Un/Regulated Industry of Un/Licensed intermediaries in India’s football market

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By – Sudipto Hambir (2nd Year Student at West Bengal National University of Juridical Sciences) and Rishika Mendiratta (Founder and Managing Editor at KhelAdhikar)

Email id – hambirsudipto@gmail.com

“You will be nearer to Heaven through football than through the study of the Gita.” –Swami Vivekanda

The importance and benefits of the beautiful game have been indisputable. Football needs the indispensable support of intermediaries for their smooth development and expansion in the present times. The evolution of Indian football has been astonishing in the last five years. With the inauguration of the Indian Super League (“ISL”) in 2014, the industry has witnessed a rapid escalation in demand for players. The introduction of eight clubs in the ISL created a relatively smooth entry passage for the players’ intermediaries in the market. The business is flourishing for Indian intermediaries, as the ISL and I-league (Unofficial Second division) are running parallel since the 2017-18 season, which leads the clubs to sign from a larger pool of players. The alteration of rules which forces the clubs to feature at least six Indian players also helps the cause of the players’ intermediaries, as more Indians players are being signed by the ISL clubs. However, this relatively new industry is not spotless and has been facing several issues in India. In this article, the authors have elucidated the legal issues and other inconsistencies relating to the market of intermediaries in the Indian scenario.

Changes in Regulation: No longer a Wild West?

In June 2014, The Federation Internationale de Football (“FIFA”) Executive Committee decided to amend the FIFA statutes and discontinue the old inefficient FIFA Players Agents Regulations (FIFA PAR). As per these regulations, the intermediaries had to undergo a test conducted by the local federation (All India Football Federation –AIFF is the governing body in India) to obtain a license. FIFA observed that 70% of the international transfers were being executed by the unlicensed agents. Other issues such as lack of transparency and confusion between the difference in player’s representative and club representatives were very prominent in the licensing system. To bring in a new wave for the governance of intermediaries, FIFA Regulation on Working with Intermediaries (FIFA Intermediary Regulations) came into force on April 2015. Since then, it has been sufficient to register with the national football governing body to obtain a license. This has also led to even expanding the sphere of intermediaries to legal persons in addition to natural persons and the services offered by them. The erstwhile representation of player agents was just a subset of the present intermediary system.

In India, we have the ‘Working with Intermediaries Regulations, 2017’ (“ AIFF Regulations”) which is the national counterpart formulated in accordance with the requirement of the FIFA Intermediary Regulations. In the event of an inconsistency between the two, it is the FIFA Intermediary Regulations which have supremacy. The new regulation has made it easier for unqualified agents to enter the market. Therefore the new regulations have come up with its own set of challenges. The following section will explain the important aspects that govern the intermediaries in the football industry.

The New Regulation Registration Procedure–Decoding the Intermediary Declaration and Representation Contract

Article 4 of the new AIFF Regulations lays down a new procedure for the registration of the Intermediaries. As per the regulations, an Intermediary means- “means any natural or legal person who, for a fee or free of charge, is engaged by a Club and/or Player in respect of a Transaction”. The intermediary must submit a written statement to the AIFF where the intermediary is a lawyer providing legal service. A non-legal intermediary who wishes to provide legal services must submit duly executed Intermediary Declaration along with the Representation Contract. When registering as a company, the agent must register himself as intermediary first by paying the registration fee. According to Article 11.4 of AIFF Regulations, Rs. 50,000 must be paid annually to acquire the intermediary license from AIFF. The intermediary also must declare that he/she has an “impeccable reputation” and no criminal record pertaining to any financial or violent crime. This should be as verified and approved by the AIFF.

It is important to submit the Intermediary Declaration, as it confirms, among other things, the adherence to the applicable statutes and AIFF regulations and those of the member associations when carrying out its activities.

In accordance with the regulations, if no Intermediary Regulation is submitted, players and clubs risk being sanctioned on the basis of their obligation to act with due diligence in the selection and engaging process of intermediaries. The General Obligations in AIFF Regulations explain that the minimum prerequisite of due diligence means that players and clubs shall duly execute the relevant Intermediary Declaration and the Representation Contract concluded between the parties.  Thus, players and clubs shall be liable to sanctions by the mere fact of not submitting an Intermediary Declaration as per the norms of strict liability. This is in contradiction to the FIFA Intermediary Regulations which state that the parties must ensure reasonable endeavours to sign the Intermediary Declaration Thus, as per FIFA Intermediary Regulations the parties would be liable not when they fail to submit the Intermediary Declaration but only if they were acting in a negligent manner.

This difference clearly depicts India’s stance to maintain a higher standard for regulation and accountability pertaining to intermediaries. However, as the FIFA Intermediary Regulations supersede the national regulations, it will be interesting to see how disputes are resolved in case an anomaly arises.

Both the intermediary and the player or the club must sign a Representation Contract for transparency and minimize corruption. A Representation Contract as per the AIFF Regulations means – “an agreement between an Intermediary and a Player and/or Club, in relation to a Transaction, and which complies with the requirements prescribed in these Regulations.” It is necessary to disclose the following minimum following details in the Representation contract so as to avoid potential disputes and uncertainties

1. Names of the parties,
2. Scope of services
3. Terms of the contract
4. Remuneration due to the intermediary
5. General terms of payment
6. Date of conclusion
7. Termination provision
8. Signatures of the parties, and if the player is minor, the signatures of the player’s legal guardian or guardians.

All the parties must ensure that no conflict of interest exists. This is in line with the requirement prescribed in the FIFA Intermediary Regulations to prevent bias and ensure accountability and transparency in governance. Thus in the Intermediary Declaration the intermediary have to explicitly state that they have- “ No contractual relationship with AIFF and/or its Members, its Affiliated Units, AIFF Competitions, Clubs and sporting organisations registered with or participating in tournaments recognized by AIFF, or any other national federations or continental confederations or FIFA that could lead to a potential conflict of interest”.

In case of any conflict of interest, the intermediary must obtain written consent from all the involved parties prior to entering into negotiations for or representing any parties. The intermediaries must inform the relevant Association every time a transaction takes place that could involve a potential conflict of interest and is in contravention with the affirmations in the Intermediary Declaration.

The Dilemma of Agent’s Fee

According to paragraph 3, Article 7 of FIFA Intermediary Regulations on working with Intermediaries, the agent’s fees should not exceed 3% of the transfer fee. This is recommendatory in nature. Such a benchmark cap can be truly detrimental in the financial prospects of the agents. It could have an adverse impact on the quality of service received by the players. Thus, it could be distorting market competition of football intermediaries’ services by both limiting the amount of remuneration and by indirectly decreasing the quality of the provided services.

The regulation of agent’s fees cap is not often followed in India. According to industry experts, the agent’s fees in India is in between 5% to 15% of the transfer fee. The rationale which is instrumental in permitting the practice is that the number of transfers taking place in Indian football transfer market is minimal. Thus, the actual source of income for the agents is the commission on a player’s contract fee. Therefore, a strict adherence to the cap would have led to underhand, illegal payments so that intermediaries can maintain the level of compensation that they receive. Ironically the scenario would have negated the primary purpose of the regulations. To illustrate in 2017, during ISL, the median contract value across ten clubs was around Rs. 20 lakh. The ISL also has a cap of 5% for the agent’s commission. A 5% commission on Rs 20 lakh would earn an agent Rs. 1 lakh. The average income of players in India range in between Rs. 5 lakh to Rs. 10 lakh per annum. If the cap of 5% is maintained then the fee is not really rewarding for the agents.

Instead of a cap, a better mechanism which India can maybe think of incorporating a graded mechanism for the payment of intermediaries. For example, there can be a model of self-regulation and accreditation of intermediaries which can be set up in co-operation with the regional football associations. By such a system, clubs and players could ensure themselves that an intermediary is of a particular standard. The payment of the intermediary could be in accordance with the criteria decided by the agency and further negotiated through individual contracts. It will also allow the agents to prove their qualifications and loyalty. This has been to an extent implemented by Argentine Football Association (AFA). The cap was introduced because it was felt that an unnecessarily large amount of money disappears from professional football through agents. It is still debatable if restricting the percentage of payment or a better regulatory and enforcement mechanism will lead to better global compliance with the regulations.

Are there Loopholes in the Intermediary Regulations?

After the deregulation, the football industry is a bit of a Wild West. The AIFF Regulations pertaining to the Representation Contract are mainly in imitation of the FIFA Intermediary Regulations with no addition of details as to bring clarity for the Indian market. The FIFA Intermediary regulations are loosely worded with respect to the representation contract and thus have various loopholes. For example, there is no provision recommending the duration of representation contract or the poaching of players or multiple representations. Thus, it is often noticed that there is more than one intermediary claiming to be the representative of a certain player. The only provision which might aid in tackling the mentioned problem is Article 5 of AIFF Regulations which stipulates that the Representation Contract should be signed by the intermediary and the player both submitted to AIFF within ten days of completion of transactions. There needs to be an amendment to the AIFF Regulations to strengthen the contractual protection of all parties involved in the transaction through intermediaries. For example, the FA came up with their own Regulation on Intermediaries. The three important changes and specifications that they included were as follows –

“B11- An Intermediary shall only enter into a single Representation Contract with the same Player at any one time.

B12 – An Intermediary shall not enter into a Representation Contract with a Player under an exclusive Representation Contract with another Intermediary.

B13 – A Player shall not enter into a Representation Contract with an Intermediary whilst under an exclusive Representation Contract with another Intermediary.”

G3 – An Intermediary should use all reasonable endeavours to ensure that the Organisation through which he operates shall comply fully with the requirements of the Rules of The Association and these Regulations in relation to any Intermediary Activity carried out by that Intermediary”

These specific provisions with respect to representation contracts help in the protection of the players and the clubs alike. For example, a 2-year period offers some protection for the investment by the intermediary in the player, at the same time allowing a player who may have had a substantial change in his prospects over the period, the freedom to find a different intermediary if he so wishes, at the end of a reasonable period. The regulations also prevent poaching by disallowing an intermediary to enter into a contract with a player or a club who he knows has an exclusive contractual relationship with another intermediary. The principle of vicarious liability as expressed by regulation G3 enumerated above is useful for increasing the efforts of compliance with the regulations.

The changes in Intermediary Regulations across the world in accordance with the national requirements is a reminder even for India to step up and tailor them accordingly. We are no longer a sleeping giant when it comes to football but an active entrant in the competitive world of the beautiful game. Thus, favourable regulatory changes will help in the long run to build a stable football industry.

                        Protection of Minors

One of the biggest issue relating to football agents in most of the third world countries is the exploitation of young footballers. African nations have been facing this problem for a very long time. FIFA has also admitted that they had failed to administer their policies regarding the issue. Many kids from African nations have been sent to Europe for trials only to be abandoned. The less unfortunate who made it to a club has been treated badly by their agents, and some even got paid lesser than the minimum wage.

In order to combat the above limitations, it has been stated the FIFA Intermediary Regulations have laid down a few ground rules such as prohibiting any kind of payment to an intermediary if the player concerned is a minor. This is in line with the national law of the member countries which debar contract by minors. Article 7 Paragraph 8 of FIFA Intermediary Regulations states that the agents are not obliged to get paid by the minor players. The intermediary also must obtain written statement to the relevant association if he/she wants to represent any minor. One of the main anomalies in the regulations is that it does not also provide a restriction on the term of the contract. Thus, enabling the intermediaries to tie down the minors even after the attaining the of age majority by signing a long-term contract. This completely defeats the purpose of the implementation of the provision. As a method to circumvent this limitation English Football Association had come up with their regulation where they have addressed this issue. It is mentioned in the FA regulation that the length of the contract can be maximum of two years and the intermediary cannot enter into a contract with the minor before 1^st January of the year of his/her sixteenth birthday.

Presently, India is not dealing with this issue.  Even the players going abroad is vastly uncommon. With the FIFA U-17 World Cup being held in India the scenario is changing and it seems that more young players are getting noticed by the European clubs. Still, the protection of minors may not be problematic for India, in the context of these regulations. This is mainly because India, the contract by minors is void ab initio and hence cannot be ratified later.

Still, the contractual stipulations in the case of minors should be carefully drafted so as to ensure that minors are not exploited because of their higher degree of economic dependency and vulnerability,

The Way Ahead!

As the football industry becomes more sophisticated the protection of intermediary becomes of paramount importance and because of the indispensable nature of their work.  Realizing this, recently the Italian Parliament amended the new Italian Budget Law (205/2017, Article 1, paragraph 373) according to which Italian National Olympic Committee (CONI) shall regulate the activities of sports agents in Italy. The amendment says that all the intermediaries must register themselves with CONI by passing an exam in order to obtain a license. English FA also had made their stance clear about the new regulation and bought new regulation of their own. According to the recent statistics, England and Italy are the highest and second highest respectively in the intermediary transactions.

Implementation of new schemes by the biggest countries in the business only points toward the fact that the regulations laid by FIFA are not sufficient. The challenges can be tackled with a unified approach and transparency in dealings. India’s efforts in strengthening the global footprint of Indian football can be strengthened if there are changes to suit the specificity of our country. The clarity as to the meaning of the conflict of interest,  stipulation of the maximum period of the representation contract , balancing provisions to prevent restraint of trade  for the players and poaching by the intermediaries, a unified and graded approach to address the issue of variation in intermediaries’ fees, specific provision to prevent potential exploitation of the minors, all will  go a long in strengthening the football industry of the country and eventually the performance of our players, enabling India to become a force to reckon with  in the global football  market.

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