Tiran Gunawardena

how football transfers actually work: the transfer agreement

Tiran Gunawardena
how football transfers actually work: the transfer agreement

Inside Reevaldo's transfer: Part 2

In our last post, we saw Paddington United negotiate a transfer agreement with Maracanã for Reevaldo. But what does a transfer agreement actually look like?

The sports law team at Mills & Reeve have been involved in countless international transfer negotiations and have sat on both sides of the table, we thought it might be useful to show how a typical deal gets done, from start to finish. Don't miss the footnotes --> 1 <-- which contain links to useful documents as well as additional insights on industry practice.

This is the second of four posts taking you inside the transfer and contract negotiations between Paddington United, Maracanã, and Reevaldo. Here, we take a look at the "real" transfer agreement between Maracanã and Paddington United.


THIS AGREEMENT is made the 1st August 2016

BETWEEN:

(1) PADDINGTON UNITED FOOTBALL CLUB LIMITED of Paddington Stadium, Paddington Green, London, W2 1NB (“Paddington United”); and

(2) MARACANÃ FUTEBOL CLUBE of Estádio do Maracanã, Rio de Janeiro, Brasil (“Maracanã”)

WHEREAS:

(1) PADDINGTON UNITED is a professional football club in England’s Premier League and affiliated to the Football Association (“the FA”).

(2) MARACANÃ is a professional football club in Brazil’s Campeonato Brasileiro Série A and affiliated to the Brazilian Football Confederation (“the CBF”).

(3) REEVALDO MARCELO DO TIRANO is a Brazilian national born on 12 May 1998 in Rio de Janeiro, Brazil and is registered as a professional player with Maracanã (“the Player").

(4) PADDINGTON UNITED wishes to acquire the Player’s registration and Maracanã have agreed upon the following terms in respect of the transfer of the Player’s registration to Paddington United.

WHEREBY IT IS AGREED as follows:

1. Definitions2

In this Agreement (unless the context otherwise requires), the following expressions have the following meanings:

“First Team Competitive Matches” shall mean the Premier League, Football League, FA Cup, Football League Cup, UEFA Champions League, Europa League (or any other names that these may change to in the future).

“Appearances” shall mean an appearance for the starting eleven for Paddington United's first team.

2. Transfer

2.1 In consideration of the transfer fee (set out in clause 3) Maracanã shall permanently transfer the registration of the Player to Paddington United upon the terms and conditions set out in this Agreement.

3. Transfer fee

3.1 Paddington United will pay to Maracanã £6,000,000,11 net of any deductions, for the permanent transfer of the registration of the Player, within 5 days of the satisfaction of the following conditions:3

(a) the Player’s International Transfer Certificate (“the ITC”) being requested and received by the FA on behalf of Paddington United from the CBF;4

(b) the transfer being matched and authorised by the FIFA Transfer Matching System (“TMS”);5

(c) the Player being granted a work permit to allow him to be lawfully employed as a professional football player in the United Kingdom;6 and

(d) the Player being registered with, and granted eligibility to play for Paddington United by the Premier League and The FA.

3.2 In addition, Paddington United shall pay to Maracanã the following contingency payments:7

(a) £1,500,000 net of any deductions, after the Player has made 25 Appearances in First Team Competitive Matches for Paddington United.

(b) £1,000,000 net of any deductions, after the Player has made 50 Appearances in First Team Competitive Matches for Paddington United.

(c) £1,000,000 net of any deductions, after the Player has scored 15 goals in First Team Competitive Matches for Paddington United.

(d) £500,000 net of any deductions, after the Player has scored 25 goals in First Team Competitive Matches for Paddington United.

(e) £500,000 net of any deductions, if Paddington United finishes in 10th place or better in a season of the Premier League while the Player is registered with Paddington United.

(f) £500,000 net of any deductions, if the Player has been named in the Professional Footballers’ Association (PFA) Team of the Year while the Player is employed by Paddington United.

For the avoidance of doubt, the maximum sum payable by Paddington United to Maracanã under this clause is £5,000,000 net of any deductions.

Payments due under this clause will be paid within 7 days of the event triggering payment and upon receipt of invoice from Maracanã.

3.3 Should the Player be permanently transferred from Paddington United for a fee in excess of the sums already received by Maracanã under this Agreement, 20% of such excess will become due and payable to Maracanã.8

Payment will be made within 7 days of the transfer being completed and receipt of invoice from Maracanã.

3.4 Paddington United shall be responsible for paying the Premier League Transfer Levy and/or any Solidarity Contribution in addition to the amounts to be paid to Maracanã stated in clause 3.9

3.5 Where any payment under this Agreement is chargeable with VAT, Paddington United shall pay to Maracanã the VAT at the rate applicable to such payment.

4. Confidentiality10

4.1 The financial terms of this Agreement are strictly confidential and shall at no time be divulged to a third party without the prior consent of both parties except:

(a) To the appropriate football authorities,

(b) If required by applicable laws or regulations of the Stock Exchange or other recognised investment exchange,

(c) As required by any governmental department or any governmental or quasi-governmental authority, official or agency,

(d) To the parties’ respective professional advisers on terms that the same shall be kept confidential,

(e) If and to the extent that the same shall have entered the public domain otherwise than by reason of unauthorised disclosure.

5. Entire Agreement

5.1 This Agreement shall represent the entire understanding between the parties. It shall supersede all previous arrangements, written or verbal, between the parties.

6. Back Stop Date

6.1 This Agreement is conditional upon the conditions set out in Clause 3.1 being satisfied and the Player being registered with Paddington United by no later than 24 August 2016.12 In the event that such condition is not satisfied, the Agreement shall be of no effect and Maracanã shall be permitted to transfer the player to another club.

7. Warranty

7.1 Maracanã and Paddington United represent and warrant unconditionally that they are fully entitled and authorised to sign and execute the terms of this Agreement.

8. Duplicates

8.1 This Agreement may be entered into in the form of duplicates or copies, each executed by both parties and, when so executed, each of the duplicates or copies shall be deemed to be an original, but, taken together, they shall constitute one instrument.

9. Governing law and jurisdiction

9.1 This Agreement is subject to the law of England and Wales and the FIFA Regulations on the Status and Transfer of Players. Any and all disputes will be handled by a competent committee of FIFA.

9.2 In the event that FIFA shall not be competent to hear a dispute, the matter may be dealt with by the Court of Arbitration for Sport.

AS WITNESS the hands of the parties hereto or their duly authorised representatives the day and year first before written.

SIGNED by Kara Downey

duly authorised on behalf of Paddington United Football Club


In the presence of:

Signature of witness:

Name of witness:                                                 Fred Peason

Address:                                                               Paddington Stadium, Paddington Green, London, W2 1NB

Occupation:                                                         Director of Football


SIGNED by Eduardo Pereira Ribeiro

 

duly authorised on behalf of Maracanã Futebol Clube


In the presence of:

Signature of witness:

Name of witness:                                                 Joao Pedro Oliveira da Souza

Address:                                                               Av. Pres. Castelo Branco, Portão 3 - Maracanã, 

                                                                             Rio de Janeiro - RJ, 20271-130, Brazil

Occupation:                                                        Chairman


  1. Pretty cool, right?




  2. It is important to define any key terms which may be ambiguous.

    Here, "First Team Competitive Matches" include all competitions, not just Premier League matches.

    Additionally, "Appearances" mean starting appearances only and will not include substitute appearances from the bench.




  3. Buying clubs should condition the payment of transfer fees upon ensuring that the necessary conditions are met relating to the player's eligibility to play for the buying club.



  4. As Reevaldo is currently registered with the CBF (Brazilian FA), he cannot be registered with The FA until the CBF sends The FA his internetional transfer certificate. For more, see Article 9 of the FIFA RSTP.



  5. The FIFA Transfer Matching System (FIFA TMS) is an online data information sytem and has been mandatory for all international transfers since 2010. Stay tuned for a forthcoming article discussing FIFA TMS in greater detail.



  6. Whilst Article 18(4) of the FIFA RSTP prevents an employment contract from being conditioned on a successful work permit or medical, it is possible to make the club to club transfer conditonal on this.

    Stay tuned for a forthcoming article focusing specifically on Paddington and Reevaldo's attempts to secure a work permit.



  7. These are all add-ons to the transfer fee that will come due if and when they are triggered. These payments are conditional on Reevaldo being a successful signing.



  8. This is a sell-on clause.



  9. When buying a player, Premier League clubs must pay an additional four percent "transfer levy" to the league.

    Only the basic fee is initially counted towards the calculation of the transfer levy, so Paddington will owe four percent of £6 million, or £240,000. However, should any of the add-on clauses be triggered, Paddington will then owe an additional four percent of the sum of the add-on clause(s).

    The league uses these fees to help pay premiums due under the Professional Footballers' Pension Scheme. Any surplus is added to the Professional Game Youth Fund (i.e. grassroots football efforts).



  10. The vast majority of transfer agreements contain confidentiality clauses, which is one of the reasons why media reporting on transfer fees can vary wildly.

    Journalists can only report what they are told and they may be told different figures depending on which side of the table their source is on. For example, a source at the buying club might tell a journalist off the record the basic fee, without mentioning the add-on clauses or additional payments. A source at the selling club, however, might include all of the add-ons, without distinguishing how likely they are to be met.



  11. The buying club is responsible for distributing Solidarity Contributions to the Player's training clubs, where applicable. For more, see Article 21 and Annexes 5 and 6 of the FIFA RSTP.

    Additionally, whether the transfer fee is a gross or net sum is a key term in transfer negotiations.



  12. Due to Reevaldo participating in the Rio Olympics and him wanting to focus on helping his country win a gold medal, the backstop date was set after the conclusion of the Olympics. Typically, clubs aren't given 24 days to fulfill the terms of the transfer agreement.