Hero's or Villains? Third party ownership in the Premier League
05 May 2009
While many economic markets are crashing and burning, many
outside observers are somewhat surprised to see top level football
still splashing the cash. It is a market where Kaka is valued at
over £95 million which is more than some top flight football clubs
may now be worth!
Investors have, for some time, been looking at alternative
products within the football industry to make money. New investment
vehicles providing guidance and monetary assistance for up and
coming foreign footballers are growing in number and
sophistication. They quite legitimately claim to give many young
footballers the chance to live the dream in the popular and
lucrative European leagues.
Take the Hero Global Football Fund for example. Dubai's national
bank has reportedly invested £27 million in the fund, alongside
other companies and individuals. It has strong links with Alan
Hansen, former Premier League referee David Elleray and David
Davies, the former executive director of the F.A. Its aim is to
invest in young players and make profits for the Fund by selling
the economic ownership in the player to European clubs willing to
pay transfer fees to recruit top talent. If the Fund owned 50% of
the rights in a player transferred for £20 million, it would pocket
Tevezgate and the New Rules
This is a past arrangement which has caused many a sleepless
night for West Ham and Premier League administrators alike. Taking
the often cited story of Carlos Tevez whose economic rights are not
owned by West Ham but by a third party investment vehicle, the
third party company inserted a clause in the contract that stated
West Ham had no veto over the sale of the player or for how much.
It meant that an outside party had material influence over the
decision making of a Premier League club.
That of course does not mean that every third party arrangement
has the same clauses. If no such clause existed in the Tevez issue,
there may not have been a problem. A common misconception was that
any third party agreement would have been in breach of the Premier
League rules. In fact it was the clause giving the owners of Tevez
influence over West Ham's transfer policy (plus the non disclosure
of the agreement itself) which incurred the Premier League's wrath.
It was for this reason that West Ham were judged to have breached
the old Premier League rule Rule U18 and fined £5.5 million by the
In reaction to 'Tevezgate' the Premier League drafted new rules
L34 and L35 in order to outlaw any type of third party agreement
from the beginning of the 2008-9 season. At its AGM in June 2008,
the new rules were brought in to protect the integrity of the
Premier League competition, which many felt was damaged by the
Tevez affair. As Tevez is still partly owned by investment
vehicle MSI, the rule change appears not to be applicable to Tevez
as the third party agreement was in operation before the rule
It seems that FIFA, football's international governing body, is
also aiming to restrict this practice, at least as far as a third
party's influence is concerned. Article 18 of FIFA's Rules on the
Status and Transfer of Players states that:
||"No club shall enter into a
contract which enables any other party to that contract or any
third party to acquire the ability to influence in employment and
transfer related matters its independence, its policies or the
performance of its teams"
It would appear that this FIFA rule does not prevent a team from
signing a player whose registration is owned by a third party. The
principle of the FIFA rules is to outlaw outside influence, whereas
the Premier League rules actually ban any agreement regardless of
whether there is a material influence clause or not. The new
Premier League rules go much further than the FIFA rules governing
third party ownership. The Premier League argue that their rules
are necessary to retain public confidence in the Premier
Last Action Hero
There has also been bad news for the Hero Fund. On 21 January
2009 the Premier League announced that:
|'The Hero Fund's proposed business model, in
our opinion, falls within the prohibition of Third Party Investment
contained within our rules. We have written to our member clubs and
the Fund to advise them of this."
The Hero Fund now faces a conundrum. It may argue that a blanket
restriction over a company's ability to own the economic rights of
a player playing in the Premier League is a disproportionate
restriction and is illegal under English or European law.
Alternatively they could decide to take the players whose economic
rights they own to other lucrative European league destinations.
The third avenue is to fall in line with the Premier League rules,
which may be as simple as relinquishing all economic rights in
return for a larger transfer fee when transferring one of its
players to a Premier League club.
Supporters of the Fund argue that such an arrangement allows
clubs to field players it would otherwise not have been able to
afford. It is highly doubtful that West Ham could have bought
Mascherano and Tevez for £40 million. It also shields the club from
the risk of poor player investment which is shouldered by the
investors and not the club. It means underperforming players can be
moved in or out without significant capital outlay or loss for the
However, other commentators are more sceptical. Of particular
concern is the impact third party ownership would have on smaller
clubs. Despite all the training and coaching a club may give a
player, an increase in the value of the player would not be enjoyed
or realised by the training club if the player was not their asset.
The delicate existence of many clubs from the Championship down to
the Ryman Premier League relies on them being able to develop
players from the grassroots level and then sell the brightest
prospects to bigger, richer teams. Without the right to receive
financial reward for this, many clubs would go out of business.
Wishing to avoid another Tevez style escapade, the Premier
League's position on the issue of third party ownership of
footballers seems resolute. In the short to medium term at least,
this stance is extremely unlikely to change. It will be of interest
to see which other European domestic associations go as far as the
Premier League has gone to outlaw this new alternative way of
funding and profiting from the global transfer system.
For further information, please contact Daniel Geey and Tim Coles.