Loan Agreements with a compulsory purchase clause. Financial Fair Play implications of this new trend
The football industry in Europe has seen a significant increase in revenues over the last decade.
Nonetheless, this noticeable growth of profits has not prevented football clubs from indebtedness, aggravated exponentially by mismanagement of resources, tax and social security duties, increasing player wages and/or rising transfer and agency fees.
With several clubs having reported financial distress and instability, authorities have enacted regulations designed to curb excessive spending with the introduction of supervision mechanisms aimed at ensuring clubs’ financial soundness. By way of example:
- UEFA approved in May 2010 the Club Licensing and Financial Fair Play (‘FFP’) Regulations aimed at introducing more discipline and rationality in football club finances.
- The Spanish Ministry of Education, Culture and Sports; the Spanish National Sports Council (‘CSD’); and the Spanish Professional Football League (‘LFP’) signed a protocol on 25 April 2012 to control and eventually reduce the tax debt of Spanish football clubs.
- On 30 January 2013 the LFP, in cooperation with the CSD, approved a set of rules on financial and economic control for Spanish football clubs (‘LFP Financial Control Regulations’).
- The Football Association Premier League (‘PL’) agreed on 7 February 2013 a set of financial regulations designed to improve the sustainability of UK clubs.
In view of the requirements contained within regulations applicable to football clubs, in recent years we have witnessed the emergence of a new contract modality for the transfer of football players between clubs.We are referring to loan agreements including a compulsory purchase clause for the transferee club which are enforceable when the initial loan period has elapsed. Presumably, this contractual trend will increase due to the recent decision of the EU Court of Justice which dismissed a challenge to the FFP Regulations.
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