Youth Recruitment in a Post-Brexit Environment: What is the position on training rewards?

The UK leaving the European Union has had a colossal impact on youth recruitment and development for British clubs. In recent times, FIFA has introduced a number of important changes to its Regulations on the Status and Transfer of Players (the “RSTP”).

The effect of this, coupled with the impact of Brexit and the UK’s new immigration regime, has seen the ability of British clubs being able to recruit players (especially those between the ages of 16 and 18 years old) from across Europe (including the Republic of Ireland) become somewhat limited.

As a result, British clubs have been placed at a competitive disadvantage, in comparison to their European rival clubs, when it comes to youth recruitment. With new hurdles in the way of signing players from overseas, the recruitment strategies and transfer policies of British clubs will no doubt be altered moving forwards. Therefore, it is imperative that clubs and agents get to grips with the latest regulations as soon as possible (particularly given that the changes are now in force with immediate effect).

This article will navigate through a player case study with a view to providing a summary of the regulations governing the recruitment of youth players at international level, including entitlements to Training Compensation and Solidarity Contributions, whilst at the same time highlighting some of the key regulatory changes that have been brought about by Brexit.

Although The FA’s new Governing Body Endorsement (“GBE”) criteria is beyond the scope of this article, it is imperative that clubs recognise that, with effect from 1 January 2021, all EU nationals (apart from nationals of the Republic of Ireland who are subject to different rules) are now subject to the same visa requirements as their non-EU counterparts.

As such, British clubs seeking to register a non-UK national must consider whether it is likely that the player in question will satisfy the criteria to qualify for a GBE. However, players aged 18 and over from the Republic of Ireland do not require a GBE due to the Common Travel Area Arrangement that exists between the two countries.

The Starting Point: International Transfer of Youth Players

There is a general prohibition on the international transfer of players below the age of 18, which is contained in Article 19(1) of the RSTP. There are five exceptions that apply to the general prohibition, and these are detailed in Article 19(2) of the RSTP. One of these exceptions occurs where:

“The player is aged between 16 and 18 and the transfer takes place within the territory of the European Union (EU) or European Economic Area (EEA)”

However, as the UK has now formally left the EU (and therefore no longer forms part of the “territory of the EU or EEA”) the exception under Article 19(2)(b)(i) will no longer apply to British clubs and, ultimately, the international transfer of minors will be prohibited.

Technically speaking, the UK’s departure from the EU could have included a prohibition on transfers of youth players between English, Scottish, Welsh and Northern Irish clubs. However, at the end of 2020, FIFA approved an amendment to Article 19 acknowledging the fact that it recognises that the UK is one state made up of four separate FIFA member associations. As such, by virtue of Article 19.2(b)(ii) of the RSTP, players aged between 16 and 18 will be able to transfer “between two associations within the same country”.

In practice, this amendment to the RSTP will mean that the transfer of a minor (aged 16 to 18) between UK member associations (England, Scotland, Wales and Northern Ireland) will still be permissible, provided that certain minimum obligations are met (these minimum obligations are identical to those that apply to a transfer of a minor aged between 16 and 18 within the territory of the EU or EEA (as is further set out in Article 19(2)(b) iii. – vi. of the RSTP)).

More importantly, the Republic of Ireland is not included in this concession and consequently, British clubs are no longer able to sign players from the Republic of Ireland under the age of 18 as this would be recognised as an “international transfer” under the RSTP.

Applying the above to our case study, the Player would be prohibited from transferring to a British club until he has reached the age of 18. As the Republic of Ireland does not form part of the UK, British clubs looking to acquire the player would not be able to rely upon the new exception in Article 19.2(b)(ii) of the RSTP given that the transfer would not be one between two associations within the same country. However, under the EU/EEA exception, the Player would still be able to transfer from the Training Club to clubs within the EU/EEA (again, provided that the minimum obligations are met, the Player would for example be able to join clubs in France, Spain, Germany, Italy etc.).

Training Compensation

In accordance with the RSTP, “Training Compensation” is payable by a club in either of the following situations:

1. when a player is being registered for the first time as a professional; and
2. each time a professional is transferred until the end of the calendar year of his 23^rd birthday

Our emphasis is added to the wording “calendar year” as, with effect from 1 January 2021, the calculation of Training Compensation will be based on the calendar year of the 23^rd birthday of the Player, as opposed to the “season” (which was the previous wording under the RSTP). The effect of this amendment is that, provided any transfer of a player takes place after the calendar year of his 23^rd birthday then no Training Compensation would be payable.

Training Compensation is intended to compensate training clubs for the investment they have made in the training and development of a player who moves internationally to another club. The rules governing Training Compensation are contained in Article 20 and Annexe 4 of the RSTP.

Training Compensation is payable until the end of the calendar year of a player’s 23^rd birthday for training costs incurred between the calendar year of the player’s 12^th birthday to the calendar year of his 21^st birthday, unless it can be shown that the player has already completed his training before the age of 21 (e.g. he has become an established first team player or international player).

There are certain circumstances where Training Compensation is not due to the player’s training clubs. Such scenarios are set out in Annexe 4 Article 2(2) of the RSTP and cover instances where the player’s contract was terminated without just cause, the player transfers to a category 4 club (the lowest category), or if the player regains his amateur status on being transferred.

Responsibility for Training Compensation

As set out in Annexe 4 Article 3 of the RSTP, when a player is registered as a professional for the first time, the club registering the player is responsible for the payment of Training Compensation within 30 days of registration to every club with which the player has previously been registered and that has contributed to his training, starting from the calendar year of his 12^th birthday. The amount payable is calculated on a pro rata basis according to the period of training that the player spent with each club.

In the case of a “subsequent transfer” (i.e. after a player has been registered as a professional for the first time he then transfers from his club to a club in a different association) the buying club is responsible for Training Compensation but only to the former club (which, subject to the terms of any loan agreement, also includes any clubs that registered the player on a temporary basis) and not the player’s previous clubs.

The obligation to pay Training Compensation arises whether the transfer takes place during or at the end of the player’s contract.

Training Compensation Calculation and Amounts

The method by which Training Compensation amounts are calculated is set out in Annex 4 Articles 4 and 5 of the RSTP. In summary, each national association categorises its clubs based upon the individual clubs annual financial spend on training and developing youth players. There are four categories; Category 1 clubs being those with the highest annual spend and Category 4 clubs having the lowest.

Annexe 4 Article 5(1) and Article 5(2) of the RSTP set out the calculation of Training Compensation. To calculate the amount of compensation due to the player’s former clubs it is necessary to take the costs that would have been incurred by the new club if it had trained the player itself. For each year of training, the costs for each category for clubs affiliated to UEFA are as follows (there are different amounts for different confederations):

The amount of time that the player has been registered with his former clubs is then multiplied by the relevant training costs above to attain the Training Compensation payable to that former club. In accordance with Annexe 4 Article 5(3), to ensure that Training Compensation for very young players is not set at unreasonably high levels, the training costs for the first four calendar years of a player’s training (i.e. 12 to 15) are based on the training and education costs of category 4 clubs, regardless of the categories of the clubs involved.

Under the RSTP, there are special provisions that apply to the territory of the EU/EEA. Annexe 4 Article 6 sets out a different method of calculating the Training Compensation payable to a player’s previous clubs if both the former and new club are based in the EU/EEA. How the special provision works is that the Training Compensation payable shall be established based on the following:

1. If the player moves from a lower to a higher category club, the calculation shall be based on the average training costs of the two clubs
2. If the player moves from a higher to a lower category, the calculation shall be based on the training costs of the lower-category club

However, as the UK is no longer part of the territory of the EU/EEA, British clubs are unable to benefit from the special provision set out above. As a result, it is likely that Training Compensation payments will come at a greater expense to British clubs now, than it did prior to Brexit.

As we know, the Player has been trained by the Training Club for the years 12 until 18. The Training Club is a UEFA category 2 club, and the Player has been registered as a professional for the first time with the New Club, a UEFA category 1 club. The amount of Training Compensation payable by the New Club is therefore calculated as follows:

Calendar years of Player’s 12^th and 15^th birthdays:  4 x €10,000 (Category 4) =        €40,000

+          Calendar years of Player’s 16^th and 18^th birthdays:  3 x €90,000 (Category 1) =         €270,000 

+          Calendar year of Players 19^th birthday (pro-rata): €90,000 / 365 = €247 x 181 days =    €44,707 

                                                                                                            TOTAL =              €354,707

By way of comparison, had the Player transferred to a UEFA category 1 club within the territory of the EU/EEA then that new club would have been able to benefit from the special provisions for the EU/EEA, under Article 4 Annexe 6 of the RSTP. In such a scenario, the Training Compensation would be lower than the above and would be determined as follows:

Calendar years of Player’s 12^th and 15^th birthdays:  4 x €10,000 (Category 4) =        €40,000

+          Calendar years of Player’s 16^th and 18^th birthdays:  3 x €75,000 (average of Category 1 and Category 2 ) =      €225,000 

+          Calendar year of Players 19^th birthday (pro-rata): €75,000 / 365 = €205 x 181 days =    €37,105 

                                                                                                            TOTAL =              €302,105

Bridge Transfers

The RSTP now defines a Bridge Transfer as “any two consecutive transfers, national or international, of the same player connected to each other and comprising a registration of that player with the middle club to circumvent the application of the relevant regulations or laws and/or defraud another person or entity.”

With the inclusion of the above definition, it is clear that the updated RSTP explicitly prohibits bridge transfers as illegitimate practices. Furthermore, Article 5bis(2) of the RSTP sets out that there shall be an automatic presumption of a bridge transfer having taken place if two consecutive transfers (national or international) of the same player occur within a period of 16 weeks.

This presumption also appears to apply if a player has been immediately loaned to another club following his acquisition by one club, which often occurs for entirely legitimate reasons (including the reasons set out in our case study or a loan back to the former club to enable the player to continue his development).

This is a particularly important amendment for clubs and agents to be aware of as Article 5bis(3) of  the RSTP provides that FIFA will impose sanctions on any party involved in a bridge transfer.

Solidarity Mechanism

Pursuant to Article 21 of the RSTP, if a professional is transferred before the expiry of his contract, any club that has contributed to his education and training shall receive a proportion of the compensation paid to his former club (i.e. a Solidarity Contribution). As the Solidarity Contribution is dependent on the transfer fee, solidarity payments will only be payable if a player is transferred for a fee, prior to the expiry of his contract. Up to 5% of the transfer fee is then withheld to be used for the Solidarity Contribution. Annexe 5 Article 1 of the RSTP sets out the specific formula and amounts of a transfer fee that are to be re-distributed to clubs that trained the player between the calendar years of his 12^th and 23^rd birthdays.

Solidarity Contribution for transfers of a domestic nature with an international dimension

For many years the position has been that Solidarity Contributions only apply in the event of an international transfer. However, by virtue of recent amendments to the RSTP, the Solidarity Mechanism has now been extended to national transfers with an “international dimension”.

This means that, subject to whether a transfer fee is paid, the transfer of a player during the course of a contract between clubs affiliated to the same association will now be subject to the payment of a Solidarity Contribution to any of the player’s training clubs affiliated to a different association. This is set out in Annex 5 Article 2(b) of the RSTP.

Up until July 2020, a training club had been entitled to receive a Solidarity Contribution only in the event that the transfer of a player took place between clubs affiliated to different associations (i.e. international transfers). However, the RSTP now provide that Solidarity Contributions will also accrue on domestic transfers (whether on a definitive or a loan basis) provided that the training club belongs to an association different to that of the two clubs involved in the domestic transfer of the player.

Applying the above to our case study, the international element on the domestic transfer is the fact that the Training Club (being a club from the Republic of Ireland) is one that is affiliated to a different association than that of the New Club and the Championship Club. A Solidarity Contribution would therefore be payable to the Training Club.

Clubs and agents should bear this regulatory change in mind when negotiating with buyer/seller clubs concerning a player with an international history. Ultimately, this additional cost (most often accounted for by the buyer club) should be factored into negotiations on a player’s transfer fee.

As will be noted from the above case study and regulatory overview, the regulations which govern the international recruitment of youth players are extensive and need to be carefully considered when formulating a youth scouting and recruitment strategy. We can provide further information and analysis on any of the areas set out above as necessary. For more information, please do not hesitate to contact Andrew McGregor or Matthew Lavelle in our Sports Sector team