and here a great article about it from the independent
Stars will buy into 'pay as you go' system
An obscure Fifa rule could revolutionise the way the transfer market operates. Nick Harris reports
Published: 13 February 2007
Offered the chance to sign Frank Lampard for £8m this summer, or Steven Gerrard for £5m next year (when 28, and in his prime), many of Europe's biggest clubs would jump at the opportunity. Theoretically, it could happen, and Chelsea and Liverpool would be powerless to stop it.
Why? Because a piece of legislation that is more than five years' old has recently started to alter the way the transfer system works.
In short, it allows players unilaterally to break a contract after a "protected period" expires. This is after three years if they signed when under the age of 28 or two years if they signed when 28 or over, regardless of how long their contract is. They have to pay compensation to do this, calculated using a formula based on wages and their original transfer fee, but it means they can effectively "buy out" their contract.
The rules that allow this are misunderstood across the industry. They are not new, as widely reported, having been in place since September 2001. They are not simple or risk-free to exploit, hence the first case of a player invoking them only arrived in summer last year, when the Scotland defender, Andy Webster, left Heart of Midlothian for Wigan Athletic.
But with that precedent set, the effects could be huge, not least in boosting player power further when negotiating deals.
Lampard is the most valuable and prominent player in England who could exploit the rules this summer, to cancel his Chelsea contract. Xabi Alonso could do the same at Liverpool this year and Gerrard next year.
Gabriel Heinze could invoke the rules to leave Manchester United this summer, as could scores of players from clubs at various levels around Europe.
In the future, players exercising their rights in this way will possibly be said to have either "done a Webster" or "done an Article 17", after the Fifa regulation that allows it. Equally, players may opt not to invoke the rule at all, but still use it as leverage to earn record-breaking contracts.
When and how did this rule come into force?
It had its genesis in a decade-old dispute between the European Commission, which frames laws across Europe, and Fifa, football's world governing body. In 1998, the EC told Fifa it believed the transfer system as it stood was a barrier that prevented players' enjoying anything like the freedom of movement that other workers had.
Fifa argued that football is a special industry that requires contract stability. The EC agreed, within limits, but still wanted a degree of flexibility for players to move, even when they had voluntarily entered into a contract. The EC's logic was that in almost all other walks of life, people can move jobs easily, and have the right to do so for many reasons: personal, professional, a dislike of a current job, a better offer elsewhere, and so on. To cut an extremely long and tortuous story short, Fifa, the EC and Fifpro (the international umbrella body for players' unions) negotiated a new framework for the transfer system, which balanced a large degree of contractual stability (ie: a club's right to force a player to honour his contract) with get-out clauses for players after certain periods, and on certain conditions.
Hence, players can unilaterally "breach" a contract when the "protected period" expires. The new system was enshrined in articles 21 and 22 of the 2001 Fifa Regulations for the Status and Transfer of Players, which came into force in September that year. Subsequent revisions have not changed the rules, although the article now dealing with unilateral breaches of contract is Article 17.
What does Article 17 say?
Article 17 deals with the compensation that must be paid for a breach of contract, principally but not solely the value remaining on the contract, plus a pro rata sum towards the player's original cost, if applicable. For example, player X, age 25, joins club Y for £6m on a four-year deal in summer 2004, on wages of £50,000 a week. In summer 2007 he can breach his contract by paying his club compensation of £2.6m for the value of his remaining wages, plus £1.5m for the amortised value remaining on his original transfer fee, or a total of £4.1m. Lampard signed a five-year deal in 2004, so can breach this summer for two years' wages, or about £8m. (His original £11m price tag in 2001 has already amortised to zero).
Gerrard signed a four-year deal in 2005, so could breach in summer 2008 for one year's wages, or about £5m. As a Liverpool youth product, there is no transfer cost to factor in. He is also beyond the cut-off age (23) where Liverpool could claim development costs.
Is it that simple?
We are dealing with football contracts and politics, so no, obviously!
For a start, the compensation formula is not set in stone, and might include a discretionary element of increase in relation to the wages part of the equation. So Lampard or Gerrard might cost slightly more than their wages, say £10m and £6.5m, but still significantly less than their market value.
This would be assessed by Fifa's Dispute Resolution Chamber (DRC) - a three-man panel comprised of an association figure from the relevant country, a Fifpro rep, and an independent member - which crunches the numbers and arrives at a figure.
How does a player invoke a breach?
He must give his club formal notice within 15 days of the last match of his club's season (domestic or European, whichever comes later) in order to leave that summer.
What are the precedents?
Andy Webster was the first player in the world to invoke Article 17 and unilaterally breach his contract when he left Heart of Midlothian. Fifa has rubber-stamped his move to Wigan (and subsequent loan to Rangers), but the DRC has yet to announce how much compensation Hearts will receive, technically from Webster, in practice from Wigan. The DRC will decide the case on 23 February.
Fifpro expects the figure to be one year's wages under Webster's Hearts contract, amounting to £250,000. Hearts wanted £2m. Fifa says that "there are no final and binding decisions" in any of the "several" cases yet. This is mainly because so few have been brought forward.
Why is this?
One reason is the whole process is still a legal minefield, despite clear terms catering for player breaches within Fifa rules.
Technically, a club who hires a player who has "breached" might face sanctions for inducing a breach, although in practice, as in Webster's case, this is unlikely. The formula is not set in stone, so poses another element of risk.
Another reason is that many clubs have been wise to the rules for years, and make sure all their best (and especially younger) players never get near the end of the "protected period". They do this by regularly updating contracts to set the protected period back to zero. Manchester United are especially canny in this respect. It is less important with older players, because "buyouts" would in many cases be more expensive than a player's market value.
Is this player power gone mad?
No. It's the law. Every club should know it and negotiate accordingly. And think of it the other way round: clubs can theoretically "breach" too, if they pay a player the full value of the remainder of his contract.
Deal or no deal
Premiership clubs are nervously eyeing their biggest names to see who could make a cheap getaway Frank Lampard (Chelsea) Current deal Five-year, signed July 2004 Leaving date (under Fifa rule) At the end of this season Guide price Approximately£8m (two years' wages) Market value Approx £25m Stephen Gerrard (Liverpool) Current deal Four-year, signed July 2005 Leaving date End of 2007-08 season Guide price Approximately £5m (one year's wages) Market value £20m or more Xabi Alonso (Liverpool) Current deal Five-year, signed August 2004 Leaving date End of this season Guide price Around £10.3m - two years' wages (£6m) plus pro rata fee (£4.3m) Market value About £15m
Article 17: The precedent
Andy Webster: Now 24, the Scotland defender joined Hearts from Arbroath in 2001 for £70,000. In July 2003, he signed a new four-year deal, on £250,000 a year. In summer 2006, unhappy with the regime of the Hearts owner, Vladimir Romanov, he invoked Article 17 by handing in notice to break his contract unilaterally. He was entitled to do so because the three-season "protected period" of his contract had expired. He joined Wigan, and is now on loan at Rangers. Hearts had valued him at £2m on the open market. Fifa's Dispute Resolution Chamber is to decide on actual compensation. It is estimated it will be closer to £250,000 or the value of the one year remaining on Webster's Hearts contract.
Other players at major clubs who could pay to go soon
Arjen Robben (Chelsea) summer 2007, for two years' wages plus two-fifths of £12m fee.
Claude Makelele (Chelsea) summer 2007, for one year's wages.
Luis Garcia (Liverpool) summer 2007, for two years' wages plus two-fifths of £6.5m fee.
Gabriel Heinze (Man Utd) summer 2007, for two years' wages.
Gary Neville (Man Utd) summer 2007, for 18 months' wages.
Alan Smith (Man Utd) summer 2007, for two years' wages plus two-fifths of £7m fee.
Freddie Ljungberg (Arsenal) summer 2007, for two years' wages.
Jamie Carragher (Liverpool) summer 2008, for one year's wages.
Thierry Henry (Arsenal) summer 2008, for two years' wages.
Stars will buy into 'pay as you go' system
An obscure Fifa rule could revolutionise the way the transfer market operates. Nick Harris reports
Published: 13 February 2007
Offered the chance to sign Frank Lampard for £8m this summer, or Steven Gerrard for £5m next year (when 28, and in his prime), many of Europe's biggest clubs would jump at the opportunity. Theoretically, it could happen, and Chelsea and Liverpool would be powerless to stop it.
Why? Because a piece of legislation that is more than five years' old has recently started to alter the way the transfer system works.
In short, it allows players unilaterally to break a contract after a "protected period" expires. This is after three years if they signed when under the age of 28 or two years if they signed when 28 or over, regardless of how long their contract is. They have to pay compensation to do this, calculated using a formula based on wages and their original transfer fee, but it means they can effectively "buy out" their contract.
The rules that allow this are misunderstood across the industry. They are not new, as widely reported, having been in place since September 2001. They are not simple or risk-free to exploit, hence the first case of a player invoking them only arrived in summer last year, when the Scotland defender, Andy Webster, left Heart of Midlothian for Wigan Athletic.
But with that precedent set, the effects could be huge, not least in boosting player power further when negotiating deals.
Lampard is the most valuable and prominent player in England who could exploit the rules this summer, to cancel his Chelsea contract. Xabi Alonso could do the same at Liverpool this year and Gerrard next year.
Gabriel Heinze could invoke the rules to leave Manchester United this summer, as could scores of players from clubs at various levels around Europe.
In the future, players exercising their rights in this way will possibly be said to have either "done a Webster" or "done an Article 17", after the Fifa regulation that allows it. Equally, players may opt not to invoke the rule at all, but still use it as leverage to earn record-breaking contracts.
When and how did this rule come into force?
It had its genesis in a decade-old dispute between the European Commission, which frames laws across Europe, and Fifa, football's world governing body. In 1998, the EC told Fifa it believed the transfer system as it stood was a barrier that prevented players' enjoying anything like the freedom of movement that other workers had.
Fifa argued that football is a special industry that requires contract stability. The EC agreed, within limits, but still wanted a degree of flexibility for players to move, even when they had voluntarily entered into a contract. The EC's logic was that in almost all other walks of life, people can move jobs easily, and have the right to do so for many reasons: personal, professional, a dislike of a current job, a better offer elsewhere, and so on. To cut an extremely long and tortuous story short, Fifa, the EC and Fifpro (the international umbrella body for players' unions) negotiated a new framework for the transfer system, which balanced a large degree of contractual stability (ie: a club's right to force a player to honour his contract) with get-out clauses for players after certain periods, and on certain conditions.
Hence, players can unilaterally "breach" a contract when the "protected period" expires. The new system was enshrined in articles 21 and 22 of the 2001 Fifa Regulations for the Status and Transfer of Players, which came into force in September that year. Subsequent revisions have not changed the rules, although the article now dealing with unilateral breaches of contract is Article 17.
What does Article 17 say?
Article 17 deals with the compensation that must be paid for a breach of contract, principally but not solely the value remaining on the contract, plus a pro rata sum towards the player's original cost, if applicable. For example, player X, age 25, joins club Y for £6m on a four-year deal in summer 2004, on wages of £50,000 a week. In summer 2007 he can breach his contract by paying his club compensation of £2.6m for the value of his remaining wages, plus £1.5m for the amortised value remaining on his original transfer fee, or a total of £4.1m. Lampard signed a five-year deal in 2004, so can breach this summer for two years' wages, or about £8m. (His original £11m price tag in 2001 has already amortised to zero).
Gerrard signed a four-year deal in 2005, so could breach in summer 2008 for one year's wages, or about £5m. As a Liverpool youth product, there is no transfer cost to factor in. He is also beyond the cut-off age (23) where Liverpool could claim development costs.
Is it that simple?
We are dealing with football contracts and politics, so no, obviously!
For a start, the compensation formula is not set in stone, and might include a discretionary element of increase in relation to the wages part of the equation. So Lampard or Gerrard might cost slightly more than their wages, say £10m and £6.5m, but still significantly less than their market value.
This would be assessed by Fifa's Dispute Resolution Chamber (DRC) - a three-man panel comprised of an association figure from the relevant country, a Fifpro rep, and an independent member - which crunches the numbers and arrives at a figure.
How does a player invoke a breach?
He must give his club formal notice within 15 days of the last match of his club's season (domestic or European, whichever comes later) in order to leave that summer.
What are the precedents?
Andy Webster was the first player in the world to invoke Article 17 and unilaterally breach his contract when he left Heart of Midlothian. Fifa has rubber-stamped his move to Wigan (and subsequent loan to Rangers), but the DRC has yet to announce how much compensation Hearts will receive, technically from Webster, in practice from Wigan. The DRC will decide the case on 23 February.
Fifpro expects the figure to be one year's wages under Webster's Hearts contract, amounting to £250,000. Hearts wanted £2m. Fifa says that "there are no final and binding decisions" in any of the "several" cases yet. This is mainly because so few have been brought forward.
Why is this?
One reason is the whole process is still a legal minefield, despite clear terms catering for player breaches within Fifa rules.
Technically, a club who hires a player who has "breached" might face sanctions for inducing a breach, although in practice, as in Webster's case, this is unlikely. The formula is not set in stone, so poses another element of risk.
Another reason is that many clubs have been wise to the rules for years, and make sure all their best (and especially younger) players never get near the end of the "protected period". They do this by regularly updating contracts to set the protected period back to zero. Manchester United are especially canny in this respect. It is less important with older players, because "buyouts" would in many cases be more expensive than a player's market value.
Is this player power gone mad?
No. It's the law. Every club should know it and negotiate accordingly. And think of it the other way round: clubs can theoretically "breach" too, if they pay a player the full value of the remainder of his contract.
Deal or no deal
Premiership clubs are nervously eyeing their biggest names to see who could make a cheap getaway Frank Lampard (Chelsea) Current deal Five-year, signed July 2004 Leaving date (under Fifa rule) At the end of this season Guide price Approximately£8m (two years' wages) Market value Approx £25m Stephen Gerrard (Liverpool) Current deal Four-year, signed July 2005 Leaving date End of 2007-08 season Guide price Approximately £5m (one year's wages) Market value £20m or more Xabi Alonso (Liverpool) Current deal Five-year, signed August 2004 Leaving date End of this season Guide price Around £10.3m - two years' wages (£6m) plus pro rata fee (£4.3m) Market value About £15m
Article 17: The precedent
Andy Webster: Now 24, the Scotland defender joined Hearts from Arbroath in 2001 for £70,000. In July 2003, he signed a new four-year deal, on £250,000 a year. In summer 2006, unhappy with the regime of the Hearts owner, Vladimir Romanov, he invoked Article 17 by handing in notice to break his contract unilaterally. He was entitled to do so because the three-season "protected period" of his contract had expired. He joined Wigan, and is now on loan at Rangers. Hearts had valued him at £2m on the open market. Fifa's Dispute Resolution Chamber is to decide on actual compensation. It is estimated it will be closer to £250,000 or the value of the one year remaining on Webster's Hearts contract.
Other players at major clubs who could pay to go soon
Arjen Robben (Chelsea) summer 2007, for two years' wages plus two-fifths of £12m fee.
Claude Makelele (Chelsea) summer 2007, for one year's wages.
Luis Garcia (Liverpool) summer 2007, for two years' wages plus two-fifths of £6.5m fee.
Gabriel Heinze (Man Utd) summer 2007, for two years' wages.
Gary Neville (Man Utd) summer 2007, for 18 months' wages.
Alan Smith (Man Utd) summer 2007, for two years' wages plus two-fifths of £7m fee.
Freddie Ljungberg (Arsenal) summer 2007, for two years' wages.
Jamie Carragher (Liverpool) summer 2008, for one year's wages.
Thierry Henry (Arsenal) summer 2008, for two years' wages.
Comment