Article 18ter of the FIFA RSTP – Prohibition of Third-Party Ownership (TPO) of Economic Rights to Players
Third-Party Ownership (TPO)
Article 18ter of the FIFA RSTP is one of the key provisions in today’s football business. This provision prohibits so-called Third-Party Ownership (TPO), which is a situation in which a third party acquires the right to a share of the proceeds from a player’s future transfer, or rights relating to such a transfer or the consideration due for it. Violation of this prohibition may result in disciplinary action by FIFA authorities.
What is Article 18ter of the FIFA RSTP?
Article 18ter of the FIFA RSTP is titled “Third-party ownership of players’ economic rights” and is found in the chapter concerning third-party influence on clubs and the ownership of players’ economic rights.
Pursuant to paragraph 1 of this provision, a club or player may not enter into an agreement with a third party under which that third party:
- acquires the right to a share, in whole or in part, of the consideration due in connection with a future transfer of a player from one club to another, or
- acquires any rights related to the player’s future transfer or transfer compensation.
The ban has been in effect since May 1, 2015. FIFA introduced it to eliminate a model in which the economic value of a player’s future transfer was subject to rights held by investors or other entities other than the clubs involved in the transfer.
What is Third-Party Ownership (TPO)?
Third-Party Ownership, abbreviated as TPO, involves a third party acquiring the right to an economic benefit associated with a player’s future transfer. For example, a club may receive funding from an investor, and in return, the investor obtains the right to 30% of the amount the club will receive in the future for the transfer of a specific player.
If a third party thereby obtains a share in the payment due in connection with a player’s future transfer or rights pertaining to such a transfer, the club violates the prohibition set forth in Article 18ter of the FIFA RSTP.
This does not mean, however, that FIFA prohibits clubs from using external financing per se. What is crucial is the nature of the rights granted to the financier, not the mere fact of raising external capital. This means that clubs may receive external financing as long as they do not, in connection therewith, grant rights to the benefits of a future transfer to a third party.
Importantly, a violation of the prohibition occurs whenever such benefits are granted to anyone other than the clubs associated with the player and the player himself. It is not necessary for the club or the player to derive any benefit from the granting of such rights.
Who is considered a “third party”?
A “third party” is any entity that is not:
- the player who is the subject of the transfer,
- a club involved in the player’s transfer,
- a club with which the player was previously registered.
A “third party” is therefore any entity other than those listed above. For example, this could be:
- a football agent,
- a club sponsor,
- an investor.
Article 18ter: Economic Rights and Federation Rights
As a result of this regulation, two categories of player registration rights have emerged—economic rights and federation rights. Federation rights refer to the right to register a player and the player’s entitlement to play for a given club. Economic rights, on the other hand, pertain to the financial value associated with the player, including a potential transfer fee.
The regulation in question pertains to the latter category of rights.
Sell-on clauses (percentage of a future transfer)
The TPO ban prohibits a third party from holding the right to a share in a player’s transfer. As noted earlier, a third party is any entity that is not the player, a club involved in the transaction, or the player’s previous registered club.
It follows that clubs are permitted to enter into so-called “sell-on clauses,” which grant the club releasing the player a percentage of that player’s future transfer fee from the acquiring club. Clubs face no sanctions for such agreements.
Agreements with Agents
It should also be noted that contracts with agents often exhibit characteristics of agreements that violate the TPO ban. Sometimes, clubs grant agents the right to a share of the transfer fee from a player’s future transfer.
Any agreement that grants a football agent the right to a share of the transfer fee for a player, without linking that fee to services provided by the agent, constitutes a violation of the TPO ban. Therefore, if a club decides to grant an agent a percentage of a future transfer but has no intention of using that agent’s services in connection with a player’s departure from the club, the club is in violation of the TPO prohibition. The key factors here are, therefore, the proper description of the contract terms and the actual intent of the parties.
What sanctions apply for violating Article 18ter?
Pursuant to paragraph 6 of Article 18ter, the FIFA Disciplinary Committee may impose disciplinary sanctions on clubs or players who fail to comply with the obligations arising from this provision. Depending on the severity of the violation, penalties may include a warning, a fine, or even a transfer ban.
At the same time, it is important to distinguish between disciplinary liability and the validity of a specific contract. The mere fact of a potential violation of the RSTP does not automatically mean that the contract is invalid or unenforceable under applicable national law. In other words, the club must still fulfill the obligations incumbent upon it as a result of the agreement (unless they are invalid for other reasons), but at the same time, it is subject to disciplinary sanctions for doing so.
Summary
Article 18ter of the FIFA RSTP prohibits the allocation of a share of a player’s transfer fee to parties other than the clubs associated with that player and the player himself. This means that football agents or sponsors may not receive a share of that fee. Violation of this prohibition exposes the club to disciplinary sanctions from FIFA, but the contract itself remains valid.
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