has their licence withdrawn or suspended, the minor (and players more generally) may terminate the representation agreement with the agent, including for "just cause".
Clearly, agents should be mindful of their compliance with the new rules when working with minors given the severity of possible sanctions and price to pay for non-compliance and breaches of the regulations.
It is important to stress that there are lots of other important changes that will also be introduced as part of the changes. These will no doubt come as quite a shock to the industry – for example, the fact that representation of coaches will now be in scope of the regulations. There are also a whole host of other obligations that will be placed on to agents (including the apparent need to register every new employee with FIFA irrespective of whether they are undertaking "Football Agent Services" within 30 days of appointment), which seems quite bizarre.
When do the Regulations take effect?
The Regulations take effect in two stages:
The initial provisions, including the reintroduction of the agents' exam and the processes for obtaining a licence came into force on Monday 9 January 2023.
However, the majority of the key provisions do not apply until 1 October 2023. There is little time for agents, clubs and others in the football industry to digest the changes as representation agreements that are negotiated today that cover the period after 1 October 2023 will need to take into account the changes that are to be introduced.
When do the Regulations apply? What about the FA's own regulations?
The Regulations apply to football agents' conduct with an international dimension (such as international transfers or representation agreements with an international dimension).
In addition to the FIFA Regulations, member associations, such as The FA, are required to bring into force and implement their own national regulations by 30 September 2023. These will replace the FA Regulations on Working with Intermediaries. The FA regulations must be consistent with the FIFA Regulations but can impose stricter measures at a domestic level. The FIFA regulations are intended to be a floor, not a ceiling.
What should agents do now?
With under nine months until the majority of the Regulations take effect, those in the football industry and, particularly, agents and clubs, will need to be aware of the Regulations and should commence or continue with their preparations to secure compliance.
In particular, agents should:
- Draft new template representation agreements which comply with the Regulations;
- Review and update existing representation agreements to bring them in line with the new requirements;
- Undertake comprehensive and thorough preparation for the agent's exam (insofar as they were not licensed under the pre-2015 regime);
- Consider any long-standing arrangements that it has with connected agents – particularly where services have been sub-contracted to ensure that these arrangements remain permitted under the Regulations (including being mindful of the changes to the FA's existing rules in this regard when they are introduced); and
- Obtain ad-hoc support to understand the new regulatory regime.
As a reminder, if an existing representation agreement between an individual and their agent (i) was entered into before 16 December 2022, and (ii) expires on or after 1 October 2023, then these may continue until expiry.
Conversely, any representation agreements enter into after 16 December 2022 must comply with the new Regulations, meaning changes may be required to these agreements before 1 October 2023 (for example, where an agency contracts with the player, rather than the agent).
Conclusion
Despite the new Regulations coming into force, they are still under legal challenge by associations of football agents and larger agencies, so there may yet be a twist in the tail.
As the regulatory landscape shifts, we are likely to see an increase in disputes between agents and clubs given the changes to the rights and responsibilities between them (for example, in relation to the payment of fees). Similarly, disputes between agents (and agencies) may increase in light of the changes to multiple representation and the new anti-avoidance measures.
These changes come as the football industry is facing greater scrutiny into its tax affairs (itself a thorny area), especially in the UK as part of HMRC's investigation into image rights as well as agent fees and dual representation. With further details of the Government's proposed independent regulator of football in England expected this year, the pace of change in the regulatory requirements (and complexity) for the football industry shows no sign of slowing down.
If you require any assistance or advice to ensure you are fully prepared for the new regulations or would like to discuss any aspect of these more generally, please do get in touch with the Simon Leaf, Tom Murray or Oliver Millichap.