As from January 1, FIFA banned third-party ownership of players.

The new rules, which have worldwide effect, will phase out third-party ownership of players with a transitional period, meaning that contracts containing third-party ownership clauses will be accepted only until April 30 this year.

Third-party ownership of players has been the subject of much debate in the last few years, particularly following the Tevez-Mascherano saga of 2007 after which West Ham United were fined £5.5 million for allowing two third-parties to own rights over both players while they were playing for the Hammers.

But, what exactly is third-party ownership?

Third-party ownership, or TPO, is a situation where a person or company, other than the club, holds or ‘owns’ a player’s future economic rights.

In other words, a person or company pays a club money in return of a percentage on the future transfer of a player.

This implies that a club that intends to acquire a player under this regime would have to pay the football club involved and any other third-party that has a share in such ‘ownership’ of the player.

Such practice is very common in South America and while the Tevez-Mascherano story is probably the most famous example of TPO, other high-profile players in recent years have been subject to this procedure.

Brazilian ace Neymar was signed by Barcelona from Santos in 2013 for a reported fee of €57 million.

Although TPO is not illegal, this practice has been frowned upon in the football governing bodies as it restricts, and in certain cases excludes, the liberty afforded to football clubs

However, it later transpired that Barcelona effected other payments of around €40 million to a company which was reported to be close to Neymar’s family, taking the total transfer fee to around €97 million.

The transfer led to the resignation of Barcelona president Sandro Rosell as allegations of embezzlement destroyed his reputation at the club and, indeed, in world football.

TPO is not merely an exclusively South American job.

In certain European countries third-party ownership is a wide-ranging practice, particularly in Portugal where, according to a report by the European Clubs Association, 36 per cent of the total market value of all players in the country is owned by third parties.

Although TPO is not illegal, this practice has been frowned upon in the football governing bodies as it restricts, and in certain cases excludes, the liberty afforded to football clubs whereby they can sell their players to whoever they want.

There are instances where clubs may tend to favour TPO as it makes the acquisition of players cheaper.

However, as UEFA general secretary Gianni Infantino stated, “TPO threatens the integrity of sporting competition, it damages contractual stability, it undermines the relationship of trust that should exist between a player and the club that employs him, it creates conflicts of interests, it means that players have less control over the development of their own careers, it keeps clubs in a vicious cycle of debt and dependence and damages the overall image of football.”

The new rules as approved by the FIFA Executive Committee last month, state that contracts containing TPO clauses signed between January 1 and April 30, 2015 may have a duration of not more than one year.

As from May 1, third-party agreements will be interdicted.

This means that players or clubs caught engaged in TPO will be referred to the FIFA Disciplinary Committee for action. Sanctions may range from fines to suspensions and also the docking of points in a league championship or relegation to a lower division.

In most European countries, this will have little or no effect but it will be interesting to see what happens in Portugal, Spain and most South American countries as such a popular practice will come to an end.

Note: Chris Bonett is a lawyer specialised in Sports Law and is currently vice-president and head of the Legal Department at the Malta Football Association.

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