SELL-ON CLAUSES IN FOOTBALL TRANSFER AGREEMENTS AND EUROPEAN UNION COMPETITION LAW
Sell-on clauses in football transfer agreements, which stipulate a percentage of a future transfer fee for the selling club, are generally permissible under European Union (EU) competition law, but can be subject to scrutiny if they restrict competition or unfairly impact player freedom of movement.
Whilst not inherently illegal, variable sell-on clauses, where the percentage varies based upon the destination club, have faced challenges from FIFA, the World Governing Body of Association Football, and have been the subject of legal battles, with some courts finding them to be potentially anti-competitive.
These clauses are primarily used to allow the selling club to benefit from a player’s increased market value if they are subsequently transferred to another club. In that sense, they serve a clear economic function in the transfer market, particularly in rewarding clubs that invest in talent development.
As the Court of Arbitration for Sport (CAS) has clearly recognised, such clauses are a well-known contractual mechanism in the football industry. In the words of the panel in CAS 2010/A/2098 Sevilla FC v. RC Lens:
“The Sell-On Clause contains a well-known mechanism in the world of professional football: its purpose is to ‘protect’ a club (the ‘old club’) transferring a player to another club (the ‘new club’) against an unexpected increase, after the transfer, in the market value of the player’s services; therefore, the old club receives an additional payment in the event the player is ‘sold’ from the new club to a third club for an amount higher than that one paid by the new club to the old club. In transfer contracts, for that reason, a sell-on clause is combined with the provision defining the transfer fee: overall, the parties divide the consideration to be paid by the new club in two components, i.e. a fixed amount, payable upon the transfer of the player to the new club, and a variable, notional amount, payable to the old club in the event of a subsequent ‘sale’ of the player from the new club to a third club.”
(CAS 2010/A/2098, Award of 29 November 2010, § 20; See also CAS 2021/A/7909, § 42)
Variable sell-on clauses, where the percentage due to the selling club varies depending upon the buying club, have been a point of contention. FIFA has previously challenged such clauses, arguing that they restrict player movement. This concern is rooted in the idea that such provisions could potentially discourage certain transfer destinations or distort market dynamics by creating artificial cost differentials between football clubs.
FIFA has implemented Regulations to address concerns about third-party influence, including some aspects of sell-on clauses, but the legality and enforceability of these Regulations are still being tested in various legal contexts. Notably, Article 18bis of the Regulations on the Status and Transfer of Players (RSTP) (June 2024 edition) provides that:
“No club shall enter into a contract which enables the counter club/counter clubs, and vice versa, or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams.”
This rule aims to preserve the independence of clubs and avoid undue influence in their decision-making, particularly in employment and transfer matters. FIFA has interpreted some sell-on clauses, especially variable ones, as potentially conflicting with this rule.
The core concern under EU competition law is whether a sell-on clause restricts competition in the market for player transfers or impedes the freedom of movement for players. Under Article 101 of The Treaty on the Functioning of the European Union, agreements that have, as their object or effect, the restriction of competition are prohibited, unless they can be objectively justified. In that context, sell-on clauses can be justified if they pursue a legitimate aim, such as allowing clubs to recoup their investments in player development, and provided that they are proportionate and non-discriminatory. This balancing test requires close examination of the structure and impact of each clause on a case by case basis.
Recent cases, such as Arsenal’s successful appeal against the FIFA decision on variable sell-on clauses, highlight the ongoing legal debate surrounding these clauses. In CAS 2020/A/7417 Arsenal FC v. FIFA, decided on 18 June 2021, Arsenal challenged FIFA’s decision to sanction the club for including clauses that varied the percentage of a sell-on fee depending upon where the player was transferred, for example, stipulating a higher percentage if the player was sold to a British club. These clauses appeared in the transfer agreements of Chuba Akpom (sold to PAOK) and Joel Campbell (sold to Frosinone).
FIFA argued that such clauses could constitute a prohibited form of third-party influence under Article 18bis of its RSTP, as they might impair the freedom of the buying club to transfer the player in the future. The concern was that financial disincentives tied to specific destinations could interfere with the autonomy of clubs and distort market behaviour.
Arsenal, however, contended that the clauses did not amount to undue influence and that the club had no control over where the players would eventually be transferred. The clauses merely reflected commercial considerations without imposing any binding restriction or constraint on the future conduct of the buying clubs. The CAS ultimately sided with Arsenal, holding that the potential influence exerted by the clauses was not material enough to violate the FIFA Regulations.
In its award, the CAS provided a clear interpretation of Article 18bis, stating that only material influence on another club’s autonomy can breach the rule, and that any unsubstantial possible influence on another club must not be considered as a violation. The Panel stressed that restrictions on contractual freedom must be justified by a legitimate objective, such as safeguarding the integrity of the competition, and must be proportionate. Where no such interest is materially affected, clubs must remain free to negotiate and structure their commercial agreements.
The CAS ruling clarifies the permissibility of variable sell-on clauses in football transfer agreements, suggesting that a certain threshold of influence is acceptable, and that a case-by-case assessment is necessary to determine whether a clause genuinely undermines the independence of the parties. This decision not only lifted the sanctions against Arsenal but also provided legal certainty for clubs seeking to include commercially meaningful but legally compliant clauses in football transfer agreements.
This ruling is consistent with the broader principles of EU competition law, which prohibit agreements that unduly distort market dynamics or hinder player mobility. Nonetheless, sell-on clauses may be admissible where they serve a legitimate aim, such as recouping investment in player development, and are applied in a proportionate and non-discriminatory manner.
In conclusion, whilst sell-on clauses are generally valid and common in football transfer agreements, special attention must be paid to their formulation, especially where percentages vary according to the destination club. The Arsenal case and established CAS jurisprudence confirm that such clauses are not per se illegal, but their legal enforceability, under FIFA Regulations and EU competition law, will depend upon the precise structure and wording of the clauses and their actual effects upon competition and player freedom of movement.
We act in all legal aspects of football transfers and their corresponding agreements and further information is available by emailing Dr Estelle Ivanova at ivanova@valloni.ch.