Sports rights of players and the possibility of their pledge

Ahunzyanov Danis Fanisovich Postgraduate student; Faculty of Law; St. Petersburg State University Leading lawyer; Gazpromneft - Expert Solutions LLC 199034, Russia, Saint Petersburg, line 8, 77, sq. 402 d.akhunzyanov@yandex.ru

At the moment, sports legal relations are at an active stage of their formation and are developing, perhaps, at the fastest pace. This is actively influenced by the so–called lex sportiva norms - the norms of international and national sports federations, as well as the prejudicial legal positions developed by sports arbitrations (arbitration courts), such as the Court of Arbitration for Sport of the City of Lausanne (hereinafter referred to as "CAS").

One of the most significant parts of sports relations in the modern world is the transfer of athletes from one sports organization to another – transfers. Without them, the modern development of sports is essentially impossible, since it is these de facto economic relations between the parties to the transition of athletes that form the basis of sports relations. For the purposes of this work, it seems necessary to consider the legal nature of sports rights, as well as transfer agreements, in order to conclude that there is or is not a legal possibility to encumber such sports rights.

The concept of "sports rights" is directly used in the Regulations of the Russian Hockey Federation (hereinafter referred to as the "FHR") on the status and transitions of juniors and graduates of hockey schools. In accordance with article 1 of the above-mentioned regulations, "sports rights are the set of powers of a club and a hockey school in relation to a junior provided for by a professional contract, a junior contract, regulatory legal acts, regulatory documents of the FHR, Leagues and IIHF. The set of powers includes, among others, but not limited to: the conclusion of a junior contract; the application of a junior to participate in competitions; the conclusion by the club of a professional contract from February 1 to April 30 of the junior's senior year (in relation to juniors undergoing training in clubs); receiving compensation for the transfer of a junior in case of his transfer to another club/ hockey school; as well as receiving compensation for the transfer of a junior in case of his transfer to another club when signing a professional contract"^{[1, pp. 6-7]}. A similar definition is considered by the Kontinental Hockey League in the Legal Regulations of the KHL, however, instead of the concept of "sports rights", it uses the concept of "secured rights" ^[2].

In accordance with the definition discussed above, sports rights in hockey include claims against a student of a sports school or hockey club, which will include economic claims (the right to claim compensation, the right to demand the conclusion of a contract) and non-economic claims (the right to require the inclusion of a junior in the application).

In turn, when considering the football regulations of the RFU and FIFA, it becomes obvious that the concept of "sports rights" is directly absent from their content ^[3,4], however, this does not mean that sports rights are actually absent in football. An analysis of the RFU and FIFA regulations makes it possible to identify rights that can potentially be considered as "sports rights". These include: the right to demand the proper performance of work duties by a football player; the right to include a football player in the club's application for participation in competitions; the right to receive transfer compensation upon transfer of a football player (both temporary and permanent); the right to receive compensation payments for the upbringing of football players such as compensation for the training of a football player (training compensation), solidarity payment upon the transfer of football players (solidarity contribution), a single annual contribution (the so-called "EEV"), as well as other rights ^[3,4]. It should be noted that the list of the above rights is not closed, because in the regulations there are other sports rights of clubs in relation to football players.

At the same time, the term "sports rights" does not actually take root among lawyers dealing with football law issues. As a rule, concepts such as "federal rights" and "economic rights" are used both in practice and in theoretical works ^[5,6].

"Federal rights" presuppose their full transfer to a new club when a football player moves from one club to another. The federal rights will include the rights to register a football player for his subsequent appearance in all competitions for the new club ^[5,6]. The federal rights are indivisible and cannot be partially transferred to a new club, since the possibility of a football player playing for two different professional clubs is absent and would be absurd in itself. At the same time, federal rights may be the subject of obligations not only in case of direct transfer, but also in case of possible repurchase of a football player (buy-back option) or redemption of a football player for a predetermined amount (buy-out option). It is also worth noting that with the temporary transfer of a football player on a "lease" basis, the federal rights to the football player are also transferred to the new club in full, however, the term of such transfer is limited to one year, after which they are subject to reverse transfer to the former football player's club.

In turn, the economic rights to a football player are associated with receiving material remuneration for the transfer of a football player to a new club (fixed and conditional transfer compensation). The economic rights to football players can be divided and also belong to third parties ^[6]. At the same time, as Javier Canosa correctly notes, economic rights are not autonomous and not every subject of legal relations can acquire them. Economic rights can only exist for clubs that previously had federal rights to a football player ^[5]. Such a restriction is indeed established by the FIFA regulations, but it will be considered in more detail later. As a rule, economic rights are reserved for football clubs in the format of a percentage with the subsequent sale of a football player (the so-called "sell-on fee"), i.e., when transferring a football player, the club acquiring the federal rights to the football player pays one hundred percent of the economic rights to the previous club, and that club subsequently distributes the transfer compensation received among other clubs if such an obligation was provided for earlier during the football player's transitions ^[7]. Moreover, it is important to note that the economic rights to football players, however not related to transfers, include the rights to claim compensation for training (training compensation), solidarity payments (solidarity contribution), as well as a single annual contribution – all these payments are the remuneration of clubs for the training of a football player at the initial stage of his career.

All sports rights (including federal and economic rights in football) are aimed at transferring an athlete from one sports organization to another. The form of implementation of such a transition is a transfer agreement (an agreement on the transfer of an athlete). Depending on the sport, its name or the requirements imposed on it may differ, but the essence of the contractual obligation is that under the transfer agreement, the sports organization that owns the rights to the athlete undertakes to dismiss the athlete within the prescribed period (or temporarily suspend the contract with him – if the transfer is carried out on a temporary basis) and another sports organization undertakes to conclude a new employment contract with the athlete, as well as optionally pay transfer compensation and perform other actions in accordance with the concluded transfer contract. The legal nature of the transfer contract is considered by researchers from various points of view.

1) There is a position according to which the transfer contract should be considered as a labor law agreement. The concept is based on the provisions of the Labor Code of the Russian Federation, which provide for the possibility of transferring an athlete from one employer to another ^{[8, pp. 35-36]}. It seems that this approach is not justified due to the fact that a transfer contract for labor relations is nothing more than a basis for transferring an employee to another employer. The Labor Code does not seek to regulate relations related to other aspects of a football player's transition, except for the dismissal of an athlete in one organization and his admission to another.

2) Some consider the transfer contract as a contract for the purchase and sale of property rights. This position is supported by the need to take into account income from transfer activities for tax purposes, as well as the possibility of paying for the rights to athletes by installments ^{[8, pp. 36-39; 9, pp. 62-79]}. Similarly to the previous position, we imagine that this approach is not supported by anything. Both arguments given by Averchenko N.S. in support of the need to consider the transfer contract as a contract for the sale of property rights are not unique to the contract of sale. The income received by the club under another agreement will still be taken into account for tax purposes, and the possibility of payment under any agreement with installment payment follows from the principle of freedom of contract. Moreover, considering a transfer contract as a contract of sale creates a dangerous precedent from an ethical point of view, allowing the actual assumption of the possibility of trading rights to people, which is an absolutely incorrect statement.

3) Some researchers consider a transfer contract as an unnamed contract that has the characteristics of other civil law contracts (purchase and sale, provision of services), as well as affecting labor relations ^[10]. Considering a transfer contract from this point of view is possible, but it seems superfluous, given the possibility of a different qualification of the transfer contract, to try to create a new institution for the purpose of regulating sports and legal relations.

4) Some researchers consider a transfer contract as a contract for the provision of services ^[11] (depending on whether the commission of the act of transferring an employee from one employer to another is considered a materialized result or not). As mentioned earlier, under transfer agreements, a sports organization that has an employment relationship with an athlete undertakes to terminate the employment contract with the athlete and transfer him to another employer, and another sports organization undertakes to hire the athlete and conclude a contract with him. Thus, the agreement assumes that the parties perform certain actions in the interests of the other party. The presence of a materialized result at the conclusion of a transfer agreement is controversial, because usually a materialized result is understood to be any material object created as a result of work. Recognition of documents as such an object (agreement on termination of the contract, order of dismissal in the order of transfer, etc.) is possible, but it seems controversial, since such documents carry for the most part a technical meaning.

In any case, the legal nature of the transfer contract, as well as the essence of sports rights for athletes, allow us to say that essentially sports rights can be defined as the rights of claim that sports organizations have in relation to economic and federal rights to athletes.

The scientific literature refers the rights of claim to the objects of civil rights, since the object of subjective civil law is formed, among other things, by the actions of other persons, which a person can demand from others by virtue of having such a right ^{[12, 13]}. In essence, the rights of claim that arise from sports rights can be divided into two groups of objects of civil rights. When it comes to so-called "economic rights" in the context of objects of civil rights, we should talk about property rights. In turn, in this context, "federal rights" can be attributed to intangible benefits.

It should be noted that in accordance with article 128 of the Civil Code of the Russian Federation, property rights, the results of work and the provision of services, as well as intangible benefits are objects of civil rights. At the same time, according to Article 129 of the Civil Code of the Russian Federation, objects of civil rights that are not limited in circulation can be freely alienated or transferred from one person to another.

Thus, with a literal analysis of the provisions of the legislation of the Russian Federation, it can be concluded that sports rights are negotiable, respectively, sports organizations can freely alienate such rights, transfer them to other persons, may be the subject of collateral, assignment and any other transactions, if this does not contradict the legislation of the Russian Federation.

However, in this context, the absence of prohibitions in the context of Russian legislation is faced with restrictions imposed by sports, in particular football regulators. So in 2015, FIFA amended the FIFA regulations on the status and transfers of football players, supplementing it with articles 18bis and 18ter, prohibiting the conclusion of contracts that allow third parties to influence the independence of clubs in concluding employment contracts, transfer contracts, as well as their policies and team performances (Article 18bis), as well as contracts that allow third parties to receive full or partial compensation in connection with the future transfer of a player (Article 18ter) ^[4]. In the context of the free disposal of sports rights, we are primarily interested in the ban established by article 18ter of the FIFA regulations. In accordance with the article under consideration, no club or player should enter into an agreement with a third party under which a third party receives the right to participate, in full or in part, in compensation paid in connection with a player's future transfer from one club to another, or receives any rights in connection with a future transfer ^{[4, p. 34]}. In this case, a third party means any person other than the two clubs involved in the transfer of the player, as well as any other clubs in which the player was registered.

Thus, the disposal of economic rights becomes virtually impossible in relation to any third parties. For example, by the decision of the FIFA disciplinary committee of March 4, 2016, FC Sint-Truidense (Belgium) was brought to justice, which signed an agreement with KICKRS (an organization engaged in crowdfunding in order to generate income for investing in the transfer of football players) regarding one of the club's players, the rights to which were purchased from the Greek club PAE Aiginiakos. The Committee pointed out that by concluding such an investment agreement, the club granted KICKRS the right to participate in the distribution of future transfer compensation in connection with the possible future transfer of a player from FC Sint-Truidense to another club.

Moreover, FIFA also prohibits transactions that give rise to economic rights for the player himself. Thus, by the decision of the FIFA disciplinary committee of July 20, 2017, it was established that FC Anderlecht (Belgium) signed an employment contract with a football player, which contained the condition that if the player moves to another club during the term of his contract with FC Anderlecht, he is entitled to 8% of the net transfer amount up to 1 million euros received by the club; 10% of the net transfer amount over 1 million euros up to 2 million euros received by the club; 12% of the net transfer amount over 2 million euros received by the club. The Disciplinary Committee indicated that the player falls under the definition of a third party, and accordingly the prohibition of article 18ter applies to him.

In accordance with FIFA comments, cases of illegal possession of economic rights by third parties do not include cases of interest payment with the subsequent sale of a player (sell-on fee) ^{[14, p. 184]}.

The same restriction exists in domestic Russian relations related to football, since the norm in question is implemented in the RFU Regulations on Statuses and transfers of football players ^[3].

Thus, the possibility of disposing of sports (economic) rights to football players is actually limited by the internal regulation of international and national sports federations.

At the same time, article 421 of the Civil Code of the Russian Federation indicates that, as a general rule, citizens and legal entities are free to conclude contracts. Of course, freedom of contract is not absolute in its understanding. For example, in cases where contracts contradict the mandatory requirements of the law, such contracts (or their separate provisions) may be invalidated ^[15].

As the researchers point out, sports regulations are by their nature accession agreements, i.e. an agreement, the terms of which are defined by one of the parties in forms or other standard forms and could be accepted by the other party only by joining the proposed agreement as a whole. The act of joining an athlete, coach, coach or other competitor to the regulations, as a rule, is an application for participation in sports competitions ^{[16, p. 16]}.

It seems that the accession agreement cannot restrict persons who have joined its terms in concluding other agreements with third parties. Moreover, the issue of compliance of such provisions with the legislation of the Russian Federation on competition is debatable. At the same time, the articles of the FIFA regulations were the subject of consideration by the Court of Arbitration for Sport and the Swiss Federal Tribunal, which confirmed the validity of the articles from the point of view of the legislation of the European Union and Swiss law, as well as from the point of view of the fundamental freedoms proclaimed by the EU. The courts found that article 18bis does not impose restrictions on the free movement of capital (article 63 of the Treaty on the functioning of the European Union), the free movement of workers (article 45 of the Treaty on the Functioning of the European Union) or the freedom to provide services within the EU (article 56 of the Treaty on the Functioning of the European Union) ^{[17, 18]}. The Swiss Federal Tribunal also pointed out in its decision that the bans certainly limit the economic freedom of clubs, it does not suppress it completely. Clubs remain free to seek investments, while only certain types of investments remain prohibited ^[18].

It seems that from the point of view of Russian legislation, such a provision can be considered as a restriction on the principle of freedom of contract and restriction of competition. In accordance with paragraphs 8, 9, part 1 of Article 10 of Federal Law No. 135-FZ dated 07/26/2006 "On Protection of Competition", actions of a dominant economic entity are prohibited, the result of which is or may be the prevention, restriction, elimination of competition in the field of entrepreneurial activity, including the creation of discriminatory conditions and the creation of obstacles access to the commodity market or exit from the commodity market to other business entities. By imposing restrictions on the possibility of concluding contracts with individual business entities, the RFU actually restricts competition by threatening to apply sports sanctions to clubs, dominating its position in the market. It seems that such provisions within the framework of Russian legal reality should be invalidated in accordance with the provisions of Article 168 of the Civil Code of the Russian Federation as violating the mandatory requirements of the antimonopoly legislation of the Russian Federation.

At the same time, similar restrictions in other sports, including hockey, have not been established at the moment.

In view of the above, it seems that despite certain restrictions imposed in football, the possibility of disposing of sports and economic rights exists in full. In particular, property rights, which by their nature are sports rights, including sports economic rights, may be subject to pledge in accordance with the provisions of Article 336 of the Civil Code of the Russian Federation. The pledge of sports rights can open up new horizons for the development of sports in Russia. Sports rights, especially in popular disciplines like football or hockey, have significant liquidity. Thus, they can be used as a valuable asset to attract investments. For business, this is a simple and understandable tool: economic rights to athletes in the long term have a tangible market value, which may increase over time.

It seems that this will be a real breakthrough for sports organizations. Clubs will be able to raise funds to improve infrastructure, support athletes and raise the level of competition, which can potentially contribute to both improving the sports components of football and hockey in Russia, and increase the volume of private financing for these sports, which will contribute to a gradual departure from public funding in the future.