Editor's Note: Ryan Gauthier is Assistant Professor at Thompson Rivers University in Canada. Ryan’s research addresses the governance of sports organisations, with a particular focus on international sports organisations. His PhD research examined the accountability of the International Olympic Committee for human rights violations caused by the organisation of the Olympic Games.

Big June 2019 for Olympic Hosting

On June 24, 2019, the International Olympic Committee (IOC) selected Milano-Cortina to host the 2026 Winter Olympic Games. Milano-Cortina’s victory came despite a declaration that the bid was “dead” just months prior when the Italian government refused to support the bid. Things looked even more dire for the Italians when 2006 Winter Games host Turin balked at a three-city host proposal. But, when the bid was presented to the members of the IOC Session, it was selected over Stockholm-Åre by 47 votes to 34. 

Just two days later, the IOC killed the host selection process as we know it. The IOC did this by amending two sections of the Olympic Charter in two key ways. First, the IOC amended Rule 33.2, eliminating the requirement that the Games be selected by an election seven years prior to the Games. While an election by the IOC Session is still required, the seven-years-out requirement is gone.

Second, the IOC amended Rule 32.2 to allow for a broader scope of hosts to be selected for the Olympic Games. Prior to the amendment, only cities could host the Games, with the odd event being held in another location. Now, while cities are the hosts “in principle”, the IOC had made it so: “where deemed appropriate, the IOC may elect several cities, or other entities, such as regions, states or countries, as host of the Olympic Games.”

The change to rule 33.2 risks undoing the public host selection process. The prior process included bids (generally publicly available), evaluation committee reports, and other mechanisms to make the bidding process transparent. Now, it is entirely possible that the IOC may pre-select a host, and present just that host to the IOC for an up-or-down vote. This vote may be seven years out from the Games, ten years out, or two years out.

Why the Changes? 

To hear IOC President Thomas Bach put it, these changes were necessary to prevent “too many losers”. Bach voiced this concern in December 2016, and again in May 2019. The essence of Bach’s concern seems to be that a city will put time and effort into a bid, only for it to not be selected by the IOC.

However, the harm caused by losing a bid is unclear. Is the fear that a losing city’s bid will be a one-and-done affair? To be fair, most are. The cities that bid multiple times before winning, such as PyeongChang (2010, 2014, 2018), and Paris (2012, 2024), are rare. But it is difficult to see how the changes will affect this.

Losing an Olympic bid certainly does not make a city a “loser”. While feelings may be hurt in the short run, cities keep on running. Toronto has lost five bids to host the Olympics, with the most recent loss in 2001 for the 2008 Games. But no one seriously thinks of Toronto as a “loser” city – particularly after the Raptors’ NBA championship victory. Legacies can still be created from losing bids. Developing a bid allows the city to re-imagine itself, and market itself to the world. It might even be in a city’s best interest to bid for the Olympics, but not win, to get the benefits without having to invest the billions of dollars to host the Games.

The IOC may be changing the process to eliminate this “winner’s curse”. Currently, bidding cities try to out-promise each other, driving up complexity and costs. Under the new system, the IOC could work more closely with a potential city or region from the outset, organizing and delivering an Olympics that truly fits. The IOC has stated that it would work less like franchisors, and more like partners with future Games hosts, and has formalised this approach in their “New Norm” modifications to Olympic Games delivery.

Finally, the IOC may be hoping that this new approach will encourage cities that might see themselves as “long-shots” to come forward and host the Games. But the last “long-shot” selected as host of the Olympic Games, Rio de Janeiro, was plagued with allegations of corruption, displacement of vulnerable people from the favelas, and poor legacy outcomes.

Back to Salt Lake City? 

This new process, with the IOC possibly presenting only one possible city to the IOC Session for an up-and-down vote has the possibility to undermine transparency in the host selection process. If the IOC is unwilling to announce possible candidates until a deal is already done, the promises made by a city or region may not even be known by its own public until the IOC Session votes on it.

Robert Livingstone, who runs the website GamesBids.com, worries that these changes will lead to “a devolution back to the 1980s and 1990s when a translucent bid process eventually led to the Salt Lake City bribery scandal.” I share that same fear. With Salt Lake City looking to host the 2030 Games, history is rhyming a little to closely.

Even if the return to lavish visits, gift-giving, influence-buying, and outright corruption don’t come to pass, this is a reversal of the general direction since the IOC published Agenda 2020 in 2014. Agenda 2020 called for more transparency, such as publishing Host City Contracts. To their credit, the IOC has followed through on many of the Agenda 2020 reforms.

A reduction in transparency will likely lead to less public participation. And that may be the IOC’s goal. The IOC is sensitive to referendums. The general public is more critical of the Games than it was in the past. In recent years, hosting the Games has been subject to more referendums than ever, with almost all of those referendums saying ‘no’ to the Games.

IOC Member Dick Pound stated that he has “no hesitation in allowing a [future host] commission to have discussions that are out of the public eye that perhaps occur with sports authorities or interested groups even before the governments had been engaged in this, and can be done on a very confidential basis.” This type of process, without even government knowledge, effectively undercuts public consultation and participation in any bid process.

This new bid process has not happened, yet. It is possible that IOC’s approach will continue to be ever-more transparent, and to allow for public input into the bid process. Naturally, until the IOC shares more of its thoughts about the process, and until we see a host selection process in action, which may be years away (under the old process, the selection process for the 2030 Games would take place between 2021–2023), any commentary about the process is admittedly speculative.

Is the IOC Afraid of Losing?

The IOC is facing a crisis of legitimacy. This crisis is no more apparent than when no city seems to want to host the Olympic Games. Of course, there are many reasons that cities are wary of the Games. High costs, poor legacies, perceptions of corruption, and other problems regularly plague the Games.

The IOC’s Agenda 2020 reforms were positive steps forward in addressing some of these issues. Instead, the IOC has seemingly decided that it would rather take the process out of the public eye under the guide of the cities being afraid of being “losers”. But it seems that the IOC is the one afraid of “losing”. Afraid of hearing that “Nobody Wants to Host the Olympics Anymore”. Afraid of the Games coming out on the losing end of referendums. Afraid of having to choose between a bad and worse option to host the Games. The only loser here might be the Olympic Games.

Editor's note: Daniela Heerdt is a PhD candidate at Tilburg Law School in the Netherlands and works as Research Officer for the Centre for Sports and Human Rights. Her PhD research deals with the establishment of responsibility and accountability for adverse human rights impacts of mega-sporting events, with a focus on FIFA World Cups and Olympic Games. She published an article in the International Sports Law Journal that discusses to what extent the revised bidding and hosting regulations by FIFA, the IOC and UEFA strengthen access to remedy for mega-sporting events-related human rights violations.

On November 26^th, the Human Rights Advisory Board[1] of the Fédération Internationale de Football Association (FIFA) published its second report. This blog provides a summary and brief evaluation of the report, by drawing a comparison to the previous report issued by the Human Rights Advisory Board (hereinafter: the Board) based on the content of the recommendations and FIFA’s efforts to implement the Board’s recommendations. The third part of this blog briefly reflects on the broader implications of some of the new recommendations issued for FIFA’s internal policies. The conclusion provides five more general points of observation on the report.

Old and New Recommendations

In its second report, the Board makes 30 ‘specific recommendations’ to FIFA, just slightly less than the previous one. However, not all of these recommendations are new to FIFA. A number of them have been released in the two update statements the Board released since the publication of its first report, one in May 2018 and one in October 2018. Two more sets of recommendations were communicated to FIFA in December 2017 and February 2018, which are as well included in this new report, but which have not been reported publicly before.

Content-wise, most of the recommendations still deal with the human rights risks associated with FIFA’s upcoming and past events. The recommendations made with regard to the human rights issues surrounding the 2018 World Cup hosted by Russia have been issued in December 2017 and concern the general situation and human rights of construction workers, human rights defenders and media representatives, mostly recommending that FIFA should use its leverage to address these issues with the government or other relevant stakeholders, such as the Local Organizing Committee (LOC). Another December-recommendation concerned the sharing of measures taken by FIFA to investigate the involvement of Russia football players in the Russian doping scandal. Furthermore, the report includes the Board’s recommendations regarding the controversies surrounding the choice of accommodation of the Egyptian national team[2], which had been addressed in a set of recommendations initially issued in February 2018[AD1] . With regard to the human rights requirements for hosting the 2026 FIFA World Cup, the report repeats the recommendation issued in May 2018, concerning FIFA’s task to take into account the capacity of bidders to assess and manage human rights risks when deciding for a host. On this issue, the report also introduces a new recommendation for FIFA to reflect on the inclusion of human rights into the bidding requirements. Furthermore, the report also includes ‘interim recommendations’ in relation to the FIFA World Cup 2022 in Qatar, and disclosed that a more detailed set of recommendations can be expected shortly.[3]

While these issues were already present in the first report, four new issues have been added in this second report by the Board:

• player’s rights,
• child safeguarding,
• the ban on woman attending sport matches in Iran,
• and FIFA’s approach to engagement and communication on human rights.[4]

With regard to player’s rights, the Board’s recommendations focus on access to remedy and FIFA’s evaluation of existing football arbitration mechanisms from a human rights perspective, the rules of the employment market for players and FIFA’s review of these rules, and on FIFA’s regulations on player’s rights which need to take the specific situation of children into account. Concerning child safeguarding, the Board recommends that FIFA’s safeguarding working group should conduct a comprehensive stakeholder consultation to identify the responsibilities of member associations concerning child players. Regarding the issue of discrimination against women in Iran, the Board recommends for FIFA to use its leverage on the Iranian Association and to issue sanctions if nothing is changing. Finally, on FIFA’s approach to engagement and communication on human rights issues, the Board recommends that FIFA establishes a systematic annual dialogue with key stakeholders, in addition to individual and event-specific stakeholder engagement and that it adopts a transparent approach on negative impacts connected to FIFA’s activities. Furthermore, the Board calls on FIFA to communicate this approach and share relevant information with confederations and member associations.

What also changed in the second report is that the Board does not issue requests to FIFA anymore. All measures proposed are formulated as recommendations. However, it is questionable to what extent the requests entailed in the first report really made a difference, since the majority of these requests were merely inquiries for more information or clarifications on certain issues.[5] Such requests about additional information or more transparency on certain issues are now included in the recommendations, such as in recommendation R42, asking FIFA to “be as transparent as possible” and to “proactively publish the steps it has taken”.[6] 

The New Tracking System

The second report of FIFA’s Human Rights Advisory Board is not only longer in terms of page numbers  but it also provides more detailed insights into human rights-related efforts FIFA undertook in the past year and continues to undertake, based on the recommendations it received. While in the first report, ‘part B’ consisted of a general overview of FIFA’s human rights efforts up to that point in time, ‘part B’ in the new report lists concrete measures taken by FIFA in reaction to the recommendations issued by the Board in its first report and other recommendations statements made in the past year. To assess these measures, the second report introduces a tracking system, which ranks the status of FIFA’s implementation of the Board’s recommendations from 1 to 4, moving from no implementation (1), to ongoing implementation (2), to advanced implementation (3), and to full or “closed out” implementation (4).[7]

There is only one recommendation for which implementation has not yet started (category 1) according to the Board. This concerns the promotion of a policy with host countries of direct employment of construction workers to prevent the strong reliance on subcontractors, which involves greater risks for workers and migrant workers in particular.[8] Ongoing implementation (category 2) has been observed in relation to the embedding of human rights throughout the FIFA organisation, including relevant committees and key staff, as well as its member associations, the testing of the method of risk identification with informed stakeholders to confirm or challenge findings, and the joint inspections together with LOCs. Furthermore, the Board assessed that implementation is ongoing for three other recommendations: first, FIFA’s considerations on how it can make the most efficient use of its leverage when it comes to the issue of security arrangements linked to hosting a FIFA event; secondly, the publishing of information on the design, operation, and the results of the monitoring of construction sites; and thirdly, making prompt and factual statements to show awareness and knowledge about critical human rights issues when they arise. The Board found that FIFA made considerable advancement (category 3) in developing a system for risk identification,  such as monitoring systems or the detailed human rights salience analysis that is part of the Sustainability Strategy and policy of the 2022 World Cup, as well as in identifying risks to fundamental civil and political rights and communicating its expectation to respect these rights with host governments.

The adoption of a human rights policy has been assessed as fully implemented (category 4). The same evaluation has been made in relation to the recommendations for the 2018 and 2022 FIFA World Cup tournaments, as well as for the bidding processes and the 2026 FIFA World Cup. However, even though the implementation efforts concerning these issues have been evaluated under the same category, taking a closer look reveals that the actual status of implementation is not the same. This is because category 4 combines two criteria, which in fact reflect very different results. ‘Full implementation’ does not necessarily reflect the same situation as ‘closed out implementation’. In other words, a reason for an implementation to end (‘close out’) is not necessarily linked to the fact that the recommended measure has been implemented in its entirety. In fact, full implementation of a certain measure can produce a completely different scenario than abandoning a certain recommendation or measure.

This can be illustrated by taking a closer look at the implementation of measures recommended to FIFA concerning the handling of human rights issues related to the 2018 World Cup. Most of them have been assessed as fully implemented or closed out, and so have the measures taken in relation to the 2022 World Cup. In reality, however, the 2018 World Cup lies in the past and the majority of measures taken in that context were discontinued before they could fully be implemented. For example, the recommendation on offering the Egyptian team an alternative location, including the financial support needed, has been evaluated as ‘closed out’, even though the Egyptian team in the end decided to stick with Grozny. The same can be said about the recommendation that FIFA should raise with the LOC that timely compensation is provided in case a worker on the World Cup construction sites got injured. Even though FIFA states that they did not have access to any financial records that would allow a verification of cash flows, the recommendation has been evaluated as “implemented/closed out”.[9] Due to this combination of two criteria under category 4, simply taking a look at the tabular overview provided at the end of the report[10] can create a distorted picture of the actual implementation status of the Board’s recommendations. Instead, a more careful look at FIFA’s actual efforts on certain issues is necessary to fully understand whether FIFA was indeed successful in implementing a certain recommendation, or whether it just dropped the implementation, for instance because it was linked to a certain event that is over now. 

The Implications for FIFA’s Internal Policies

Some of the recommendations included in the report relate to how FIFA embeds its human rights commitments internally and within its member associations. For instance, according to the Board FIFA should discuss with the Board the reasons for the decision of the Ethics Committee to not publish a detailed explanation of how it reached a decision in a case, and that it should review its operations in that regard.[11] In addition, it recommends FIFA to be explicit with its member associations on what it expects and in what timeframe it expects them to align with FIFA’s human rights responsibilities. The Board also implies that anticipated sanctions should be included in FIFA Statutes, the Disciplinary Code and the Ethics Code.[12]

Furthermore, the update statement by FIFA in this second report reveals that a number of measures were taken in relation to embedding human rights in its organization, based on previous recommendations made by the Board.  For instance, FIFA Council and Committee members have to follow an e-learning course, which includes a human rights module, and a human rights working group has been established within FIFA’s Governance Committee. However, implementation on those matters is ongoing and it becomes clear that this so far has not been the focus of FIFA’s human rights-related efforts and more could be done in that regard.[13] The context and overview FIFA provides on embedding the respect for human rights is rather vague and the measures taken so far do not reach the entire FIFA organization.[14]

Conclusion

A number of general observations can be made based on this summary and comparison. First, most recommendations and action taken by FIFA seem to concentrate on FIFA’s commitment to identify and address human rights risks, which actually was already the case in the first report. Secondly, while FIFA’s events still seem to be a priority, the Board focused also on new issues. Yet, perhaps not enough attention is dedicated to changing FIFA’s international structures and culture into a well-established acceptance and reflection of FIFA’s human rights responsibilities. Furthermore, the report provides valuable and detailed insight into the progress made and how it is made, for instance in relation to FIFA’s leverage over Qatar’s Supreme Committee and the Qatari government to change certain regulations, the human rights defender cases in which FIFA intervened, or the external partners FIFA worked with to address certain human rights risks.[15] Finally, it is a comprehensive report, reflecting the Board’s understanding towards FIFA’s burden of having to address issues of “the past, present and future all at once”, and the fact that “FIFA has to deal with the legacy of decisions taken and contracts signed before the organisation recognized its human rights responsibilities”.[16] This also shows that FIFA takes the Board seriously and in many ways follows the Board’s recommendations.

In general, the fact that FIFA has an active Human Rights Advisory Board in place for more than a year now and renewed its mandate until the end of 2020 should be applauded.[17] Just this month, the International Olympic Committee announced that it is also setting up a Human Rights Advisory Committee, which is supposed to be fully operational by the 2024 Olympic Games, unfortunately not in time for the Beijing Winter Olympics in 2022.

[1] The members of the board are listed in the annex of the first report.

[2] Egypt’s national team chose Grozny, the capital of Chechnya, as its training camp during the World Cup 2018. FIFA authorized this choice, despite the fact that the region’s human rights record is dominated by cases of extrajudicial killings, torture, and enforced disappearances and the Head of the Chechen Republic, Ramzan Kadyrov, is known for his repression of journalists, critics, minority groups, and human rights defenders.  

[3] See p.19 of the second report

[4] Ibid., p 20

[5] See p. 5, 7, or 11 of the first report

[6] See p. 15 of the second report

[7] See p. 5 of the second report

[8] See p. 60 of the second report

[9] See p. 48 of the second report

[10] Ibid. p. 80 ff.

[11] Ibid. p. 27

[12] Ibid. p. 25

[13] Ibid. p. 34 f.

[14] Ibid. p. 33 & 35

[15] Ibid. pp. 17-18, 67, & 69

[16] Ibid. p. 28

[17] Ibid. p. 79

Footballleaks is now operating since nearly half a year and has already provided an incredible wealth of legal documents both on TPO (and in particular Doyen’s contractual arrangements) and on the operation of the transfer system in football (mainly transfer agreements, player contracts and agents contracts). This constant stream of information is extremely valuable for academic research to get a better grip on the functioning of the transfer market. It is also extremely relevant for the shaping of public debates and political decisions on the regulation of this market. As pointed out on the footballleaks website, it has triggered a series of press investigations in major European news outlets.

In this blog, I want to come to a closure on our reporting on Doyen’s TPO deals. In the past months, we have already dealt with the specific cases of FC Twente and Sporting Lisbon, reviewed Doyen’s TPO deals with Spanish clubs, as well as discussed the compatibility of the TPO ban with EU law. In the Sporting Lisbon case, Doyen has since earned an important legal victory in front of the CAS (the ensuing award was just published by Footballleaks). This victory should not be overstated, however, it was not unexpected due to the liberal understanding of the freedom of contract under Swiss law. As such it does not support the necessity of TPO as an investment practice and does not threaten the legality (especially under EU law) of FIFA’s ban.

In our previous blogs on Doyen’s TPO deals we decided to focus only on specific deals, Twente and Sporting Lisbon, or a specific country (Spain). However, nearly six months after the whole footballleaks project started, we can now provide a more comprehensive analysis of the TPO deals signed by Doyen. Though, it is still possible that other, yet unknown, deals would be revealed, I believe that few of Doyen’s TPO agreements are still hidden. Thanks to footballleaks, we now know how Doyen operates, we have a precise idea of its turnover, its return on investments and the pool of clubs with which it signed a TPO agreement. Moreover, we have a good understanding of the contractual structure used by Doyen in those deals. This blog will offer a brief synthesis and analysis of this data.

I.              Doyen’s “geoeconomics” 

A.    The Iberian base

If you trust the veracity of Doyen’s map of deals,[1] Doyen had signed 31 TPO deals before March 2015, of which many ERPAs are published on the footballleaks website. It started operating in August 2011, with a deal involving Abdellaziz Barrada, which was then a player at Getafe and is now playing at Olympique de Marseille. Until the end of 2013, and the signing of the controversial deal with FC Twente, Doyen was only operating in the Iberian Peninsula (with the exception of an isolated contract involving Felipe Anderson from the Brazilian club Santos in September 2011). The clubs involved were Sporting Gijón, Atlético Madrid, FC Porto, Sporting Lisbon, Getafe, Sevilla FC, Benfica, and Valencia. Those deals concerned a wide range of players, from the highly profitable stars Falcao, Mangala or Rojo to a series of unknown players. Based on the aforementioned ‘map of deals’, Doyen has extracted substantial profit margins from those deals. The maximum of 524% profit being reached on Kondogbia’s transfer from Sevilla to Monaco (Doyen invested €1.5 million and recouped €9.358.653 one year later!).

What drove Spanish and Portuguese clubs into the arms of Doyen? The first openly acknowledged reason for TPO deals is enshrined in many of the ERPAs signed during this first phase of Doyen’s operation: it’s the financial crisis, stupid! Spain and Portugal were directly affected by the crisis. Their financial systems broke down as well as their public finances. At once many Spanish and Portuguese clubs (like most of the local businesses) must have been cut off from their usual credit lines and unable to rely on the traditional patronage of local authorities. In 2012, the outstanding debt of Spanish football clubs with the public authorities was restructured. A recent economic study shows the depth of the financial difficulties faced by a majority of the Spanish clubs in the BBVA League at that time. Barcelona and Madrid are the two lone trees that are hiding a very poor forest. This is a fertile ground for risk-averse investors like Doyen to supplement traditional lenders. As far as the three Portuguese top clubs (Benfica, Sporting Lisbon and FC Porto) are concerned a different dynamic might be at play. Indeed, they have a (quasi) secured spot in the most prestigious European club competition, the UEFA Champions League. There is obviously no better competition to feature the qualities of a player and boost his market value. Their collaboration with Doyen is, thus, less risky than for mid-level Spanish clubs (Getafe, Gijón, Sevilla or Valencia), which were unlikely (or at best uncertain) of ever participating in the Champions League.

In 2014 and 2015, this Iberian bias progressively faded. Doyen entered in new deals only with Granada (Luis Martins), FC Porto (Brahimi) and Cadiz FC (multiplayers). As FIFA announced its decision to ban TPO in September 2014, this might have cooled off the interest of the most prominent Spanish and Portuguese clubs. It is also possible that since the Eurozone crisis came to a slow end and the European central bank flooded the financial markets with cheap money, football clubs progressively recovered access to more traditional (and less risky) sources of credit.

B.    Doyen’s internationalization

This disaffection of its traditional market has probably incentivized Doyen to internationalize its investments beyond its Iberian basis, starting with the infamous multiplayer deal with FC Twente in December 2013. Since August 2013 and a first TPO deal with a Mexican investment company, Twente’s management seems to have been desperately looking for cash to finance its unlimited ambitions. The fire sale of Twente’s key players to Doyen was probably urgently needed to cover the club’s short-term deficits. In practice, some of the players concerned (Tadic and Promes) were sold only six months after the deal. Doyen made a huge profit out of those sales, reaching 300% for Promes’ transfer. In that case Doyen’s intervention was triggered by the financial despair of an overambitious mid-level club, with an insufficiently solid source of stable revenues to support its activity on the transfer market. Doyen was no white knight. It is an investment fund, not a charity! The group was interested in the worthy assets of Twente and bought them at cheap value. This was probably the most destructive intervention of Doyen, as it was not aimed at supporting the recruitment of a specific player but at temporarily propping up the finances of a bankrupt club in return for its only solvable assets.

In 2014 and 2015, Doyen decided also to heavily invest in the South American market. It made a number of deals (11) involving mostly Brazilian players (from Santos FC, Sao Paulo, Atletico Paranense and Flamengo) and also two Columbians (from Deportivo Estudiantil). Those deals are for the most part still on-going. They are also probably riskier for Doyen than the European deals because of the limited guarantees that South American clubs can provide. The Leandro Damiao case is there to remind us that those deals are in any case risky for the clubs. Damiao was a great prospect when he was transferred for €15 million to Santos in December 2013. Based on the map of deals Doyen loaned €12 million to Santos in return for 80% of the economic rights attached to him. Yet, after three years, Damiao’s contract was rescinded in December 2015 and he moved on a free transfer to Betis Seville, leaving Santos with an €18 million debt to pay to Doyen (which was recently upheld by the Brazilian justice). This is a good reminder that TPO, on whichever continent, is everything but risk-free for clubs. The sweet feeling of short-term cash might very well turn into the (very) sour taste of long-term debt.

Finally, in 2015 Doyen entered into a surprising deal with an unknown Belgian club: Seraing United (or RFC Seraing). The relatively small deal (€300.000) concerns three of Seraing’s players. It is definitely an unusual investment for Doyen with very little potential to extract substantial profit. One hypothesis is that this contract is used as a legal Trojan horse to support Doyen’s legal challenge against FIFA’s TPO ban in front of Belgian courts. Indeed, Doyen has hired (for €200.000 in 2015 as indicated in the ‘map of deals’) star lawyer Jean-Louis Dupont, who was Jean-Marc Bosman’s lawyer in the eponym case, to entertain complaints in front of the European Commission and simultaneously the Belgian courts against FIFA’s TPO ban. In that regard, it has successfully used the sanctions imposed by the URBSFA (the Belgium Football Federation) and FIFA against Seraing to justify the jurisdiction of the Belgian courts over the case (see our blog on the latest ruling in this case). Doyen’s TPO investment in Seraing has probably more to do with a smart legal stratagem than a long-term investment.

II.            Doyen’s Contractual System

A.    Doyen’s guarantee: the Put Option or Free Agency Fee

Doyen’s contractual system has been relatively stable since it started operating. The principle is always the same: Doyen provides a lump sum (for various purposes, often the recruitment of the player) and gets a percentage of the economic rights attached to a player in return. However, what it does not do, and that is decisive in making it a rewarding business model, is share with the club the risk that the player fails to become a star or that the player leaves on a free transfer at the end of his contract. For the latter scenarios, Doyen quickly developed a bulletproof contractual system structured around a number of contractual clauses limiting its exposure. Be it named ‘Free Agency Fee’ or ‘Put Option’, the idea is that if a profitable transfer of the player fails, Doyen will secure a minimum return on its investment (often the original grant plus 10% of interests each year). This minimum return on investment is usually secured with a ‘hard’ warrantee, a pledge on a share of fixed revenue. This ‘deed of pledge’ (as it was called in Twente’s case) is often attached to the future revenues derived from the broadcasting rights to which the club is entitled as a member of a professional league or its future ticketing proceeds. It is this secured minimum return on investment that makes it a low risk economic endeavour for Doyen. Basically, Doyen’s only risk is that a club would go bankrupt and disappears, but football clubs are a bit like systemic banks, they are too popular to fail and have the tendency to be rescued by public authorities when they face deep financial trouble.[2]

B.    The ‘Reasonable Transfer Offer’ and Doyen’s influence on the transfer policy of clubs

Doyen’s TPO system also guarantees that in case a player is successful, a club will be forced to transfer him if a ‘Reasonable Transfer Offer’ is made. The ‘Reasonable Transfer Offer’ is defined as a minimum amount. If an offer matches or exceeds this amount, Doyen can force the club into choosing either to sell the player or to buy back Doyen’s share for a price equivalent to Doyen’s share of the transfer proceeds if the player would have been transferred. This is a mechanism that ensures that clubs will not be able to keep an outstanding player and pay the minimum fee due at the end of his contract (or the put option fee), rather than sell the player for a more substantial amount. As the clubs having recourse to Doyen are, as it is argued in its own submissions to the French and Belgian courts, unable to afford recruiting these players in the first place, they are more than unlikely to be able to buy back the share of the economic rights owned by Doyen when their price has tripled or quadrupled. The alternative is simple: sell or go bankrupt. Until now few clubs have chosen the latter option. The mechanism of the ‘Reasonable Transfer Offer’ is in itself aimed at influencing the transfer policy of the clubs signing a TPO deal with Doyen. They have their hands doubly tied: if the player fails to materialize as a star they will have to repay at least Doyen’s investment plus healthy interests; if he does become a star they will lose him as soon as the right transfer offer comes. And Doyen’s TPO contracts ensure that the right transfer offer will come. 

C.     Doyen’s double-game as an agent

In many of the ERPAs published by footballleaks one will find a provision indicating that Doyen has the right to act as an agent to promote the transfer of the player of which it owns a share of the economic right.[3] Doyen, which has intimate knowledge of the key legal conditions enshrined in the ERPA, is in a position to market the players to new clubs and force a transfer by disclosing (informally) the level of the ‘Minimum Transfer Offer’. The potential for conflicts of interests between Doyen acting as an investor and owner of a share of the economic rights attached to a player and Doyen acting as mandated agent to promote the transfer of the same player is obviously high. Nelio Lucas, who was and still is active as an agent, impersonates these ties between Doyen and the shady world of agents. His personal contacts in the milieu are well-known and have been instrumental to the success of his enterprise. Doyen’s unhindered double game as an agent and an investor is one of the reasons why TPO needs at least to be strictly regulated or even banned. When engaging in TPO deals, financially distressed clubs are basically handing over to Doyen the management of parts of their squad. Indirectly the player’s freedom is also impaired. Who can doubt that a club will be able to incentivize his player to leave if it needs him to do so due to Doyen’s financial Sword of Damocles pending over its head.

Conclusion: Thank you footballleaks!

Doyen’s business model is smart and has to be acknowledged as a cynical embrace of the intrinsic logic of FIFA’s transfer system. It plays on each club’s natural drive for grandeur and the propensity of the clubs’ management to throw caution to the wind to get there at least once. Doyen’s head, Nelio Lucas, is no criminal. There is no indication that he engages in match fixing or money laundering. He is a dead-set investor hunting for the grail: secure financial returns on investments. And he (with many others[4]) has found a way to play the transfer system to his advantage and to game irrational clubs and managers. This does not imply that this business model should go on, however.

Instead, it must be acknowledged that this extreme form of ‘financiarisation’ of football brings with it important risks for clubs. Not only football fans are sometimes (often) irrational, more dramatically the management of clubs are often acting irrationally when they take on huge financial risks to achieve short term sporting success. It must also be acknowledged that public authorities have the tendency, for right or for wrong, to bail out football clubs when they face financial troubles. Thus, in turn, raising the potential of moral hazard and free riding from the part of reckless investors. Finally, it is clear that the transfer market due to its intrinsic transnational structure and the role played by inter-subjective networks is prone to conflicts of interests, which are heightened when the ownership of the economic rights attached to a player are distributed in an opaque fashion amongst a set of different actors.[5] The problem must be understood as structural. New legal mechanisms must be devised to avoid that the transfer system is abused for the purpose of speculation and to ensure that clubs are not incentivized to have recourse to creative financing to achieve competitive balance. 

All this calls for strong regulatory intervention. But, can FIFA truly regulate a complex set of transactions that span a variety of jurisdictions? Personally, I doubt it.[6] It needs to simplify the market to better control it. The TPO ban is a form of simplification. Another option would be to use FIFPro’s current complaint against the FIFA transfer system in front of the EU Commission to reinvent the transfer system and put a negotiated end to the artificial commodification of football players’ contracts.

In any event, we would not have been able to discuss all of this without footballleaks. In a complex world where markets ignore borders and economic actors operate from opaque jurisdictions, exceptional actions are needed to supervise those transactions and ensure that the visible hand of the general interest supports the (sometimes truly) invisible hand of the market.

[1] This document is susceptible to being easily forged, as it is a simple excel sheet. Therefore, I crosschecked the data included on the excel sheet with Doyen’s ERPAs published on Footballleaks, which confirmed the likely veracity of the information provided in the map of deals.

[2] This is where the EU State aid rules might also come into play to protect the public purse. See R. Craven, ‘Football and State aid: too important to fail?’, International Sports Law Journal (2014) 14:205–217 and B. Van Rompuy & O. van Maren, ‘EU Control of State Aid to Professional Sport: Why Now?’, Forthcoming in: A. Duval & B. Van Rompuy (eds.) The Legacy of Bosman. Revisiting the relationship between EU law and sport (T.M.C. Asser Press, 2016).

[3] See for example: ERPA Guilavogui, para.7 ; ERPA Ola John, para.10.6 ; ERPA Luis Martins, para 14.2 ; or ERPA Kondogbia, para.7.

[4] Numerous investment firms and agents/intermediaries relied on a similar business model. Footballleaks has released fewer documents as far as they are concerned, but see for examples: Gestifute; Gol Football Luxembourg S.A.R.L; Representaciones Internacionales Vijai SA; Quality Football Ireland Limited; Leiston Holding limited.

[5] The “opacity” of the transfer system was recently flagged by an excellent Harvard study: M. Andrews and P. Harrington, ‘Off Pitch: Football’s financial integrity weaknesses, and how to strengthen them’, CID Working Paper No. 311 January 2016.

[6] Andrews and Harrington (at p.99) believed before footballleaks’ releases “that the lack of knowledge about TPO affords it room to hide and that a general ban will force more ‘hiding’, which will limit opportunities to gather information about the practice and effectively regulate it in future.” Yet, I think FIFA would had a very hard time to create the transparent register they dream of, compliance with a duty to disclose would be extremely difficult to police and the case-by-case assessment of an incredible number of contractual arrangements would be needed. With the full ban FIFA reduces the administrative burden and partially externalizes enforcement to whistle-blowers (as footballleaks) and the press.