Examining the right for clubs to receive compensation for the training of young players

Football clubs may seek compensation for the training of young players whom they have trained where those players wish to sign their first professional contract with a club in another Member State.

In 1997, Olivier Bernard signed a ‘joueur espoir’ contract with Olympique Lyonnais for three seasons. ‘Joueurs espoir’, are football players between the ages of 16 and 22 employed as trainees by a professional club under a fixed-term contract. At the end of his training, the ‘joueur espoir’ is obliged to sign his first professional contract with the club that trained him, if the club requires him to do so. Before Mr Bernard’s contract was due to expire, Olympique Lyonnais offered him a professional contract for one year. Bernard refused to sign that contract and signed a professional contract with Newcastle United FC instead.

Olympique Lyonnais sued Bernard, seeking an award of damages against him and Newcastle United of € 53,357.16, which was the equivalent to the salary which Bernard would have received over one year if he had signed the contract offered by Olympique Lyonnais. The argument was accepted by the Court in France and an award ordered against Bernard and Newcastle United. Bernard and his new club appealed the decision under Article 39 ECFreedom of movement for workers and as a result the French Appeal Court asked the European Court of Justice whether or not requiring a trainee footballer to pay damages if he signs with a professional club in another EU country breached EU law.

The court in Luxembourg acknowledged that the French rule on trainees was clearly a restriction on the freedom of movement for workers, which of course includes footballers. However, the restrictions could be justified under certain circumstances, such as the need to encourage the recruitment and training of young professional players. The Court’s judgment states that:

“In view of the considerable social importance of sporting activities, and in particular football in the EU, the objective of encouraging the recruitment and training of young players must be accepted as legitimate…In the court’s view, the prospect of receiving training fees is likely to encourage football clubs to seek new talent and train young players…A scheme providing for the payment of compensation for training where a young player, at the end of his training, signs a professional contract with a club other than the one which trained him can, in principle, be justified by the objective of encouraging the recruitment and training of young players…The amount of that compensation is to be determined by taking account of the costs borne by the clubs in training both future professional players and those who will never play professionally.”

In Olympique Lyonnais SASP v Olivier Bernard and Newcastle UFC the judges at the European Court of Justice said the French scheme of ‘joueur espoir’ which triggered the case was based on payments not for costs incurred in training that player, but in relation to the total loss suffered by the club, which went beyond what was necessary to encourage and fund recruitment and training of young players.

As a result of the Bernard case FIFA has adopted rules under which the club, and not the player, pays compensation. Under Article VII: Training Compensation and Solidarity Mechanism, of FIFA’s Regulations on the Status and Transfer of Players, training compensation shall be paid to a player’s training club(s); (i) when a player signs his first contract as a professional, and (ii) each time a professional is transferred until the end of the season of his 23rd birthday. The obligation to pay training compensation arises whether the transfer takes place during or at the end of the player’s contract. The provisions concerning training compensation are set out in Annexe 4 of the regulations[1]. Here you will find a copy of a letter that is circulated to FIFA Members each year in relation to the categorisation of clubs and registration periods.

Annex 4[2] of the regulations state that in order to calculate the compensation due for training and education costs, associations are instructed to divide their clubs into a maximum of four categories in accordance with the clubs’ financial investment in training players. The training costs are set for each category and correspond to the amount needed to train one player for one year multiplied by an average “player factor”, which is the ratio of players who need to be trained to produce one professional player.

The training costs, which are established on a confederation basis for each category of club, as well as the categorisation of clubs for each association, are published on the FIFA website. They are updated at the end of every calendar year. Associations are required to keep the data regarding the training category of their clubs inserted in the transfer matching system up to date at all times.[3]

As a general rule, to calculate the training compensation due to a player’s former club(s), it is necessary to take the costs that would have been incurred by the new club if it had trained the player itself.

Accordingly, the first time a player registers as a professional, the training compensation payable is calculated by taking the training costs of the new club multiplied by the number of years of training, in principle from the season of the player’s 12th birthday to the season of his 21st birthday. In the case of subsequent transfers, training compensation is calculated based on the training costs of the new club multiplied by the number of years of training with the former club.

To ensure that training compensation for very young players is not set at unreasonably high levels, the training costs for players for the seasons between their 12th and 15th birthdays shall be based on the training and education costs of category 4 clubs. This exception shall, however, not be applicable where the event giving rise to the right to training compensation[4] occurs before the end of the season of the player’s 18th birthday.

The Dispute Resolution Chamber reviews disputes concerning the amount of training compensation payable and has discretion to adjust the amount payable if it is clearly disproportionate to the case under review.

So do clubs ever try and avoid paying training compensation for young players? Mr Gregory Ioannidis, Head of Sports Law at CGV & Co LLC and Senior Lecturer at Buckingham School of Law some clubs, says that some clubs ‘don’t pay “training compensation” on time in order to save time.’ Mr Ioannidis went on to say recently via Twitter that clubs should ‘make no mistake as to the consequences. Contractual stability is taken very seriously by FIFA and those clubs delaying payments usually suffer the consequences.’ According to Mr Ioannidis, ‘In one of my recent cases before FIFA, the Respondent club was made to pay almost double of what they owed to my client [interest + costs].’

FIFA keep the information about the clubs and players that come before the Dispute Resolution Chamber confidential so there is no way of knowing, without a little insider knowledge, who might be the biggest culprit for delaying the payment of training compensation. However, the decisions themselves are published in full here. The sheer number of decisions shown certainly suggests that Mr Ioannidis is correct in his comments above.

It is clearly important that fair compensation is offered to clubs that lose some of their best young prospects to perhaps larger and more successful clubs, or just those that can offer them more money. FIFA is clearly correct in enforcing these regulations and penalising those clubs that attempt to flout the rules. One must wonder, however, whether or not the deep pockets of certain clubs (even in the unstable financial climate that we currently find ourselves in) will continue to disregard the consequences of failing to pay proper compensation.

Disclaimer: The views expressed are those of the writer and this article does not constitute legal advice.

[1] Page 23

[2] Pages 59 to 63

[3] Annexe 3, article 5.1 paragraph 2

[4] Annexe 4 article 2 paragraph 1