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Revisiting FIFA’s Training Compensation and Solidarity Mechanism - Part. 4: The New FIFA Clearing House – An improvement to FIFA’s training compensation and solidarity mechanisms? - By Rhys Lenarduzzi

Editor’s note: Rhys Lenarduzzi recently completed a Bachelor of Law (LL.B) and a Bachelor of Philosophy (B.Phil.) at the University of Notre Dame, Sydney, Australia. As a former professional athlete, then international sports agent and consultant, Rhys is interested in international sports law, policy and ethics. He is currently undertaking an internship at the T.M.C. Asser Institute with a focus on Transnational Sports Law.

In September 2018, the Football Stakeholders Committee endorsed the idea of a Clearing House that was subsequently approved in October of the same year by the FIFA Council. A tender process commenced in July 2019 for bidders to propose jurisdiction, operation and establishment. Whilst many questions go unanswered, it is clear that the Clearing House will be aimed at closing the significant gap between what is owed and what is actually paid, in respect to training compensation and solidarity payments. The Clearing House will have other functions, perhaps in regard to agents’ fees and other transfer related business, though those other operations are for another blog. It will hence act as an intermediary of sorts, receiving funds from a signing and therefore owing club (“new” club) and then moving that money on to training clubs. Whilst separate to FIFA, to what extent is unclear.

I have landed at the position of it being important to include a section in this blog series on the soon to commence Clearing House, given it appears to be FIFA’s (perhaps main) attempt to improve the training compensation and solidarity mechanisms. As will be expanded upon below, I fear it will create more issues than it will solve. Perhaps one should remain patient and optimistic until it is in operation, and one should be charitable in that there will undoubtedly be teething problems. However, it is of course not just the function of the Clearing House that is of interest, but also what moving forward with the project of the Clearing House represents and leaves unaddressed, namely, the issues I have identified in this blog series.

1. Operation and Function of the Clearing House

The Clearing House will apparently work in the following ways:

When a player is registered as a professional for the first time, or, in the case an international transfer becomes known via TMS (Transfer Matching System), a Preliminary Player Passport will be created. This will contain the information acquired by FIFA from the relevant national associations and money owing will be calculated, per the FIFA redistributive mechanisms (enshrined in Article 20 and Annex 4 of the RSTP in the case of training compensation, and at Article 21 and Annex 5 in the case of the solidarity mechanism; see Blog 1 for a comprehensive overview). Aforesaid calculation will be undertaken by FIFA and not the Clearing House, and the Preliminary Passport will be reviewed, then given the green light or conversely disputed by the relevant member associations, rather than the training clubs supposedly due compensation. Payment directions, including bank accounts and official contact details of clubs and national associations connected to the redistribution will then be communicated by FIFA to the Clearing House. An invoice may then be issued to the new club and the obligation of that club is to pay accordingly, to the Clearing House. The Clearing House will then distribute to the training clubs, though its mandate extends to confirming and ensuring the amounts and details are correct, and the money makes it to its destination. FIFA will be made aware of which payment obligations have been fulfilled, and which have not. It is FIFA and not the Clearing House then who may sanction non-compliant clubs.

For a more comprehensive overview of the Clearing House, please see Toni Roca’s piece on the LawInSport website; FIFA’s Clearing House: The Future Of Solidarity Mechanism & Training Compensation.

2. Potential Positives & Success of a Kind

One can see the positive side of modernising, centralising and digitising the transfer system, so as to improve compliance and efficiency in accordance with the regulations as they stand and the payment obligations that arise from those regulations. If achieved, FIFA can say it has ticked that box and many stakeholders will be pleased.

As mentioned in the second blog of this series, “In 2018, it was reported that just USD$67.7m of the USD$351.5m due to be distributed in solidarity contributions, was actually paid. That is a mere 19.3% of what should have trickled down and perhaps just as alarming is that this percentage has been worsening”. If FIFA does in fact close the gap between what is owed and what is paid by way of the Clearing House, that would indeed be success of kind. Hundreds of millions of dollars might make it to training clubs, some of those undoubtedly do not need the compensation, but a large share of those that might benefit are the kind of club I have referred to throughout this series as nurseries and/or victims of the so-called muscle drain. If achieved, one would then have to take their hats off to FIFA, as a specific objective would have been accomplished.

Success in the way imagined above would just be solving one issue, however. I appreciate that hundreds of millions of dollars can go a long way in achieving some form of redistributive solidarity and the fruits of that redistribution could potentially be far-reaching. Though lingering behind this hypothetical success would of course be, what proceeding with the Clearing House ignores.

3. Cause for Concern

Whilst one has to applaud FIFA’s efforts towards improvements, there appears a myriad of questions left unanswered not only about the Clearing House but additionally about the redistributive mechanisms themselves. To proceed under the guise that all is well with these systems and that all that needs to be remedied is the gap between what is owed and what is actually paid, is to ignore much of what I have raised in this blog series.

The following excerpt from a relevant FIFA webpage captures the organisations’ position.

“The original objectives and principles of the transfer rules remain sound: the protection of contractual stability; encouragement of training; solidarity between the elite and grassroots; protection of minors; competitive balance; and ensuring the regularity of sporting competitions”. 

To expand, this kind of sentiment highlights FIFA’s intention to proceed without answering the fundamental questions, as though it is the position held by all that these systems are targeted at legitimate objectives and adequate to attain them. This is clearly not just a case of once the Clearing House is in operation, the systems will simply work perfectly. To put the practical critique aside momentarily, the establishment of the Clearing House is no response to a fundamental critique, the philosophical flaws in justification for the redistributive mechanisms and it appears the hindrance cause by the systems to players’ free movement will continue to be ignored. 

Additionally, and returning to a practical perspective, with the Clearing House relying on a Players Passport, the compliance or non-compliance of national associations to provide and maintain the correct information seems to be what the project hinges on. Historically, some national federations have not been so reliable in this sense, so this is likely to be another aspect that will need significant attention. There may be less disputes given the supposed streamlining of the payment process, but might this quickly be forgotten given the introduction of the Clearing House seems to simultaneously mean an increased administrative burden on FIFA and the national associations? Then let us not proceed as though there will be no disputes at all. We are yet to be made aware what the process will be in the case of a dispute over the amounts calculated, a dispute over the Preliminary Passport, or the expiry dates of outstanding payments, to point to a few issues that may arise. Afterall, the dynamics of a transfer will change with the introduction of the intermediary Clearing House and will take some getting used to. Furthermore, it looks as though the training clubs owed money will not be involved directly in the process of disputes, which is to be dealt with by the member associations. This is questionable, as not all clubs have good relationships with their national associations, nor are national associations necessarily more trustworthy or better positioned to handle a dispute. On occasions it has been found that the reason a training club has not received their training compensation or solidarity payment, was because it was being held by a national federation (see section 4. of Blog 2 for a personal anecdote of an instance as such).

4. Concluding remarks

This account of questions and concerns is not exhaustive, and yet I would emphasise the issues with training compensation and solidarity mechanism more generally. Could the establishment of the Clearing House in fact raise more questions and cause more problems than it solves, given it may just semi-solve one problem, that of the gap between what is owed and what is paid? It is reasonable to ponder whether the commencement of the Clearing House in fact houses, protects and reinforces FIFA’s commitment to systems that are ultimately flawed, when time and energy could be better spent completely overhauling them. As it stands, and if one finds themselves sympathetic to the issues I have identified throughout this series, one can be reasonably concerned that the establishment of the Clearing House prolongs the arrival of a preferable alternative system.

In my next and final blog of this series, I intend to consider alternative systems of redistribution. I will also take the opportunity to address the idea that football clubs are incentivised by training compensation and solidarity payments.

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