Training compensation and solidarity mechanism
Preamble
The most visible immediate effect of the Bosman ruling was that clubs lost their power over players whose contracts had expired, leaving these players free to conclude new contracts with other clubs. The clubs obviously wanted to prevent their players leaving for free, and many clubs tried to compensate for this loss of power by trying to tie players to longer contracts and implement clauses in the contracts giving the club the right to unilaterally extend contracts[1]. Further, the clubs claimed that the Bosman ruling was a large threat to the development of football, as there were no longer any incentives to train and develop players, as it would be cheaper to sign trained and developed football players than it would be to train and develop football players themselves. The clubs and club associations issued this problem to FIFA and UEFA, urging them to establish transfer regulations that were compliant with EU law, but at the same time secured the clubs’ right to be reimbursed when players transferred to other clubs.
FIFA’s solution to this problem was to issue provisions that secured clubs compensation for training players that eventually become good enough to secure professional contracts. Training clubs were given two methods of securing compensation for training players; training compensation and solidarity mechanism.
When they launched the revised RSTP in 2001, FIFA explained the reasoning behind the system for training compensation, in their circular no. 769:
“The new regulations create a detailed system for the payment of training compensation. This system is designed to encourage more and better training of young football players, and to create solidarity among clubs, by awarding financial compensation to clubs which have invested in training young players. At the same time, care has also been taken to ensure that the amounts of training compensation do not become disproportionate, and unduly hinder the movement of young players.”
In the same circular, they explained the reasoning for the solidarity mechanism:
“The new club concerned is to distribute 5% of this compensatory amount to all the clubs where this player has played between the age of 12 and 23. This distribution of monies is meant as a solidarity contribution to the clubs involved in the training and education of the player»
Training Compensation
RSTP art. 20 and annexe 4 regulates training compensation. In short, training compensation is paid by the new club to the clubs that trained the player between the ages 12 and 21. The obligation to pay training compensation occurs if one of the following two conditions are met:
1) When a player signs his first contract as a professional, and
2) Each time a professional is transferred internationally until the end of the season of his 23rd birthday
The basic principle is that the new club must pay training compensation whenever a player signs his first professional contract and each time the player transfers between clubs of two different national associations. Compensation is payable until the end of the season of the player’s 23rd birthday. There is an obligation to pay training compensation regardless of whether the player’s contract has already expired or not. However, according to Annexe 4, art. 2 section 2, no compensation shall be paid if the player’s contract was terminated without just cause, the player transfers to a category 4 club (the lowest category), or if the player regains his amateur status. For transfers within the EU/EEA, Annexe 4, art. 6 section 2 states that no compensation is payable if the former club does not offer the player a new contract and cannot justify why it should still be entitled to compensation. This exception must be seen in connection with the Bosman ruling and the consequent agreement between EU and FIFA, as the European Court of justice concluded that the right for a club to claim transfer compensation for a player whose contract is expired did constitute a breach of the principle of free movement of workers. The exception for EU players can be seen as a compromise between FIFA and EU, where EU accepts that a club should be compensated for training a player who sign professional contracts with a new club, but not if the player is unwanted by the former club, and for all practical reasons is forced to find a new employer. This particular issue is explained in detail in this article.
The training period is normally between the player’s 12th and 21st birthdays. However, in some cases it is evident that the player finished his training period before his 21st birthday, and the calculation of training compensation must be adjusted accordingly. In the case CAS 2013/A/3303 Bradford City Football Club v. Falkirk Football Club the panel concluded that the player had ended his training just before turning 20 years old. In its consideration of when the player had ended his training, the CAS panel stated:
“various factors are generally included in the assessment of whether a player´s training period must be deemed to have been completed before the age of 21, including the level of talent of the player, whether or not the player is playing regularly with the first team and the value of the player, e.g. reflected in a loan fee achieved for the services of the player”
As stated in Annexe 4 art. 3 section 1, training compensation occurring as a result of the player signing his first professional contract, shall be divided between all the clubs that contributed to the player’s training. In the case of subsequent transfers however, training compensation is paid only to the player’s former club.
According to Annexe 4 art. 4, national associations have been instructed to divide their clubs into four categories in order to calculate training compensation. The training costs for these four categories are set by UEFA and the other continental associations. The pre-determined sums are supposed to resemble the amount needed to train one professional player for one year multiplied with what FIFA/RSTP calls the “player factor”. The player factor is the ratio of players that need to be trained in order to produce one professional player. Once the club category has been established for both the selling and buying clubs, the training compensation is calculated by multiplying the number of years which the selling club trained and developed the player. However, the training costs for players for the years 12 until 15, shall be based on the training costs for category 4 clubs. For all confederations except UEFA, the training compensation is calculated based on the category of the new club. For transfers within UEFA, however, the training compensation shall only be based solely on the category of the new club if the new club is of the lower category. If the new club is of a higher category, the training compensation is based on the average training costs of the new club. For example, if a player has been trained by a UEFA category 2 club for the years 12 until 19, and signs his first professional contract with a UEFA category 1 club, the training compensation will be calculated like this:
12th until 15th birthday: 4 X EUR 10,000 (category 4)
+ 16th until 19th birthday: 4 X EUR 75,000 (average category 1 and 2)
= EUR 340,000
It is worth noting that although there is not an obligation according to RSTP to pay training compensation when a professional player transfers domestically, some national associations have transfer regulations that make training compensation payable also for domestic transfers.
It is also worth noting that in August 2019, FIFA issued circular 1689, where they announced amendments in Art. 13 of the Rules Governing the Procedures of the Players' Status Committee and the Dispute Resolution Chamber. The changes aim to make it easier for clubs to claim training compensation and solidarity payments. If, within 15 days of receipt of the proposal, the parties accept the proposal or fail to provide an answer, the proposal will become final and binding. If, on the other hand, a party requests a formal decision, the proceedings will be conducted according to the procedure laid down in the Rules.
Solidarity Mechanism
In addition to training compensation, clubs that contribute to the training of players that develop into professional players for other clubs will be entitled to solidarity contribution, regulated in RSTP art. 21:
“If a professional is transferred before the expiry of his contract, any club that has contributed to his education and training shall receive a proportion of the compensation paid to his former club (solidarity contribution). The provisions concerning solidarity contributions are set out in Annexe 5 of these regulations.”
As with training compensation, as stated in RSTP art. 1, the obligation to pay solidarity contribution only occurs when a player transfers internationally. However, some national associations have transfer regulations that make solidarity contribution payable also for domestic transfers.
Unlike training compensation, solidarity contribution will only be payable upon the international transfer of a player who is already a professional, as a transfer fee is not payable for amateur players. As the solidarity contribution is dependent on the transfer fee, solidarity payments will only be payable if a player is transferred for a fee, prior to the expiry of his employment contract. Another difference from training compensation is that transfers occurring after the season of a player’s 23rd birthday will continue to engage the obligation to pay solidarity contribution.
The calculation of solidarity payments is slightly simpler than the calculation of training compensation. As a starting point, five percent of the transfer fee will be deducted, and divided between the clubs that trained the player between his 12th and 23rd birthday. The training years between the player’s 12th and 16th birthdays are valued at half of the of the value of the subsequent years. If the player is under 23 years old at the time of the transfer, the total solidarity payment will be less than five percent, as the compensation for the remaining years will be deducted. For every year that the player is younger than 23, 0.5% shall be deducted from 5%.
FIFA’s clearing house and consequences for training compensation and solidarity mechanism
On 25 July 2019, FIFA announced that they plan to establish a new clearing house as a part of a reform package of the transfer system endorsed by the Football Stakeholders Committee in September 2018. With the clearing house, FIFA aims to centralise all payments associated with football, including the calculation and automatic distribution to the training clubs of the amounts due as solidarity contribution and training compensation. When the conditions for paying training compensation or solidarity payments are met, i.e. when an international transfer or the first registration of a player as a professional occurs, FIFA will calculate amounts due based on the player passport, that shows all the clubs that have trained the player between the age 12 and 21. The clearing house will then issue an invoice to the new club. Once the clearing house has received the payment, it will distribute the payment to the training clubs.
[1] Frans de Weger, ‘The jurisprudence of the FIFA Dispute Resolution Chamber’ (2008) p. 5.
