Going full circle: FIFA’s plan to re-regulate football agents

With world football focused on the continuing disruption caused by COVID-19, attention has (for now) been diverted away from a series of regulatory reforms concerning football agents which were approved by the FIFA Council in October 2019.

The headline-grabbing reform is a proposed cap on the fees that agents can levy for arranging a transfer. However, there are other significant reforms which also merit review. These include the creation of a FIFA Clearing House to improve financial transparency and the reintroduction of a mandatory licensing system for all agents.

FIFA is now in the process of turning the proposals into binding regulations, with a third and final consultation period underway and implementation planned for later this year.

In this article, we consider the key implications of the proposed commission caps, Clearing House and licensing system, suggesting some adjustments which could head off potential challenges to the reforms.

How have we reached this point?

FIFA has a long and convoluted history of regulating agents spanning nearly 30 years. To understand the context for the latest reforms, it helps to look back at the FIFA Players’ Agents Regulations adopted in 2008 (the 2008 Regulations). These regulations were complex and included a licensing regime with strict entry requirements, which made it difficult to become a licensed agent. The regime – whilst well intentioned – failed to gain traction: at a conference in Brussels in November 2011, FIFA’s then legal director Marco Villiger expressed concern that only 25-30 percent of transfers were managed by agents licensed by FIFA.

These concerns led to a change of tack, with FIFA opting for a partial deregulation of the football agent industry via the 2015 Regulations on Working with Intermediaries (the 2015 Regulations). The 2015 Regulations abolished the licensing regime created by the 2008 Regulations and instead prescribed a set of minimum standards for agents (now termed “intermediaries”) to meet. Implementing and policing those standards was delegated to national football associations and their respective local regimes.

Whilst the number of operational football agents has increased since 2015, national associations have implemented the 2015 Regulations inconsistently, resulting in divergent levels of commission, standards of vetting and controls on conflicts of interest. At the same time, agents’ fees have spiralled, with total remuneration in 2019 reaching US$653.9 million, being four times higher than in 2015. Premier League clubs alone spent more than £263 million in agent fees in 2019. Against this backdrop, FIFA has grown concerned at the scope for abuse by unscrupulous actors. It is primarily this concern which underpins FIFA’s latest reform proposals, which we will now examine in greater detail.

Hard caps on commissions

FIFA intends to cap the commissions that agents can earn through player transfers, with the cap expected to work as follows:

• Agent acting for selling club – 10 percent of transfer fee.
• Agent acting for buying club – 3 percent of player's salary.
• Agent acting for the player – 3 percent of player's salary.
• Agent acting for both player and buying club – 6 percent of the player's salary.

Of the package of reforms announced by FIFA, this has proved the most controversial. It marks a significant departure from the position under the 2015 Regulations, which provide indicative caps on agent remuneration but ultimately allow each national association to apply its own benchmarks. There are also significant competition law concerns as to whether the fixing of remuneration levels across the market is necessary and proportionate to FIFA’s objectives.

It is worth noting that the proposed caps, when applied in a UK context, appear out of kilter with equivalent regulations applying to similar domestic sports. Using rugby as an example, Regulation 8.7 of the RFU Regulations simply requires that an agent’s remuneration be calculated on a “reasonable” basis, affording agents and their clients a considerable margin of discretion. The England and Wales Cricket Board takes the same approach in its Players’ Agent Registration Regulations.

Whilst hard caps could help bring commissions down, a number of practical issues arise when we consider how the caps might apply across different football leagues. In particular, there is a risk that the caps could unfairly prejudice agents representing lower league players. Taking England as an example, so-called “super agents” can currently earn millions of pounds for single transfers largely thanks to the eye-watering sums earned by top players (according to the 2019 Global Sports Salary Survey, first team players in the Premier League earn on average £61,024 a week). But members of this relatively small and select group of agents represent a disproportionately high number of top players playing in England. Outside of the Premier League, a much broader group of agents represent players with considerably lower earnings. As such, agents’ fees as a proportion of player earnings tend to be higher in the lower leagues, where the absolute value of fees is relatively small. This is a phenomenon replicated throughout the sport, with FIFA’s ‘Intermediaries in International Transfers 2020’ report recording an average commission of 17.3 percent for transfers valued at less than US$500,000, compared with an average of 5 percent for transfers valued at more than US$5 million.

Given these disparities in earnings, a universal cap on commission could distort competition by pushing smaller agents out of the market and consolidating the power of “super agents”, who benefit from economies of scale. This is a risk which FIFA will need to address before finalising the draft reforms. Whilst FIFA is unlikely to shift too far away from its proposed hard caps, a potential compromise to address these concerns could be the concept of a gradual (or “tiered”) cap, which would essentially cap agents’ commissions on a sliding scale depending on the value of the contract – for example, 10 percent commission for those worth under £1 million, and up to 3 percent on those over £10 million.

Reintroduction of a licensing regime

Emilio García Silvero (Chief Legal Officer of FIFA) has said that it was a “mistake” to deregulate agents in 2015. Now, FIFA plans to reintroduce a formal licensing regime, with the stated aim to “raise professional standards” among agents. The regime will include further education measures and a requirement for continuing professional development.

Football agents can have considerable influence over their clients’ (typically short) careers and often advise them on a range of non-football-related matters such as managing their relationship with the media and their personal finances. As such, it is to be welcomed that there should be some regulation of the profession.

In practice, however, any licensing regime will only be effective if it is widely adopted and adhered to amongst agents. The 2008 Regulations provide a salutary lesson: many would-be agents simply could not or would not meet its stipulations, choosing instead to operate without a licence. To avoid a similar outcome this time, FIFA will need to strike a balance between enforcing meaningful standards in the industry and imposing excessive burdens on individual agents.

One way in which FIFA could resolve this tension would be to adopt a graduated approach to its licensing requirements. For instance, one of the more onerous provisions of the 2008 Regulations was Article 9, which required agents to take out comprehensive professional liability insurance covering “every possible risk connected with the players’ agent’s occupation”. If this was not possible, Article 10 required agents to obtain a bank guarantee from a Swiss bank for a minimum amount of CHF 100,000, regardless of the agent’s turnover or average deal size. For smaller agents, a flat figure such as this may not be appropriate or achievable. However, a more progressive approach would allow agents representing clients with relatively modest salaries to take out a policy with a lower level of minimum cover than, for example, agents representing players in Europe’s top divisions.

Clearing House

FIFA has also proposed that all agent commissions be paid through a FIFA Clearing House. This is part of a wider drive towards increased transparency and oversight in the transfer process, with the ultimate goal of ensuring that all payments connected to transfers (including transfer fees as well as any training compensation and solidarity contributions owed to players’ former clubs) are centrally recorded and automated. Once it is fully operational, FIFA estimates that around USD 400 million per year will be paid through the FIFA Clearing House, comprising more than 14,000 transactions in over 120 countries.

There are obvious advantages to the proposed Clearing House, which promises to allow regulators to track payments to and from players, clubs and agents via an electronic passporting system. FIFA has also indicated that there will be a system of checks to ensure compliance with national and international financial regulations, including applicable Anti-Money Laundering laws and sanctions regimes. This reflects similar developments in other industries, most notably the banking sector, which saw G20 leaders enact reforms to increase market transparency in the trading of over-the-counter (OTC) derivatives after the collapse of Lehman Brothers in 2008.

However, as with all payment automation processes, the success of the project will depend on the collaboration of stakeholders to provide accurate input data and the robustness of the Clearing House’s payment machinery. Key issues which FIFA will need to anticipate at this stage include how to deal with changes to agreed payments, whether (and, if so, how) to account for applicable taxes, and how to resolve mistakes and disagreements as to principal amounts, interest and currency conversion rates. Sensibly, FIFA has indicated that it will be introducing operations to the Clearing House in phases, which should enable any teething issues to be worked out at an early stage.

Looking ahead

From FIFA’s public statements, it appears to be determined to push forward with the reforms, whatever the objections of football agents. Speaking to reporters in November 2020, Mr Garcia Silvero commented that “[i]f we can’t agree with the agents then we will move ahead. We are committed to this.”

Against this, prominent football agents have indicated a willingness to challenge the reforms – particularly the proposed hard caps on commissions – through legal action. Jonathan Barnett (a football agent who represents high-profile players such as Gareth Bale), has commented that “[w]e will try until the last minute to resolve the problem but rest assured, if necessary we will go to every court in the world.”

For the moment, the parties are locked in a final consultation over the draft regulations, which is set to conclude in the spring. With modest adjustments to the headline reforms, such as those discussed above, it is possible that the parties could reach a mutually acceptable position. Failing that, FIFA runs the risk of having to re-visit the regulation of football agents in another six years’ time…