Training Compensation and Solidarity Payments

A Guide to FIFA Articles 20 and 21 of the FIFA Regulations on the Status and Transfer of Players (“RSTP”).

Link : FIFA Regulations-on-the-status-and-transfer-of-players-2018

FIFA’s RSTP cover inter-association transfers. That is, the transfer of a player from a club in one association to a club in another association. A common example would be a player moving from a South American club to a European club.

Basic Framework of a Transfer

Generally speaking it works like this: A club is interested in acquiring a player who is playing for another club (or a player who is under contract with a club desires to move to another club and that other club desires to hire that player.) The players are under contract, and most clubs have a transfer fee, either a hard number written into the contract (usually only for big names like Ronaldo or Messi – you may have heard of the term “release clause”) or (more commonly) the current club has the legal option to negotiate the fee amount.

Typically speaking, the player’s agent acts as a facilitator to these negotiations, frequently agents will get a fee for their services from the purchasing club (which incentivizes agents to try to arrange transfers). Once everyone agrees, the fee is paid and the player is transferred; if it is an international transfer this can only happen during the two official FIFA transfer windows, one in summer and a shorter one in winter. Simple enough, eh?

Now, if there are training or compensation fees it gets a bit more complicated. A link to the RSTP is provided above. Articles 20 and 21 as well as Annexes 4 and 5 are the relevant sections. Training compensation happens for players under 23 who either get their first professional contract from another club or who transfer to another club before their 23rd birthday, essentially it’s a fee to ensure that if a club trained a player who goes elsewhere, its money isn’t wasted. These numbers are paid separately from any transfer fees. Solidarity payments are laid out more exactly, upwards of 5% of the transfer fee, with clubs getting a percentage of that based on what years they trained the player from years 12-23 of his life; years 16+ receiving a higher percentage. It’s worth noting this happens for every transfer fee forever. These fees are typically paid on top of the transfer fee; the buying club essentially views them as a tax on the transfer fee.

Articles 20 and 21 of the FIFA RSTP

Above: English, French and Spanish versions of Articles 20 and 21, FIFA RSTP. A link to Annexes 4 and 5 is at the bottom of this page.

Similarities and Differences between the two forms of compensation

These are the principal similarities between the two regimes:

  • Pursuant to the RSTP, purely domestic transfers of professional players do not give rise to an entitlement on the part of training club(s) to receive training compensation or a solidarity payment (see the “Scope” definition in Article 1, RSTP);
  • Both training compensation and solidarity payments may need to be distributed amongst several training clubs;
  • The obligation to ensure that the regulations are complied with falls on the ‘new’ club (i.e. the purchasing club, or the club signing a player on his first professional contract);
  • The “Player Passport” (see Article 7, RSTP) will provide assistance to clubs in tracing the sporting history of players and complying with their payment obligations.

The principal differences between the two mechanisms is summarised in the following chart:

When Is It Payable?

Training Compensation Solidarity Payments
when a player signs his first
professional contract with a club that
is different from the club(s) that
contributed to his training.
only upon the international transfer
of a player who is already a
professional.
may also be payable when a player is
transferred between clubs belonging to different national associations,
until the end of the season of his 23rdbirthday, whether that transfer takes place during or at the end of the
player’s contract, and whether that
transfer involves a fee or not.
only payable if a player is transferred for a fee, between clubs belonging to different national associations, prior
to the expiry of his employment
contract.
– also includes transfers occurring
after the season of a player’s 23rd
birthday.
amount of training compensation is
calculated by reference to published “training costs” (to which reference is made in Annexe 5, RSTP) and the
number of years a player has spent
training with a former club(s).
amount is fixed at a maximum of 5% of the agreed transfer compensation.
Note: A separate set of rules applies to the calculation of training
compensation in circumstances
where a player moves from one
association to another inside the
territory of the EU / EEA.
the same rules apply to the
calculation of solidarity payments,
whether a player moves from one EU / EEA country to another or not.

A more detailed look at these two mechanisms follows:

Training Compensation

What is the relevant time period of training covered by this rule?

There is a presumption that a player’s training and education ordinarily takes place between the ages of 12 and 23.

As a general rule, training compensation will be payable up to the age of 23 – the amount of which is to be calculated by reference to training incurred up to the age of 21.

In calculating the amount of training compensation, a different reference period will be taken into account if it is “evident that a player has already terminated his training period before the age of 21” (see Annexe 4, Article 1 (1) RSTP).

It is possible for a ‘new’ club to reduce its liability to pay training compensation, if it can demonstrate that the player in question had ceased to be in a period of training before the age of 21.

Factors that may be taken into account when considering whether a player’s training period has been completed before the age of 21 include:

  • The level of talent of the player;
  • Whether the player is playing regularly for the first team; and
  • The value of the player (e.g. as may be reflected in a substantial loan fee achieved for the services of the player).

Calculation of Annual Training Costs

Football associations are required by FIFA to divide their clubs into a maximum of four categories, “in accordance with the clubs’ financial investment in training players” (Annexe 4, Article 4 (1) RSTP). The stipulated training costs for each category are intended to “correspond to the amount needed to train one player for one year multiplied by an average ‘player factor’, which is the ratio of players who need to be trained to produce one professional player.”

Each year, FIFA publishes an updated list of “Training Costs and Categorization” for each confederation. Here is the list published by FIFA in 2018. (Note that actual amounts have not been adjusted by FIFA since 2001.)

ConfederationCategory ICategory IICategory IIICategory IV
AFC40,000 USD10,000 USD 2,000 USD
CAF30,000 USD10,000 USD 2,000 USD
Concacaf50,000 USD40,000 USD10,000 USD 2,000 USD
CONMEBOL30,000 USD10,000 USD 2,000 USD
OFC30,000 USD10,000 USD 2,000 USD
UEFA90,000 EUR60,000 EUR30,000 EUR10,000 EUR

For example, for Category I clubs within UEFA, the annual training costs are deemed to be 90,000 Euros; whereas for Category II clubs within CONMEBOL, the annual training costs are deemed to be $30,000 USD.

Each national association is then required, on an annual basis, to input into the FIFA Transfer Matching System (“TMS”) the appropriate categorization of its affiliated clubs (or, for those clubs not presently listed in the TMS, to send written communication to the FIFA Players’ Status and Governance Department). Annexe 4, Article 4 (2) also states clearly that “Associations are required to keep the data regarding the training category of their clubs inserted in TMS up to date at all times.”

Which club(s) are entitled to receive training compensation?
How much is each ‘qualifying club’ entitled to receive?

Every club with which the player has previously been registered (in accordance with the players’ career history as provided in the player passport) and that has contributed to his training starting from the season of his 12th birthday is entitled to receive compensation. (Annexe 4, Article 3 (1) RSTP).*

* subject to the caveat that only those clubs which are properly linked / affiliated to a national football association (which itself is a member of FIFA) are authorised to claim training compensation.

For example, the CAS held in Brazilian Football Federation v. Sport Lisboa e Benfica-Futebol S.A.D. (in the context of a dispute regarding solidarity payments) that “…only clubs that are linked to a national soccer association, which again is a member of FIFA, are authorised to claim the solidarity contribution. This is due to the fact that only such clubs can refer to the set of rules of FIFA and especially to the Regulations.” (para. 16, emphasis added).

As to how much is each qualifying club entitled to receive, the appropriate method of calculation depends on whether or not the player is “moving from one association to another inside the territory of the EU / EEA.” If he is not, then the general provisions in Annexe 4, Article 5 RSTP will apply. If he is, then the “special provisions” in Annexe 4, Article 6 RSTP will apply.

What if a player is signed on loan?

Article 10 (1) RSTP provides as follows:

“A Professional may be loaned to another club on the basis of a written agreement between him and the clubs concerned. Any such loan is subject to the same rules as apply to the transfer of players, including the provisions on training compensation and the solidarity mechanism.”

The FIFA Commentary explains the position (on page 32):

“A loan is subject to the same rules that apply to the transfer of players, including the provisions on training compensation… In other words, the club receiving a player on loan is entitled to claim training compensation … for the time the player remained with it, and it can claim training compensation if the player transfers to a third club provided the player is younger than 23.”

What happens if a player’s training history cannot fully be ascertained?

Annexe 4, Article 3 (3) RSTP provides as follows:

“An association is entitled to receive the training compensation which in principle would be due to one of its affiliated clubs, if it can provide evidence that the club in question – with which the professional was registered and trained – has in the meantime ceased to participate in organised football and/ or no longer exists due to, in particular, bankruptcy, liquidation, dissolution or loss of affiliation. This compensation shall be reserved for youth football development programmes in the association(s) in question.”

Time period in which to pay training compensation

The deadline for payment of training compensation is relatively short, being 30 days following the registration of the professional with the new association (Annexe 4, Article 3 (2) RSTP).

Disputes Regarding the Amount of Training Compensation

Annexe 4, Article 5 (4) RSTP provides as follows:

“The [FIFA] Dispute Resolution Chamber (“the DRC”) may review disputes concerning the amount of training compensation payable and shall have discretion to adjust this amount if it is clearly disproportionate to the case under review.”

There is, however, a jurisdictional limitation on the competence of the DRC. Pursuant to Article 22 (d) and Article 24 RSTP, the DRC has jurisdiction to hear disputes relating to training compensation between clubs belonging to different football associations.

The FIFA Commentary explains (on page 67):

“Disputes between clubs belonging to the same association related to training compensation and the solidarity mechanism shall be settled in accordance with national regulations.”

Solidarity Compensation

What solidarity payments are payable, and to whom?

To calculate the ‘pot’ of money that is to be distributed amongst ‘qualifying clubs’ Annexe 5, Article 1, RSTP provides as follows:

“If a professional moves during the course of a contract [between clubs belonging to different national football associations], 5% of any compensation, not including training compensation paid to his former club, shall be deducted from the total amount of this compensation and distributed by the new club as a solidarity contribution to the club(s) involved in his training and education over the years…”

The CAS has made it clear that the level of solidarity payments is to be calculated by reference to the full transfer compensation payable by one club to another, in order to acquire the player’s services. (See Genoa Cricket and Football Club S.p.A. v. Club Bella Vista)

The CAS explained in the Genoa case:

“The solidarity mechanism is meant to redistribute the value of the training given to a player. The new club benefits from the increase of the value of the player, deriving from the training and education provided by all former training clubs, including possibly the transferring club. This system may be compared, to some extent, to the levy of a tax. In accordance with the RSTP, the new club has to retain 5% of the transfer compensation, with the consequence that the amount received by the transferor club is reduced accordingly. The ratio legis of this system is that it is easier for the new club to determine the former clubs of the player. The player being at the disposal of the new club, he can assist the latter in this task.”

“By providing that a proportion of 5% of “any” transfer compensation is to be distributed, the FIFA Regulations set in place some sort of security policy, which prevents the clubs eligible for solidarity contribution to
be exposed to arbitrary results, abuses and great uncertainty.”

With regard to the method of distribution, Annexe 5, Article 1 RSTP continues as follows:

“This solidarity contribution reflects the number of years (calculated prorata if less than one year) he was registered with the relevant club(s) between the seasons of his 12th and 23rd birthdays, as follows:

Season of 12th birthday: 5% (i.e. 0.25% of total compensation);
Season of 13th birthday: 5% (i.e. 0.25% of total compensation);
Season of 14th birthday: 5% (i.e. 0.25% of total compensation);
Season of 15th birthday: 5% (i.e. 0.25% of total compensation);
Season of 16th birthday: 10% (i.e. 0.5% of total compensation);
Season of 17th birthday: 10% (i.e. 0.5% of total compensation);
Season of 18th birthday: 10% (i.e. 0.5% of total compensation);
Season of 19th birthday: 10% (i.e. 0.5% of total compensation);
Season of 20th birthday: 10% (i.e. 0.5% of total compensation);
Season of 21st birthday: 10% (i.e. 0.5% of total compensation);
Season of 22nd birthday: 10% (i.e. 0.5% of total compensation);
Season of 23rd birthday: 10% (i.e. 0.5% of total compensation).”

Again, it should be noted that only those clubs which are properly linked / affiliated to a national football association (which itself is a member of FIFA) are authorised to claim a solidarity payment.

Note: The payment structure set out above means that, in practice, a total of 5% of the transfer compensation will often not be payable. As the FIFA Commentary explains (on page 129):

“If a player who is younger than 23 transfers during the validity of his employment contract and a solidarity contribution is payable to his former training clubs, the total deduction from the transfer compensation will be less than 5%. For every year that the player is younger than 23, 0.5% shall be deducted from 5% (e.g. for a player who is in the season of his 21st birthday, the relevant percentage will be 80% of 5%, i.e. 4% of the compensation paid for the transfer of the player.”

This principle was confirmed by the CAS in Confederaçao Brasiliera de Futebol v. Bayer 04 Leverkusen Fussball :

“…one cannot possibly accept that the 5% figure was intended as an absolute requirement rather than a ceiling. The inference is overwhelming that it is the latter.”

Thus, solidarity payment obligations will be triggered whenever a player is the subject of an international transfer, accompanied by the payment of a fee by the purchasing club to the selling club, prior to the expiry of his employment contract.

Which club bears the financial burden of paying the solidarity payment?

In , Club Atlético River Plate v. Hamburger S.V. the CAS confirmed that it is permissible for the selling and purchasing to club to reach an agreement as to who bears the financial burden of paying the solidarity payment(s), and/or in what proportions.

For example, if the agreed transfer fee is 1 million Euros and the full 5% solidarity payment is payable, the buying club will in fact only transfer 950,000 Euros to the selling club, with the remaining 50,000 Euros being distributed (by the new club) in accordance with the solidarity payments regime. It is, however, permissible for the parties to contractually agree (using this example) that the agreed transfer fee is 1,000,000 Euros, with the full transfer fee paid by the purchasing club to the selling club (without any deduction); and the purchasing club bears the ‘extra’ financial burden of distributing the appropriate solidarity payment (in this illustrative example, EUR 50,000). In effect, the purchasing club’s total outlay would be $1,050,000 Euros.

Best Practices Note:

It is important that contractual agreements between clubs clearly stipulate who is responsible for bearing the financial cost of any applicable solidarity payments.

On a related point, in the same way that it is possible for clubs to waive their right to receive training compensation (as discussed above), it is also possible for clubs to waive their rights in respect of solidarity payments.

What if a player is signed on loan?

In addition to Article 10 (1) RSTP, the FIFA Commentary explains:

“A loan is subject to the same rules that apply to the transfer of players, including the provisions on … solidarity mechanism. In other words, the club receiving the player on loan shall retain 5% of the loan fee and distribute it to all clubs that contributed to training the player between the ages of 12 and 23. At the same time, the club receiving a player on loan is entitled to claim … a solidarity contribution for the time the player remained with it…”

What happens if a player’s training history cannot fully be ascertained?

Annexe 5, Article 2 (3) RSTP provides as follows:

“An association is entitled to receive the proportion of solidarity contribution which in principle would be due to one of its affiliated clubs, if it can provide evidence that the club in question – which was involved in the professional’s training and education – has in the meantime ceased to participate in organised football and/or no longer exists due to, in particular, bankruptcy, liquidation, dissolution or loss of affiliation. This solidarity contribution shall be reserved for youth football development programmes in the association(s) in question.”

Time frame for making solidarity payments

The deadline for making solidarity payments is again relatively short.
Annexe 5, Article 2 (1) RSTP states it is:

“30 days after the player’s registration with the new club; or
In the case of contingent payments, 30 days after the date of such payments.”

Disputes Regarding Solidarity Payments

Pursuant to Article 22 (d) and Article 24 RSTP, the FIFA Dispute Resolution Chamber (“DRC”) has jurisdiction to hear disputes relating to solidarity payments between clubs belonging to different football associations.

Disputes between clubs belonging to the same association related to the solidarity mechanism shall be settled in accordance with national regulations.

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