Every so often, I receive an excellent question (or set of questions) from readers of the blog. Recently, I received some really insightful queries from Jason Ives in relation to specific transfer agreement clauses. I set out his questions and provide some detail on how such clauses work in the football industry.

Can you please explain how buy-back clauses work?

Buy-back clauses in transfer agreements are used primarily to give a selling club the security of being able to repurchase a promising player at a set fee should the player excel in the future. Some high profile examples of such reported clauses include Álvaro Morata (Juve back to Madrid), Casemiro (Porto back to Real Madrid) and Gerard Deulofeu (Everton back to Barcelona).

In many cases, the benefit of the transfer extends to the:

– selling club as they receive a transfer fee for a player that at present probably isn’t getting regular playing time with the possibility of requiring the player if he plays well at a predefined fee;

– buying club who can purchase a player that they otherwise may not have been able to acquire had it not been for the clause. In addition, the buyback figure is usually significantly higher than the original transfer fee; and

– player (who can play regular first team football, probably receive a pay rise and demonstrate their talent).

– The buy-back provision is usually based on a number of individual or cumulative triggers including activating the clause:

In defined transfer windows (i.e. the selling club cannot buy back the player for a minimum of two seasons);

– should the original selling club bid a set amount (which could vary depending on the season that the buy-back clause is triggered i.e. €2m in the 15-16 windows and €2.5m in the 16-17 windows).

– Should a buy-back provision be triggered, there is usually a contractual obligation to enforce the contract and transfer the player accordingly.

As such provisions are commercial agreements between contracting parties, there is always the possibility of removing a buy-back clause should both parties agree (usually through payment made to the club that has the benefit of the buy-back clause).

An interesting situation was previously reported with Atletico Madrid defender Toby Alderweireld who was on loan at Southampton for the 2014/15 season. Southampton had an agreement with Atletico when entering into the loan deal that they had the option to purchase the defender for £6.8m.

Although not a buy-back provision, the clause gave Southampton the ability to convert the loan into a permanent transfer unless Atletico paid Southampton £1.5m to remove the clause. In the 2015 summer window Tottenham bid around £11.5m which Atletico accepted. Southampton though wanted to enforce the £6.8m purchase clause.

It has not been publically reported how the matter was finally resolved but it is likely that Atletico provided compensation to Southampton in order for the player to transfer to Tottenham.

How is it different from a first refusal clause?

A first refusal transfer clause gives the club who has the benefit of the clause the opportunity to be informed of any deal that the selling club is willing to accept for the transfer of the player.

This is different from a buy-back clause because usually with a first refusal clause, the selling club retains the power to decide whether to sell the player or not.

Typically, a buy-back clause automatically triggers the transfer of the player should specific contractual conditions be met. In practice, the selling club will not have any way of refusing the buy-back offer if the clause is intended to be an automatic trigger and it is drafted appropriately.

What price does the original club have to offer to buy the player back?

The most common way for the original club to repurchase the player is through a set transfer fee that is inserted into the transfer agreement i.e. If the club bids £15m in any of the first 2 transfer windows.

In practice, these matters can become more complicated if there are different set fees depending on the year that the clause is activated, if the player is called up for the national team, if he scores a certain number of goals or makes a number of appearances.

So, for example, a basic buy-back clause could be structured as follows to ensure that the buy-back fee will be set at:

– €5m should such a bid be received from the Offer Club in the Summer 2016 Window; or

– €6.5m should such a bid be received from the Offer Club in the Summer 2017 Window.

An additional €1m fee will be required to activate the buy-back condition should the player[1]:

– be called up to play in an officially recognised FIFA national team representative match;

– score 10 Premier League goals in any season consisting of 38 league matches; or

– play for at least 60 minutes in 50% of all Premier League, domestic cup and UEFA Champions League or Europa League competition matches.

What if a third club comes along with a bigger offer than the original club was offering? Does the original club have to match it? What if the third club then ups its offer in response?

This was a similar scenario to the Toby Alderweireld situation discussed above. In practice, a selling club, just as Atletico did, can have the benefit of a stipulated transfer amount cancellation clause, which caters for such a scenario where a third club bids more than the stipulated buy-back amount.

Whether such a cancellation clause is inserted in the first place can depend on the negotiation position of the parties. If the original seller (who will have the benefit of the buy-back) is in a strong position, there is less likelihood of such a cancellation figure being inserted or in the alternative the cancellation figure being set at a high sum.

If there is such a provision and the buy-back cancellation sum is paid to the original club, then the selling club is free to sell the player and accept a higher amount.

If the club refuses to pay the buy-back cancellation sum or there is no clause in the contract, then the original selling club should be able to enforce the buy-back clause so long as it can agree personal terms with the player and that the player wishes to re-join the club (though these factors may not be straightforward in practice!).

Note that for ease of reference the drafting presumes that the player will be playing in the Premier League for the first two seasons. If the player, for example, was transferred after his first season, and that season was not covered by a buy-back clause (which would be very unlikely), the buying club may still have the benefit of a first refusal transfer clause to match any other offers.

About the contributor

Daniel Geey, Associate in the Competition and EU Regulatory Group at Field Fisher Waterhouse LLP

Daniel has provided advice and presentations on a whole raft of football related issues and can offer industry specific legal advice on football takeovers, Premier League, Football Association, UEFA, FIFA, FFP and more.

Check out Daniel’s blog, ‘The Final Score on Football Law’ here and follow Daniel on Twitter here

It’s nice to have a rich Grandfather.

Or better yet have black gold – crude oil – seeping up through your floorboards. If you too lived the life of Jed Clampett and The Beverly Hillbillies, you could do just about anything you wanted.

In the world of elite sports here in the People’s Republic of China, let the good times roll.

It’s the Roaring 20’s – sans Prohibition – in China where the seemingly impossible three decades ago during the heart of the Cultural Revolution is today commonplace.

The sport of Baseball is one very good example. Considered decadent by Chairman Mao and through the willing hands of devotees in the 1960’s, the American pastime was obliterated from the sports landscape, only to make a brief appearance during the run-up to the 2008 Beijing Summer Olympic Games … to again fade from the sports landscape … probably forever.

During its resurgence in Beijing for the Olympics and later in the southern metropolis of Guangzhou in 2010 for The 16^th Asian Games, Baseball had its proverbial “moment in the sun”. The sport had its one chance to win glory and honor for the “Motherland” and by doing so, preserve the financial umbilical lifeline provided for those elite programs that are considered “winners” by the Chinese Government.

But even after all of the grand promises made by Major League Baseball, Team China, led by former MLB Rookie of the Year and Los Angeles Dodgers Manager Jim Lefebvre, won only one game and fell flat during the ’08 Olympics.

And when Team China lost, Baseball in this country was doomed.

It certainly didn’t help that the sport was later removed from the Olympic roster of competition.

Baseball is now dead in China, moaning and slouching like a zombie.

There is a natural order of things when it comes to sports in the PRC and only if you are winning do you see the financial good times. The Chinese are fixated on winning medals at the Summer Olympic Games, especially gold. The Asian Games and Winter Olympics are nice, but it’s the Olympiad that the bosses in Beijing really care about. Over the coming decades, the overriding Chinese goal is to win nothing less than every medal at the Summer Olympic Games.

This bears repeating so you understand the impact of what is really happening here in China.

Listen carefully … every single Olympic medal.

Impossible you say. No one has THAT kind of money to put together an unstoppable elite sports program that is simply unrivaled around the world?

To do that will cost “big time” money. Nearly infinite. Money for training. Money to hire the best international coaches and lavish on them financial rewards that would make even the NBA blush. Money. Money. Money.

But there is one unmovable position by the Chinese Government when it comes to their elite sports…

Losers need not apply.

Let’s go back to Baseball for just a moment … the Chinese Government pumped in more than US$30 Million Dollars (that’s with an M) to build three Olympic Baseball Stadiums; and these were all temporary stadiums that had one single use – for the 2008 Beijing Summer Olympic Games.

Today all the Olympic Stadiums have been leveled and weeds grow 10 feet tall and cover what is left of Center Field. In Guangzhou for the 2010 Asian Games, the run down downtown Softball field was gutted and rebuilt – again at the cost of millions of dollars – for this one single event. Likewise for the Asian Games, a new Baseball stadium was built that could rival any Minor League team in America. Now, two years later, both Softball and Baseball stadiums in Guangzhou lay abandoned and are never used.

This is how it is in China.

If your sport is one that China is required to have as host at an event like the Olympics and if that sport has even the slightest possibility of winning a medal, then money is truly no object.

Why?

First – hosting that sport to the world gains face and great glory for the Motherland – irrespective of if Team China is winning or not. It is a complex, centuries-old concept in China and the modern-day version has not changed throughout the years and second – it really does matter what the foreigners think here when they step onto the field of play here in China. The Chinese want their visitors to have the best of everything even if their players have to sacrifice. Once these mega events like the Olympics, Asian Games, World University Games in Shenzhen and the upcoming Youth Olympic Games in Nanjing are over, that city or region then has the very best sports venues in the world.

Yet when the foreigners leave, the music stops and the TV camera are turned off; all of the multi-billions of dollars spent on buildings are just … there. The event organizers just walk away.Rarely will these stadiums, if ever, will be used and frankly the Chinese don’t really seem to care. One day they may need that venue for one event or another and then it will be used. Otherwise all of these awesome facilities just sit and sit and sit – vacant.

By Ken Jacobs

As Cricket Australia (CA) moves towards its two largest test matches of the summer headed by the Boxing Day test in Melbourne, Directors and senior management will have little time to reflect on their “hat-trick” of key decisions taken in 2011 that will shape the way cricket is played, and managed, in Australia in the years ahead.

First, has been the Argus Review into the performance of the Australian team following the disastrous home Ashes Series in 2010/11 which followed hot on the heels of the 2009 Ashes defeat in England.

The Argus Review contains some 51 recommendations, many of which have already been implemented with a new coach, captain and selection committee together with a restructuring of the management structure around the team.

Whilst much of the report is rightly directed at the elite level, deep within are also a series of recommendations aimed at recognizing grade/club cricket as a vital part of the pathway system, as well as the “grass roots” or community cricket competitions.

Despite claims of cricket being Australia’s most popular sport (this is very much debatable be it across attendances, levels of sponsorship, media rights etc), the levels of people actually playing the game are, and should be, of concern to CA.

I specifically refer to “playing” as against “participating” which is the overarching description used by CA to promote the numbers involved in the sport. CA’s census of 2010/11 indicated that were some 850,155 indoor and outdoor participants involved in the sport as distinct from regular players in the sense that all understand.

Participants include those involved in modified forms of cricket, social cricket, and introductory forms of the game for children aged 5-10 years – entry level participation accounted for 19.22% of the total. In fact, of the 850,155 only 317,309 were regular or traditional club cricketers! And, herein lies the challenge!

Even more concerning are reports of the loss of  players (as distinct from participants)  in the current season with some reports indicating as much as a 15% decline in 2011/12 and below targets level for the IN2CRICKET programme.

The message to CA is clear – fix the top levels of the cricket structure by all means but ignore club cricket at your peril and take heed of advice from people running the grass-roots game on a volunteer basis!

The second leg of the hat-trick has been the Crawford /Carter Governance Review of CA.

If adopted in its entirety, the majority of the current Board of directors will be serving their last season as a Director of Cricket Australia. It is proposed that the current Board of 14 will be replaced by a Board of 9, which will probably see one Director coming from each State and three independent Directors.

The shareholders of CA are, in fact, the 6 State cricket Associations who must approve or reject the proposed changes to the CA constitution no later than February 15th 2012. If adopted, CA CEO James Sutherland would also be appointed to the Board as an Executive Director.

The key for State Associations may well be the outcome of a review of the financial structure and distribution model which has been conducted concurrently with the governance review. Interestingly, the financial review has been conducted “in-house” by CA Directors!   

Clearly the debate will continue to rage about the merits of the governance changes as recommended which will most certainly see more centralization of power. Notwithstanding valid claims of conflicts of interest in the current system, the “system” has, nonetheless, worked pretty well over many years.

The third and, possibly, most vital act is, of course, the introduction of the new Big Bash League (BBL) T20 competition (launched on December 16th). This competition comprises 8 new franchises (compared to 6 in the previous Big Bash) with players crisscrossing the country to ply their trade and each franchise topped up by a couple of internationals (but no Indian players!).

The strategy behind the BBL is aimed at young families in an effort to attract them to the game of cricket as participants, spectators or “consumers” of the sport. The second target is clearly a new media rights deal for CA in 2 years time with the BBL becoming one of their most valuable assets.

Already television ratings have been very encouraging; although, not necessarily matched by the somewhat underwhelming live attendances given the promotional efforts on the back of the return of Shane Warne. (This could well change in the holiday period in January).

The new BBL has been a tough market for the franchises to secure sponsors and members. It has been an expensive exercise for Australian cricket with estimates of $11-15million being pumped into the start-up phase but, it is early days yet. CA and the 6 State Associations who own the franchises are not anticipating profits being made in year 1.

So, as they enjoy the spoils of the festive season (and, hopefully, some good Test cricket), the Directors of CA and their senior management team may consider these recent decisions and whether they will, in fact, take Australian cricket into another golden era!

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About Ken Jacobs:

Ken Jacobs has many years of experience operating in the sports and leisure industry across a range of issues relevant to the sports business sector at local, national and international levels.

From 1980-2007 he managed significant growth in one of Victoria’s leading sports as CEO of Cricket Victoria. During this period Ken was responsible for the management of an increase in participation levels from 100,000 to 185,000 across 1100 cricket clubs in Victoria and a growth in revenue from $500k to $25million. He was also responsible for the implementation of Cricket Victoria’s renowned local government and volunteer recognition programs and the implementation of its first strategic plan. This period also included management and promotion of the iconic Boxing Day Test match at the Melbourne Cricket Ground which has been recognised by the State Government as one of the State’s marquee events

From February –May 2007 Ken was engaged by the International Cricket Council as Event Manager for the staging of cricket’s World Cup in the Caribbean region.
The growth in the business of cricket has been replicated across sport generally which includes an increase in employment in the sports sector, an increasing involvement of government at local, state and federal levels which has coincided with increasing commitment in the funding and promotion of sport.

Ken is a qualified accountant (FCPA),is a member of the Australia New Zealand Sports Law Association and has an extensive network of high level sport, government, commercial and media contacts to ensure clients receive the desired outcomes. Ken was awarded The Medal of the Order of Australia on Australia Day 2009 in recognition of his contribution to cricket and the community.

Ken Jacob’s

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Dutch soccer club and Eredivisie league leaders PSV Eindhoven have announced a five-year extension of their sponsorship agreement with electrical giants Philips, extending their relationship beyond 100 years in the process.

The new deal, which comes into fruition in July, will take the partnership between the two organisations through to the end of the 2015/16 season and surpasses a 100 year partnership with the company having launched the club as a workers team in 1913.

The shirt sponsorship deal has been in place since the inception of the concept in 1982 and PSV are the only club in the Netherlands who are able to boast the same shirt sponsor every season without exception throughout the near 30-year period.

In addition to the kit sponsorship agreement, Philips are also the title sponsors of PSV’s home ground the Philips Stadion and have held this distinction since it opened upon the club’s founding almost a century ago.

PSV general manager Justin Sanders spoke of the deal: “With the 100-year anniversary of PSV in 2013 rapidly approaching, we are very proud of our unique, historic relationship with Philips. Philips and PSV are strong brands and we expect to sign more partners in order to fulfil the club’s sportive ambitions.”

Terms of the new deal were not disclosed, though a statement on the club’s official website PSV revealed that the sponsorship agreement will be continuing under the current conditions of the existing five-year deal that was signed in August 2006.

In addition to these terms, PSV and Philips are planning to explore opportunities for the club to increase their sponsorship revenues by recruiting further partners who fit the profile of promoting healthy living through sport.

Harry Hendriks, chief executive of Philips Electronics Benelux, added: “PSV and Philips have the longest running sponsor relationship in the world, which is extended with another five years. In addition, we share the ambition to make health and well-being central themes of our co-operation by launching innovations and its applications in Holland and across the borders.”