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End of the Transfer Fee?

In August 2006 Andrew Webster, a soccer player for the Scottish club Heart of Midlothian, signed a deal with Wigan in the English Premier League. He did this without the agreement of Hearts, while having about one year left to run on his contract, invoking article 17 of the FIFA player transfer rules, which specifies “consequences of terminating a contract without just cause”. Hearts took the case to arbitration and claimed a sum in the region of £5m, representing what they believed his value in the transfer market would be. The Court of Arbitration in Switzerland has just ruled that compensation should be set at £150,000, representing roughly the amount of salary remaining to be paid on his contract.

In effect this ruling places a limit on the soccer transfer market, which has at times seemed to involve absurd sums of money. However, some of the more outraged claims of soccer officials should be treated with caution. Clubs employing players under 23 are specially protected and can demand much larger transfer fees; up to the age of 28 the first three years of a contract are “protected”, involving the threat of sporting sanctions both for the player and any club that takes him on if there is a unilateral breach.

In many ways the ruling brings players into line with most other forms of skilled employment: both sides can unilaterally breach a contract, if they do so financial compensation must be paid, which must reflect economic losses, but should not be punitive. Moreover, I think the fear expressed by some, that this will damage small clubs, is misplaced. It is just as likely that this rule will bring down the transfer fee of an aging star moving from a big club to a small club as the reverse.