Compensation for Academy Players
On 10 February 2020 Fulham FC (“FFC”) announced that the Professional Football Compensation Committee (“PFCC”) had reached its decision on the appropriate level of compensation Liverpool FC (“LFC”) was to pay to FFC for Harvey Elliott’s move from FFC to LFC in July 2019. The amount of compensation determined by the PFCC was ‘a record amount for a 16-year-old player’, reported as an amount of up to £4,300,000, including a £1,200,000 initial fee, and a 20% sell-on fee.
This article will explain when compensation is payable in respect of academy players, the role of the PFCC in respect of the same, and consider the record amount of compensation awarded for Harvey Elliott’s move from FFC to LFC.
Compensation payable for academy players
The PFCC’s involvement in determining the appropriate level of compensation payable by Club A to a Club B for Club B’s registration of an academy player that has come from Club A is a matter of last resort, and only in certain circumstances.
The Premier League and the English Football League each provide rules in respect of youth development. The Premier League’s (“PL”) Youth Development Rules are found at pg. 359-453 of the Premier League Handbook. The English Football League’s (”EFL”) Youth Development Rules are found at pg. 38-80 of the EFL’s Youth Development Charter (see also EFL Regulations, regulation 61). The PL’s and the EFL’s Youth Development Rules (“YDR”) are the same. For the purposes of this article, all references to the YDR will be to those in the PL Handbook.
Firstly, it is necessary to identify when Club B is obliged to pay compensation to Club A for Club B’s registration of an academy player that has come from Club A:
Pursuant to YDR, rule 326, when Club B registers an academy player an obligation is imposed upon Club B ‘to pay compensation for the training and development of that Academy Player to any Club or Football League club which previously held his registration (“the Training Club”)’ (emphasis added). Pursuant to the YDR, rule 1.9, an ‘Academy Player’ is, generally, a male player in an age group between Under 9 to Under 21 ‘who is coached by, or plays football for or at a Club which operates an Academy’. Pursuant to the YDR, rule 1.1, an ‘Academy’ is an establishment for Academy Players operated by a club in accordance with the YDR and licensed by the Professional Game Board (see also the YDR, rules 6-20). Further, following the nomenclature above, Club A would be the ‘Training Club’.
Pursuant to YDR, rule 326.1, the above-stated obligation upon Club B only arises where:
Club A has indicated to the academy player its intention to retain the academy player’s registration (see YDR, rule 266); or
Club A has offered a Scholarship Agreement to the academy player (available to be offered to 13-17-year-olds) (see YDR, rules 247-248 and 278, and PLYD Form 1; The Football Association (“the FA”) Rules, rule C3.1); or
The academy player seeks to register for Club B because he has moved residence outside the permitted travelling time from Club A (see YDR, rule 234); or
Club A and the academy player agree to terminate the academy player’s registration (see YDR, rule 272.2) and Club A and the academy player agree that Club A should retain the right to receive compensation should the academy player sign for another club; or
The PL Board makes a decision to that effect (see YDR, rules 273 and 276); and
Club A held a valid licence to operate as an ‘Academy’.
Upon Club B being obliged to pay compensation to Club A for Club B’s registration of an academy player that has come from Club A, the YDR then provide mechanisms for determining what level of compensation is to be payable, which will be by one of three ways:
Where the academy player is in or about to enter any age group between Under 9 and Under 16 when he is first registered by Club B, the compensation by Club B to Club A will be calculated in accordance with YDR, rules 330 to 340 (YDR, rule 328);
Where the above does not apply, Club A and Club B will simply agree on the amount of compensation payable by Club B to Club A (YDR, rules 327.2 and 338); or
Failing any such agreement, and where the academy player is in any age group between Under 17 and Under 21 when he is registered by Club B or where Club A offered a Scholarship Agreement pursuant to the YDR, rule 278, the PFCC shall determine the compensation payable by Club B to Club A (YDR, rule 329). Any such compensation set by the PFCC is to be determined in accordance with the Regulations of the PFCC (“PFCC Regulations”) as set out in the PL Rules, Appendix 11 (YDR, rule 341). (See also YDR, rules 342-343 which identify when the PFCC will also determine the compensation payable in respect of a ‘Contract Player’ whose former club held that player’s registration as an academy player (PL Rules, rule A.1.51; the FA Rules, rule C1.1.)
The YDR, rules 330 to 340, applicable when determining the compensation payable to Club A in respect of an academy player in or about to enter any age group between Under 9 and Under 16 when he is first registered by Club B, are very prescriptive:
There is an ‘initial fee’ payable to Club A and, if the academy player is in age group Under 12 or older, ‘contingent compensation is payable to all qualifying Training Clubs’ (YDR, rule 330). Accordingly, there can be ‘contingent compensation’ payable to Club A, in addition to Club Z and Club Y that previously held the academy player’s registration.
The ‘initial fee’ is calculated by multiplying ‘the applicable annual fixed fee… by the applicable number of years’ and adding ‘any initial fee… paid by the most recent Training Club when it acquired the registration of the Academy Player’ (YDR, rule 331). The ‘applicable annual fixed fee’ is identified in a table in YDR, rule 333, and ‘the applicable number of years’ means the number of years for which the academy player was registered for Club A (YDR, rule 322). That table in YDR, rule 333 is as follows:
As a basic example: Club B is obliged to pay compensation to Club A in respect of Ronaldo Smith, a 14-year-old prodigy of football, who has been at Club A, a Category 1 Academy throughout, since he was 9 years old (the FA Rules, rule C4.2.1) and who was not at another academy previously. The ‘initial fee’ payable by Club B would be:
For the age 9 and 10: 2 x £3,000 (£6,000) +
For the age 11, 12, 13 and 14: 4 x £40,000 (£160,000) =
Total: £166,000.
The ‘contingent compensation’, as the name suggests, is contingent upon three specified events. Firstly, contingent compensation will be payable for up to a maximum of 100 ‘First Team Appearances’ that the academy player makes for Club B (or any other club the academy player subsequently registers with, including on loan) (YDR, rules 334.1, 336 and 337). YDR, rules 335 provide the following figures for ‘First Team Appearances’:
As a basic example: Ronaldo Smith reaches 100 first team appearances for Club B and Club B has been in the PL for all of those appearances, the total ‘contingent compensation’ for ‘First Team Appearances’ payable by Club B to Club A over time would be:
Appearances 10-60: £150,000 x 6 = £900,000
Appearances 70-100: £100,000 x 4 = £400,000
Total: £1,300,000.
Secondly, contingent compensation will be payable by Club B to Club A if before the academy player’s 23rd birthday the academy player’s registration is transferred from Club B to a club not affiliated with The Football Association (YDR, rule 334.2). In such circumstances, Club B will be required to pay to Club A 20% of the compensation fee (i.e. transfer fee, PL Rules, rule A.1.44), loan fee (PL Rules, rule A.1.120) or contingent sum (PL Rules, rule A.1.50) received by Club B for that transfer which is in excess of (i) any amounts of training compensation and/or solidarity payments received by Club B and Club A pursuant to the FIFA Regulations for the Status and Transfer and Players, articles 20-21 and annexes 4-5; and (ii) the sum paid by Club B to Club A to acquire the academy player’s registration.
Thirdly, contingent compensation will be payable by Club B to Club A on (i) all future transfers of the academy player’s registration (i.e. without any age limitation) to football clubs in the PL, the EFL or the National Division of the National League; and (ii) all future loans of the academy player to clubs not affiliated with The Football Association (YDR, rule 334.3). In such circumstances, Club B will be required to pay to Club A 5% of the compensation fee, loan fee or contingent sum paid in respect of such transfers.
YDR, rule 337 provides details of how responsibility shifts between clubs for the contingent sums payable under YDR, rules 333.1 and 334.3. As a basic example: Ronaldo Smith never makes a first team appearance for Club B, and is transferred to Club C, another PL team, for a compensation fee of £10,000,000. Club A will be entitled to a contingent sum from Club B of £500,000 (5% of £10,000,000). Ronaldo Smith then makes 100 first team appearances for Club C and Club C has been in the PL for all of those appearances. Club C will be obliged to pay the contingent sum of £1,300,000 (as calculated above) to Club A over time for those 100 first team appearances.
The PFCC
Comparatively, when the PFCC is required to determine the compensation payable by Club A to Club B pursuant to YDR, rule 329 and in the circumstances identified above, the PFCC Regulations are not as prescriptive. Predicting or advising in respect of the likely outcome of a PFCC determination is therefore difficult. The PFCC Regulations, regulations 3 and 4 identify that the PFCC shall simply take into account the following:
Criteria such as the status of Club A and Club B; the age of the academy player; any fee paid by Club A upon acquiring the registration of the academy player; the length of time that Club A has held the registration of the academy player; the academy player’s playing record; and interest shown by other clubs in acquiring the registration of the academy player.
Costs such as those incurred by Club A in operating an Academy, including living accommodation, training and playing facilities and education and welfare requirements; and any other cost incurred by Club A directly or indirectly attributable to the training and development of players (e.g. if the player has been involved with the first team).
The PFCC Regulations also provide the procedure that the PFCC follows when required to determine the compensation payable by Club A to Club B, which can be summarised as follows:
Proceedings before the PFCC brought pursuant to YDR, rule 329 or otherwise are commenced by either Club A or Club B making a written application to the secretary of the PFCC, which shall: (i) identify the respondent club and the player concerned; (ii) set out the facts surrounding the application including the criteria stated in the PFCC Regulations, regulation 3 (see above); (iii) identify the documents relied upon and provide copies of the same; and (iv) where the application is made by Club A, give full particulars of the costs stated in the PFCC Regulations, regulation 4 (see above) (PFCC Regulations, regulation 10).
Club A and Club B are required to pay an administration fee, which is an amount determined by the Professional Football Negotiating and Consultative Committee (“PFNCC”) (the PFNCC is explained in this earlier Football Law article, and its constitution is found at pg. 708 of the PL Handbook) (PFCC Regulations, regulation 11).
The secretary of the PFCC then procures the PFCC to determine the application and will send the application to the respondent (e.g. Club B) (PFCC Regulations, regulation 12).
The PFCC procured by the secretary of the PFCC will be composed of (i) an independent chairperson with a legal background, and who is subject to the approval of the PL, the EFL and the Professional Footballers’ Association (“PFA”); (ii) an appointee of each of the leagues of which Club A and Club B are members of, or if Club A and Club B are members of the same league, then an appointee of that league; (iii) an appointee of the PFA; and (iv) an appointee of the League Managers’ Association (PFCC Regulations, regulation 5).
Within 14 days of receipt of the application sent by the secretary of the PFCC, the respondent is to send to the secretary of the PFCC a written response (PFCC Regulations, regulation 13). The response should also include copies of any documents relied upon, and where the respondent is Club A, full particulars of the costs stated in PFCC Regulations, regulation 4 (see above). The secretary of the PFCC will then send the response to the chairperson of the PFCC and the applicant club (PFCC Regulations, regulation 14).
The chairperson of the PFCC will then give directions as deemed appropriate for the future conduct of the proceedings, including the production of documents and requiring a person to attend the hearing of the application to give oral evidence (PFCC Regulations, regulations 15 and 16). Once those directions have been complied with, the chairperson of the PFCC will give notice to the parties of the date, time and place of the hearing of the application (PFCC Regulations, regulation 17). The chairperson of the PFCC will also have a discretion as to how the hearing of the application is conducted (e.g. in person or by video) (PFCC Regulation, regulation 19).
The hearing of the application is private, and the parties (e.g. Club A and Club B) are entitled to be represented at the hearing by a solicitor or barrister (PFCC Regulations, regulations 21 and 22).
If the members of the PFCC cannot reach a unanimous decision then a decision shall be reached by a majority, with the chairperson having a second and casting vote in the event of an even split (PFCC Regulations, regulations 8 and 27). The PFCC’s decision will be announced as soon as possible (at the end of the hearing if possible) and the PFCC will also give reasons for its decision (PFCC Regulations, regulation 23 and 24). The PFCC’s decision is final and binding, and therefore cannot be appealed against (PFCC Regulation, regulation 25).
Harvey Elliott
Despite the PFCC providing written reasons for its decisions, those written reasons are not publicly available. Accordingly, it is not possible to substantively break down or analyse the (potential) £4,300,000 figure and 20% sell-on fee reached in respect of Harvey Elliott, or other sums in respect of other academy players, by the PFCC.
In this author’s opinion, it is likely that the prescriptive figures in YDR, rules 330 to 340 as explained above provide helpful guidance to the PFCC when reaching decisions, particularly in respect of staged appearance fees and sell-on fees. For example, the 20% sell-on fee included in the PFCC’s decision in respect of Harvey Elliott mirrors the 20% sell-on fee payable under YDR, rule 334.2 in respect of a subsequent international transfer of an academy player to whom that rule applies. Comparatively, when the PFCC was required to make a determination in respect of Ethan Ampadu’s move from Exeter City FC (“EFC”) to Chelsea FC (“CFC”) in 2017, the PFCC required CFC to pay £250,000 for Mr Ampadu’s 10th, 20th, 30th, 40th and 50th first team appearances for CFC.
The greatest disparity between the PFCC’s determination in respect of Mr Elliott and the prescriptive figures in YDR, rules 330 to 340 as explained above appears to be in respect of the amount payable as an initial fee. As noted at the beginning of this article, the PFCC determined the initial fee payable by LFC to FFC for Mr Elliott was £1,200,000, similar to the £1,300,000 initial fee paid by CFC to EFC for Mr Ampadu.
The PFCC’s determination in respect of Daniel Sturridge’s move from Manchester City FC (“MCFC”) to CFC in 2009 which included an initial fee of £6,500,000 is not directly helpful or comparable to Mr Elliot’s case.[1] Mr Sturridge was 19 years old and had made a number of first team appearances for MCFC at that time. The same can be said of the PFCC’s determination in respect of Danny Ings’ move from Burnley FC (“BFC”) to LFC in 2015 which also included an initial fee of £6,500,000.[2] Mr Ings was 23 years old and had also made a number of first team appearances for BFC at that time. Further, and in the same vein, those decisions were likely to have been made pursuant to YDR, rule 342-343 or PL Rules, rule V.17 rather than YDR, rule 329.
What can be taken from the PFCC’s decision in respect of Mr Elliott is, and subsequent to the PFCC’s decision in respect of Mr Ampadu, that there is the beginning of a precedent of c. £1,200,000 payable as an initial fee for those stand-out 16-17-year-old academy players moving to PL clubs.
Footnotes
[1] Jonathan Ellis and James Eighteen ‘Academies and Youth Issues’ in Nick De Marco QC (ed) Football and the Law (Bloomsbury Professional 2018), para 10.64.
[2] Ibid.
12 April 2021