Third Party Ownership (TPO) & how it has affected us

Liverpool Football Club - General Discussion

Postby C-R » Sun Dec 28, 2014 12:02 pm

Very interesting article this, thing's could have been very different for us...


It is a practice that has been banned in English football for the last seven years. It’s a bugbear of Fifa, and a process few inside the game have any real time for, or understanding of.

Why, then, does third party ownership remain such a big talking point?

Of the many issues facing clubs in the transfer market these days, the issue of TPO is among the most complex. And the most frustrating.

TPO is the agreement between a club and a third party - be it an individual, a consortium or an investment fund - in exchange for owning a percentage of the future transfer value of a player (the so-called ‘economic rights’).

It is a system which is common across South America, as well as Southern and Eastern Europe, where investment companies can turn substantial profits from transferring players.

Clubs like Shakhtar Donetsk, Benfica and current Spanish champions Atletico Madrid have all benefited from the practice, and argue that TPO enables them to purchase players they would otherwise not be able to afford, therefore increasing competition.

Critics, though, claim that the practice interferes with players’ freedom of movement, and takes significant sums of money out of the game.

A recent report from auditors KPMG stated that there is only one guaranteed winner in these deals – the third party investor, while significant money is lost to the game, and many clubs are drawn into a financial dependence. FIFPro, the world players’ union, claim this amounts to “an abuse of our industry” and has likened TPO to “a form of modern-day slavery”.

In the Premier League, the practice is already banned. The cases of Carlos Tevez and Javier Mascherano, brought to England by a third-party investment group in 2006, brought about a significant change in league legislation. Rules U39 and U40 now outlaw any kind of TPO in the Premier League.

Mascherano, of course, ended up at Liverpool. Indeed, it was the Reds’ pursuit of the player which, in essence, blew the lid off TPO in this country.

Mascherano’s economic rights, like those of Tevez, were “owned” by investment groups linked to the businessman Kia Joorabchian.

Joorabchian’s main company, Media Sports Investments (MSI), had previously agreed a 10-year mutual arrangement with the Brazilian club Corinthians, whereby it would provide money to cover running costs at the club, in exchange for a significant share (51%) of any future profits.

That, of course, included money made from transfers. So when Tevez and Mascherano, both full Argentine internationals, were parachuted into Corinthians by their ‘owners’, MSI then stood to make substantial profits from the pair’s next move.

That next move would be to England. West Ham signed the pair in a sensational double deal in August 2006, but neither were destined to stay long at Upton Park.

By January 2007, Liverpool were in for Mascherano, and informed the Premier League that they were seeking to register the player using the same terms as West Ham had used a few months earlier.

The Premier League, with reservations about the deal, asked West Ham to submit all documents relating to the original Tevez and Mascherano transfers, found irregularities and launched an investigation.

Liverpool, after a delay of almost three weeks, eventually completed the transfer, though they were forced to make adjustments to its structure, in order to avoid a similar investigation.

West Ham, meanwhile, were fined £5.5m for not disclosing all the documents relating to the original transfers (and for breaching a rule which stated that external companies must not influence a club’s transfer policy), and after a series of court cases, Premier League clubs eventually agreed to prohibit TPO.

The issue, though, remains. An investigation by the Guardian’s David Conn in September claimed that Jorge Mendes, a Portuguese agent involved in many of the biggest transfers in European football, was “serially involved in third-party ownership”.

The report said Mendes, along with former Manchester United and Chelsea executive Peter Kenyon, were advising five Jersey-based funds over the investment in players’ economic rights, and suggested Mendes’ position as agent to many of these players represented a conflict of interests, and therefore a breach of FIFA regulations.

An earlier Guardian report had claimed Chelsea were working in partnership with Mendes – who is the agent of Jose Mourinho - as well as the US-based Creative Arts Agency to buy “economic rights participation agreements” in footballers playing outside the Premier League, most notably in Portugal.

Liverpool, meanwhile, have found TPO an issue as they have looked to strengthen their squad in recent seasons, with their signing of Lazar Markovic this summer a case in point.

The Reds paid Benfica £9.9m for their 50% share in the Serb, with a third-party, believed to be linked to agent Pini Zahavi, receiving a further £9.9m for the other half. Markovic had long been expected to join Chelsea, whose links with both Benfica and Zahavi would have enabled them to acquire him for a reduced fee.

A suspicion also lingers that the failed pursuit of Diego Costa in 2013 was down to third-party influence over the player. Liverpool met Costa’s buyout clause at Atletico Madrid, but were never afforded the chance to speak to the player.

Twelve months later, the striker moved to Stamford Bridge, with suggestions, unconfirmed at this point, that a portion of the £32m transfer fee may have found its way into the pockets of third-parties, including Mendes and a number of companies with financial links to Chelsea.

Liverpool also found TPO an issue when chasing Armenian midfielder Henrikh Mkhitaryan, then of Shakhtar Donetsk, the same summer. Liverpool wanted the player, but found that his rights were split between Shakhtar and the player’s former clubs Metalurh and Pyunik, with all three parties wanting a say in what happened next.

Rinat Akhmetov (Shakhtar’s oligarch owner), Sergei Taruta (the owner of Metalurh and another oligarch) and Ruben Hayrapetyan (Pyunik’s owner, and an Armenian billionaire), all wanted to sell Mkhitaryan to Anzhi Makhachkala for €35 million.

Mkhitaryan, who had no intention of moving to Anzhi, hired Italian agent Mino Raiola to negotiate his exit from Donetsk, and eventually joined Borussia Dortmund, with the German club’s chief executive, Hans-Joachim Watzke, stating upon completion that the transfer had been “very difficult”.

FIFA, for its part, has acted. The governing body announced earlier this month that TPO will be banned globally from May 1 next year, after a meeting of its executive committee in Marrakesh.In the meantime, expect the issue to rear its head again, somewhere, in January. It’s a murky world, is the transfer market. And TPO simply muddies the waters further. Plenty in the game will be glad to see the back of it.
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