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18 April 2020

Avengers assemble: English football’s governing bodies

The Premier League (“PL”) met once again on Friday (17th April) and reiterated its “objective to complete the 2019/20 season”. This position is mirrored by the English Football League (“EFL”), with its Chairman Rick Parry penning an open letter to supporters on the same day, reassuring them that they are committed to “delivering a successful conclusion to the 2019/20 season”.

The PL and EFL’s joint stance will not come as a surprise to observers, who may recall UEFA’s letter to Europe’s national associations and leagues earlier this month, recommending that domestic league seasons be completed or else risk clubs’ entitlement to participate in next season’s UEFA club competitions. Reports now indicate that UEFA has issued a further letter asking its national associations to plan a domestic league finish by 31st July. UEFA has already confirmed plans to hold a series of meetings starting Tuesday 21st April, mindful of having to possibly wedge its own competitions’ fixtures into the intense domestic league schedules being planned by the national associations or otherwise consider options such as a season-ending ‘mini-tournament’. 

FIFA’s guidelines

On Tuesday 7th April, FIFA published its guidelines on dealing with football regulatory issues caused by COVID-19 (the “Guidelines”). At the time of publishing, FIFA expressed its intention fundamentally to achieve the completion of various club competitions’ fixture calendars, even if that means extending those calendars beyond their original scheduled end-date.

FIFA is continuing to monitor developments and may yet issue further guidance. However, the Guidelines should be acknowledged as a helpful starting point whilst the football industry tries to find its feet in these times of great uncertainty. As a reminder, the Guidelines seek to address four main “points”: (1) expiring agreements and new agreements; (2) agreements that cannot be performed as the parties originally anticipated; (3) registration periods (“transfer windows”); and (4) other regulatory matters.

The context

This article highlights FIFA’s qualifying statements in the Guidelines and analyses the importance of the role that will now be undertaken by English football’s governing bodies, with a particular focus on the expiry/extension of player contracts.  

Expiry of player contracts (PL and EFL)

The expiry date in any given year for player contracts in the PL and EFL is 30th June (save in certain specific cases). Ordinarily, this would safely align with the end-date for domestic league and cup competitions and UEFA club competitions. However, FIFA has now made clear that it will approve requests for an extension to these competitions.

One of the key reported takeaways from Friday’s PL meeting was an acceptance that the season would not be able to resume until at least 8th June. The EFL is facing a similar outcome and so it means there is an increasing inevitability that the end-date for these competitions will be after 30th June and therefore beyond the expiry date of numerous player contracts. Over the Easter weekend, Richard Bevan (Chief Executive at the League Managers’ Association) shone a light on the numbers, noting that around 1,000 EFL players and 329 PL players will be out of contract at the end of June, as things stand. This is a substantial number by any measure and, in the case of the EFL, well over a third of the total number of players registered.

Expiry of player contracts – the proposed solution

Under the first point of its Guidelines, FIFA proposes that player contracts will now expire at the amended end-date of the relevant competition’s season. Many observers think this is a sensible proposal designed to help players, clubs and leagues achieve the completion of their seasons with a view to minimising further disruption in these unusual circumstances.

Compliance with the proposal

FIFA acknowledges its first and second points (see above) are “general (non-binding) interpretative guidelines” to its overarching Regulations on the Status and Transfer of Players (“RSTP”). FIFA further clarifies, “as a general rule, employment agreements shall be governed by national law and the contractual autonomy of the parties”. Additionally, FIFA’s dispute resolution mechanism “where clubs and employees cannot reach an agreement” would only come into play if national law does not address the situation or a collective agreement with a player’s union is not applicable. 

In other words, FIFA cannot compel a player, nor a club, to extend a playing contract. The situation in each case will depend primarily on the relevant country’s employment law and the contractual terms agreed by the player and his club.

From the perspective of English law, the same principle applies in respect of the PL, the EFL, the Football Association (“FA”) and the Professional Footballers Association (“PFA”). In the end, the onus will be on clubs to agree a position with their out-of-contract players.

Nevertheless, English football’s governing bodies have an important role to play in shaping the environment within which clubs and players will seek to find a suitable solution to player contracts expiring on 30th June. This might be in the form of amendments to regulations, guidelines and/or collective agreements.

Summary of some key issues

Inevitably, there will be a range of items for clubs and players to consider as they seek a resolution to the problem presented by contracts expiring on 30th June. Each club and player will have their own set of circumstances, objectives and concerns. However, there are various issues that the governing bodies of English football will be looking at in an attempt to help clubs and players establish next steps. For example:  

1. When will the 2019/20 season resume?

Fundamentally, clubs will be hesitant to enter into discussions with an out-of-contract player until there is a degree of clarity on whether the PL and/or EFL seasons will resume and if so, when. Clubs may be happy to let certain players go on 30th June, in any event (see issue 2 below, in particular).

Similarly, certain players will be looking ahead to next season and, without certainty regarding their long-term futures (see issue 3 below), may be wary of the increasing likelihood of an intense fixture calendar with limited periods of rest between games and consequently, an increased risk of injury.

The resumption of the 2019/20 season is not solely in the hands of English football’s governing bodies. On Thursday 16th April, the UK Government announced an extension to UK lockdown measures for at least an additional three weeks, in accordance with the review required as part of the recently enacted Health Protection (Coronavirus, Restrictions) (England) Regulations 2020.

For as long as the lockdown remains in place (supported by government guidance that “outdoor recreation” businesses and venues must close and that UK citizens observe fundamental measures on social distancing), English football’s governing bodies will find it difficult to sanction a resumption of the season and that will include playing ‘behind closed doors’ – especially where “the full support of the Government” is being sought (in the words of the PL).

2. Cash flow crunch

Clubs may until recently have planned for only a limited number of weeks without playing league fixtures, and many (particularly in the EFL) are highly reliant on ‘match-day’ revenue. Without this revenue, clubs are increasingly finding it difficult to make salary payments to players and other non-playing staff at contracted levels. An increasing number of clubs are agreeing salary reductions, deferrals and ‘furloughing’ arrangements. This trend looks set to continue; for example, the EFL and PFA have now agreed a collective “recommendation” for players in League One and Two to accept a wage deferral of up to 25% for April (except where players already earn less than £2,500 per month).  

Clubs will be hoping for the FA, PL and EFL to work together and quickly to identify financing solutions that sustain them beyond June – in addition to the financial packages announced in recent weeks (which are substantially a combination of accelerated payments that were due to clubs later, in any event). The situation is especially critical for EFL clubs given that match-days in the short-term are much more likely to be behind closed doors (as confirmed by Rick Parry in Friday’s open letter), thereby disproportionately impacting their revenues. Without viable financing solutions, some clubs will find it difficult to offer short-term contract extensions to players.

3. Will parameters on contract extensions be relaxed?

Clubs and players may not want to extend contracts any longer than is required to complete the current season. However, there are certain regulatory parameters that could be interpreted as a ‘stumbling block’ to clubs and players agreeing short-term extensions.   

To give one example, certain players might not be so willing to agree to a short-term extension unless they receive some form of uplift to their existing financial package, particularly where they do not yet have contracts lined up for next season and would like to keep themselves ‘injury-free’ in pursuit of such contracts. These players (even at the lower end of the EFL) might be seeking a degree of financial security before committing to a short-term contract extension. They might otherwise decide to ‘take their chances’, run-down their existing contracts and await the offer of a long-term contract.

English football’s governing bodies might consider methods of facilitating a smoother pathway for clubs and players to agree short-term extensions. For example:   

  1. Temporarily disarm the restriction on the requirement for a player contract to be extended by a minimum of one year where there is an amendment that seeks to increase a player’s “remuneration” (a term which is interpreted widely to include benefits in kind in the PL Rules and EFL Regulations) and where that re-negotiation/amendment takes place during a season (as would be the case here). Clubs might then find ways to agree short-term extensions with players by incentivising them accordingly.

  2. Allow players to negotiate and conclude terms on a pre-contract with another PL or EFL club.

    Players may enter into discussions and conclude a contract with an overseas club if their existing contract is due to expire within six months. However, this right does not extend to players seeking to conclude a domestic playing contract. As it stands, these players must wait until at least after the third Saturday in May (16th May 2020) to negotiate terms with a prospective new club.

    If players were granted the opportunity to secure their futures for next season and beyond, they might be more amenable to short-term contract extensions with their existing clubs – including where it would mean a reduction to their existing financial package (thereby helping their existing clubs). The traditional argument against this is that it could undermine the integrity of the competition (e.g. players playing against their future clubs). Nevertheless, in these uncertain times, English football’s governing bodies (in tandem with FIFA) might now consider this a realistic option.  

English football’s governing bodies (in particular the PL and EFL) might yet provide further guidance to clarify and resolve regulatory points including the above. It will otherwise be up to the clubs and their advisors to interpret the existing regulations and identify workable solutions. This will only add to clubs’ existing contractual concerns, which will include questions on how to deal with player loan agreements, amending existing provisions regarding performance-related bonuses (now affected by the re-scheduling of fixtures) and, in some cases, the extensions of separate image rights contracts.

4. Agents’ commissions

Players’ agents will likely expect to receive commission for any extension of a player’s contract, regardless of how long that extension will be. Again, the situation will be case-specific. However, it is likely that agents will have clauses in their representation contracts with players entitling them to a commission fee each time the relevant player agrees to enter into a new contract during the agent’s period of representation. Irrespective of how that commission fee is paid (i.e. by the player and/or the club on the player’s behalf), these are additional payments that neither the club nor the player will have anticipated making before the season was disrupted by the pandemic. Potentially, this could impact on the possibility and/or commercial terms of short-term contract extensions. 

In addition, clubs will be alert to agents’ commission fees which are outstanding. Players’ salary reductions and deferrals do not necessarily have an equivalent impact on agents, if the relevant commission amount has been prescribed as a lump sum ‘fixed fee’ payable on certain dates. Clubs might now be investigating methods of adjusting agents’ commission fees, or perhaps liaising with agents to defer scheduled payments.

Closing comment

The COVID-19 pandemic has presented an extensive array of complex challenges to the football industry and the situation continues to develop on a daily basis. In relation to player contract extensions, clubs and players will be analysing the issues and deliberating over the appropriate solutions, in consultation with agents, lawyers and accountants. In the interim, they will be hoping and waiting for English football’s governing bodies to provide appropriate guidance and propose additional methods of financial support where it is needed.

As always, Charles Russell Speechlys’ sports team will be on hand to address questions and respond to any immediate concerns from members of the football family who continue to be affected by the COVID-19 pandemic. The team can be contacted on football@crsblaw.com.

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