FIFA’s Clearing House: The Impact Upon Football/Soccer Clubs and Agents
It is reported that the global football transfer market is worth around $7billion. In the modern era, with broadcasting rights, more valuable endorsements and increasing external investment, this figure is continually rising. Hence, it is a vital area of football and with such enormous transactions taking place, it is an area that might need to be monitored and regulated with great scrutiny to reinforce proper conduct.
Only recently have FIFA decided to implement a formulated system that they believe will improve the landscape of the transfer market and the financial incomings and outgoings involved. Part of this reform is the idea of a FIFA Clearing House. In this blog, I will outline exactly what this Clearing House entails and how this is likely to impact world football both positively and negatively. As the great reform and new regulations are likely to be brought in by FIFA in the near future, this is an important change to note and to understand.
What is the Clearing House?
The concept of a FIFA Clearing House has been borne out of the notion that a lot of money is lost from transactions that take place during player transfers. Each transfer involves a large number of payable parties; namely the player, the clubs, the agents, the lawyers and the training club, as well as others. Hence, this provides difficulty in overseeing exactly where each payment goes from and to and how the payments are made. Furthermore, additional considerations such as taxes on the remuneration and benefit in kind payments complicate the situation further. Consequently, millions of Pounds, Euros and Dollars are mismanaged and ‘lost’ during the process.
For example, regarding training compensation and solidarity payments, it is alleged that currently only around $70million is paid annually to training clubs despite $400million being owed in total as part of the training compensation for the player. FIFA have shown that often this money ends up in strange locations, peculiar bank accounts and in unexpected forms of remuneration connected with the transfers that take place. Hence, the argument for a centralised FIFA Clearing House emerged and could be a possible solution to the issue. Importantly, the Clearing House will not make profit, it solely serves to reduce ‘lost’ finances.
The primary underlying problem with the current environment is that a lot of money is being ‘lost’ from the game of football and ending up in the wrong places or is not being sufficiently paid. The fundamental aim of the Clearing House is to prevent this. All transactions that take place during the transfer of a player across the football world will pass through the centralised system. This facilitates for FIFA to have greater control in overseeing payments that are made and ensuring that they are being paid to the right clubs. This is important as the graph below shows the sheer size of the football market and the value of transactions that can take place. The graph below is for the European football market alone:
European Football Market: 2011 to 2021 (€ billion)
As part of the Clearing House, agents are one of the parties that will have to disclose the fees they receive from each deal. Agents are a part of the transfer process and will be remunerated for the role they play in the deal. This has been an area where fans have expressed particular interest in being visible to understand how they benefit financially and whether or not it is done in an appropriate and proper manner. I will go on to consider the issues that this may create in the following section.
The new reforms are directed towards enhancing transparency in football and improving the game as a whole. There are several components of the Clearing House that are required to reinforce the objectives of its implementation. FIFA are using an independent payment institution in Paris to receive and review the information provided regarding transactions through transfers. The aim is to run a centralised, streamlined, predictable and automated process. This independent and non-biased body prevents any accusation that FIFA may not be implementing and operating the new system properly. The institution is also tasked with carrying out retrospective due diligence and risk analysis on the compliance of clubs with international financial regulations over the last few years. This serves the purpose of immediately enhancing the transparency of the transfer market as a mark of the Clearing House beginning to make a difference.
FIFA have also stated that the requirement for provision of information on transfers and transactions is burdened upon the member associations in which a transfer takes place. It is the responsibility of each national football association to provide reliable and accurate information to the Clearing House that can then be judged as to whether or not they meet the correct procedures and payments for a transfer. The information provided will give FIFA, the Clearing House and the independent financial body, the resources and understanding to ensure that the appropriate parties are sufficiently remunerated for their role in the deal.
FIFA have outlined a distinction to be made between domestic and international transfers in accordance with the new Clearing House as well as the FIFA Regulations on the Status and Transfer of Players. It has been stipulated that member associations must also implement their own electronic domestic transfer and registration system integrated into the FIFA Transfer Matching System. This will be used by the FIFA Clearing House for assessing domestic transfers. The details of international transfers however, will use the International Transfer Matching System to assist the Clearing House in registering details.
One of the main beneficiaries of the Clearing House therefore will be smaller clubs at the lower end of the football pyramid. If they receive the full sum of training compensation they are entitled to, this will make a significant difference to their financial stability. With less money being lost out on by them, the Clearing House will likely transform the operations of the lower clubs in football and help them in developing into a stronger entity. This is an admirable and desirable outcome that FIFA hopes to achieve as simply as illustrated below:
As well as preventing money being lost out of the game, the Clearing House should also have the benefit of enabling fans to understand where the money passes into from football transfers. This kind of interaction can enhance fan engagement and lessen any worries regarding the financial situation of football. An increased perception of integrity, financial accountability and a public approach to avoiding fraudulent conduct and activity is likely to improve football as a whole if the system is implemented reasonably and in the understanding of any issues that may arise and the adverse impact it may have. FIFA will likely implement additional measures and requirements in order to avoid such problems.
The most significant point of contention to raise regarding the implementation of the FIFA Clearing House is that it requires individuals and bodies to publicly disclose their earnings throughout the year. Whilst it is agreeable and beneficial that football and the transfer landscape is transparent, demanding the public disclosure of individual income sets a dangerous precedent. Article 8 of the European Convention of Human Rights and Article 12 of the Universal Declaration of Human Rights concerns an individual’s right to privacy and private life. In other words, we have a fundamental right to have personal information kept securely and not shared publicly without our expressed permission.
To look at this from another perspective, it is commonly deemed socially unacceptable to inquire about how much a person earns in their line of work. Friends and associates will rarely ask you to disclose your income or salary for a year. In any line of profession this is usually socially unacceptable as it can give rise to problems, especially in certain regions. For example, if we consider an area that struggles with poverty issues and a low average income, forcing an agent in these locations to declare their earnings, may leave them vulnerable to social condemnation, resentment, persecution and also places them at risk of burglary or other forms of crime and theft.
Publicly disclosing one’s income is an uncomfortable situation to be in in any case and it is important for FIFA to account for this consideration if they are to ask agents and other individual parties to detail this. Whilst FIFA have acknowledged that they intend for this public information to be necessary and proportionate, it could be deemed that this idea contradicts common social and public policy and interest for this to be a requirement of the FIFA Clearing House. The worst possible outcome of implementing the system would be that certain parties involved in transfers are then placed into a difficult predicament and forced to put themselves into a vulnerable position in society.
The fundamental principles, values and objectives underlying the concept of the FIFA Clearing House system is admirable and agreeable. For the elements of accountability, centralisation, cleanness and the extent of transparency that it will provide, it will be a system that should benefit world football. However, there are wider considerations to be made regarding the protection of individual parties that are involved within a transfer transaction. The consequences of forcing a party to declare individual earnings is against common societal standards and is likely to create issues resulting from such a level of publicly available information and financial figures.