Professional Footballers Australia (PFA) finally reached agreement with Football Federation Australia (FFA) late last week, paving the way for A-League clubs and players to include buy-out clauses in the special conditions to their playing contracts provided they comply with Article 17 of the FIFA Regulations for the Status and Transfer of Players (RSTP).
However, players, clubs and agents must be aware of the important legal distinction between “transfer clauses” and “buy-out clauses”.

In April 2011, FFA unilaterally introduced a new provision into the A-League Player Contract Regulations that reads as follows:

“9.1    A player contract between a Club and a Player must:

…(f)    not contain any clause which limits the amount a Club can receive or request in relation to the transfer of the Player, including, without limitation, any clause which requires the Club to release or transfer the Player to another club if that club pays the Club a specified minimum transfer fee in respect of the Player…”

The PFA argued the new regulation breached Article 17 of the FIFA RSTP, which allows clubs and players to set out an agreed amount of compensation in the event a contract is unilaterally terminated by either party.  FIFA’s official commentary of the RSTP provides:

“The parties may, however, stipulate in the contract the amount that the player shall pay to the club as compensation in order to unilaterally terminate the contract (a so-called buy-out clause).  The advantage of this clause is that the parties mutually agree on the amount at the very beginning and fix this in the contract.  By paying this amount to the club, the player is entitled to unilaterally terminate the contract…Whenever a player has to pay compensation to his former club, the new club…shall be jointly and severally liable for its payment. (page 47)”

FFA and the PFA have agreed that, whilst the FFA regulation abolishes transfer clauses, it does not impinge on the rights of clubs and players to negotiate buy-out clauses within the meaning of Article 17 of the FIFA RSTP.  The distinction between the two may appear technical, but it is of great significance.

A transfer clause obliges a club to agree to the transfer of a player in specified circumstances.  A buy-out clause puts a value on the compensation to be paid when one party unilaterally terminates the contract.

FFA’s lawyers have advised the PFA that:

“…there is a clear distinction between a buyout clause under the FIFA Regulations and the clauses prohibited by (Clause 9.1(f)), being “minimum transfer fee” clauses.  Buyout clauses relate to arrangements between a player and a club to quantify damages if the player unilaterally breaches their contract. Minimum transfer fee clauses are not dealt with or specifically contemplated by the FIFA Regulations.  The distinction between buyout clauses and “minimum transfer fee” clauses was recognised in the 2008 CAS decision relating to player Matuzalem and FC Shakhtar Donetsk.”

The PFA agrees with this advice.  In the famous Matuzalem case, the Court of Arbitration for Sport stated:

“70. The relevant part of clause 3.3 of the employment contract between Player and Shakhtar Donetsk reads as follows: “During the validity of the Contract, the Club undertakes – in the case the Club receives a transfer offer in amount of 25,000,000 EUR or exceeding the some [recte: sum] above the Club undertakes to arrange the transfer within the agreed period.” (sic)

71. The Panel, after careful review of the evidence submitted, comes to the conclusion that clause 3.3 cannot be interpreted as a penalty/liquidated damages clause in the meaning of art. 17 of the FIFA Regulations.

72. The Panel takes in consideration the wording itself of clause 3.3: in no terms the clause is addressing a situation of unilateral, premature termination, but rather a situation in which a transfer of the Player may take place. According to its wording the clause does indeed, as claimed by the Player, address an obligation of Shakhtar Donetsk to “let the Player go” by arranging a transfer within a certain period, provided Shakhtar Donetsk is offered a certain minimum transfer fee by a new club.

73. It is certainly true that the clause 3.3 somehow indicate a financial value of the Player and of his services respectively. But such value is used as a kind of de minimis cap to trigger an obligation of Shakhtar Donetsk to negotiate and conclude a transfer agreement with the interested new club. Therefore, by accepting such clause Shakhtar Donetsk has indicated that in any event for a transfer fee of at minimum EUR 25,000,000 it would be willing to renounce to the services of the Player.” (sic)

This distinction proved decisive in the recent case between Alex Brosque and Sydney FC.  In that case, the clause in question was a transfer clause, which meant Alex was entitled to transfer and Sydney FC was obliged to agree to that transfer, even though Alex had signed a new contract with Sydney FC to take effect at a later date.  Accordingly, the obligation to transfer also involved the termination, by mutual agreement, of both of the contracts between Alex and Sydney FC.

FFA and the PFA have now agreed on two key points:
transfer clauses in place before the date of promulgation of the new regulation will, as in Alex’s case, continue to apply; and
the wording of a transfer buy-out clause for the purposes of Article 17 of the FIFA RSTP.

The agreed wording for a buy-out clause is:

“1.    Subject to paragraph 2 of this Special Condition, if a Party terminates this Contract otherwise than in accordance with clause 11, that Party (the First Party) must pay the amount of [insert amount] (the Compensation) to the other Party (the Second Party).

2.    The Parties acknowledge and agree that:

(a)    The Compensation is [inclusive/exclusive]* of any and all amounts payable under the FIFA RSTP in respect of Training Compensation and Solidarity contributions owed to the Club or any other clubs in accordance with the FIFA RSTP and/or FFA National Registration Regulations.

(b)    Upon payment of the Compensation, the Second Party has no other claim against the First Party in respect of the termination of this Contract.

(c)    In the case of termination by the Player, upon payment of the Compensation, the Player may enter into a playing contract with an overseas based club of his choice.

Note:    * indicates that the Parties should specify whether the agreed amount is inclusive of amounts payable under the FIFA RSTP.

Players and their agents seeking to negotiate buy-out clauses into A-League player contracts are strongly encouraged to obtain the advice of the PFA.