FIFA Case Note: Udinese v. Paris St. Germain

Long-standing precedent from FIFA’s Dispute Resolution Chamber entitles clubs to training compensation for the period they take a player on loan.  But the right to compensation does not arise until the parent club transfers the player to a club in another association.  In other words, the time with the parent club and the time on loan are treated as a single period, and the loan club is entitled to training compensation, pro rata, based on the time it trained the player within that period.

When the transfer is between EU countries, there is a calculation issue, however. In these instances, FIFA regulations provide that the amount of compensation is determined by one of two formulas.  If the transfer is from a higher category club to a lower category club, the lower category club’s training costs determine the amount of compensation.  If the transfer goes the opposite direction, the training costs are the average of the two categories.

When no loan is involved, this process is easy enough: apply the appropriate formula to the training costs, and multiply by the amount of time the training club had the player.  But when a loan is involved, questions emerge – like, how is the loan club’s compensation determined?  Or more specifically, which club’s training costs get plugged into the formula: the loan club or the parent club? 

First off, when those clubs are in the same category, no dilemma exists.  It is when they hail from different categories that issues arise.  On one hand, logic might suggest that the parent club’s category should also govern the loan club because the player’s time with both is treated as a single period. But in a recent decision, the DRC expressed a different view. 

In August 2020, the chamber addressed the case of then-17-year-old French goalkeeper Denis Franchi.  Almost a year earlier, Franchi had moved from small Italian club Prata Falchi to Paris St. Germain.  Upon arrival at PSG, Franchi signed his first professional contract.  For approximately two years leading up to the transfer, Udinese, a large Italian club, had Franchi on loan.  So based on Franchi signing his first professional contract with PSG, Udinese requested training compensation.

Udinese’s right to compensation was obvious, and PSG did not contest that point.  The dispute arose over the amount.  Udinese asked for €87,468.45 for the 20 months it had Franchi on loan.  In effect, they treated the transfer as between Udinese and PSG.  As both are Category I clubs, the amount was calculated off the training costs for that category (€90,000 per season).  But PSG believed they only owed €52,446.24, which would be the amount if Franchi came from Prata Falchi.  Here, the transfer would be from lower to higher, making the training costs an average between Prata and PSG’s categories.  (Prata is in Category 4, which is €10,000 per season).

Based only on the “well-established jurisprudence of the DRC,” the three-judge panel sided with Udinese.  As the DRC usually avoids case citations, it was difficult to verify this conclusion.  But after reviewing cases with transfers similar to the Prata-PSG transfer, it became clear that, in these circumstances, the DRC calculates each club’s compensation as if that club were making the transfer.  So here, this would mean the training costs for Prata’s compensation would derive from the average between categories.  Conversely, Udinese’s compensation would use only Category I for training costs.    

Beyond the logical dilemmas, FIFA’s Regulations on the Status and Transfer of Players also pulls this case in opposite directions.  While the RSTP does not address this situation directly, different provisions hint at different outcomes.  Specifically, paragraph 3 of Annex 4 states that training compensation should be paid to a player’s training club(s) on a pro rata basis, depending on the time they trained the player.  This would suggest training compensation stems from the relationship between the training club and the player’s new club.  So calculating training costs in the EU/EEA would follow the same principle and determine training costs based on that relationship.  In effect, the panel in the Udinese case took this route.  Nonetheless, at least one section of the RSTP suggests the opposite route.  In relevant part, paragraph 6 of Annex 4 addresses training costs for intra-Europe transfers:

(a) If the player moves from a lower to a higher category club, the calculation shall be based on the average training costs of the two clubs

(b) If the player moves from a lower to a higher category club, the calculation shall be based on the average training costs of the two clubs.

Note that both provisions link the training costs to clubs involved in the transfer.  For example, in scenario (a), the player “moves from a lower to a higher category club.”  Training costs are then the average costs for those two clubs – i.e. the clubs in the transfer.  The language says nothing about loan clubs that are not part of the transfer.  Likewise, in scenario (b), the first clause refers to a transfer between two clubs, and the subsequent clause provides that training costs stem from one of those clubs.  So these sections may conflict with the DRC’s jurisprudence on the subject.

Regardless, the DRC has taken one side of the debate – a point the Udinese case bolstered.  And so this is the view that prevails.

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