There is a subset of third-party influence cases that turn on a confusing distinction between penalty and bonus clauses. Usually, the debate arises in the context of a loan agreement. Generally-speaking, one club will loan a player to another, with a provision that increases the fee based on how much the player plays. In some agreements, the fee increases as the player earns more playing time, whereas, in others, the fee increases if the player fails to hit certain appearance and minutes benchmarks. FIFA views the former as a bonus clause – which is acceptable under its third-party influence rules – and the latter as a penalty clause – which violates those rules. But at least on the surface, the two concepts tend to look alike.
How are the concepts similar?
Let’s start with a penalty clause.
In January 2019, Italian club Udinese loaned Venezuelan striker Darwin Machis to Cadiz, then part of Spain’s second division. The loan agreement had a clause imposing a €150k fee on Cadiz if Machis played in fewer than 50% of the club’s games during the loan period. The FDC considered this wrongful third-party influence and, therefore, struck the clause. The FIFA Appeal Committee later affirmed.
The Appeal Committee explained what they saw as the difference between a permissible bonus clause and sanctionable penalty clause. In a bonus clause,
the payment originates when a player is fielded for a certain number of matches and the amount increases the more matches that he is fielded, which obviously happens due to his good sporting performance. In that case, the club is free to decide whether to field the player or not, although not having to face a financial consequence in case that it decides not to field him.
The Committee added that this differs from a penalty clause where, “if the club decides not to field the player based on sporting reasons as it considers his performance not to be adequate, it would have to face a financial consequence by means of a penalty.” In the Committee’s view, unlike the bonus clause, the penalty clause “affects the club’s independence in sporting decision making.”
At first glance, the Committee’s distinction appears to be missing a difference. After all, both clauses force the loanee club to pay the loaner based on the player’s playing time. As such, both could sway the loanee from a decision they would otherwise make. In Udinese’s case, Cadiz (the loanee) would have had to pay Udinese (the loaner) if Machis did not play in 50% of the games. This condition applied regardless of whether Cadiz wanted to play Machis that often. So the payment could put Cadiz in a situation where they want to leave Machis out of the team, but nonetheless include him to avoid the penalty. Now consider the opposite scenario (which is hypothetical). Suppose the loan agreement paid Udinese what it termed a “bonus” if Machis played in more than 50% of Cadiz’s matches. Also suppose Cadiz believed Machis was good enough that the team wanted him to play every game. Like the “penalty” clause, the payment to Udinese would incentivize Cadiz to go against their better sporting judgment and bench Machis. The difference in the two scenarios would not be the existence of third-party influence but the decision that influence urged.
How are the concepts different?
So then, if penalties and bonuses function the same way on paper, is not the distinction arbitrary?
This time, let’s start the analysis with a bonus clause.
Assume the opposite of the Machis loan agreement – the loanee pays more if the player plays. The player has then satisfied the purpose of the loan: helping the loanee achieve their sporting goals. Similarly, the loaner has fulfilled their obligation to the loanee: supplying an adequate player. So an extra payment to the loaner would be in return for conferring a benefit on the loanee. And this looks like a bonus.
In the FDC case, the agreement forced the loanee (Cadiz) to pay the loaner (Udinese) if the loanee did not select the player often enough. This means the loanee pays even though the loaner gave them an inadequate player. Or put another way, the loanee pays the loaner despite the loaner doing nothing to earn the fee. So this cannot be a bonus. But it can be a penalty – a penalty on the loanee for failing to give the loaner’s player enough seasoning.
Still, regardless of what is fair, why is this third-party influence? One reason could be that a club accepts a player on loan to help them succeed on the field. So in the first instance, the “free” route is a decision they are not going to make. Indeed, if the player earns playing time, and the club doesn’t play him, they would not have agreed to the loan in the first place. Therefore, the payment does not affect their choice because, in this instance, they were always going to choose to play the player.
In the second instance, the player has not earned playing time. So under normal circumstances, despite making the loan, the loanee is not going to pick the player. But here, the payment pulls them in the opposite direction – against their normal sporting judgment and against their sporting interests. This qualifies as material influence in a way the reverse situation does not.
FIFA jurisprudence offers results but little explanation
Neither the FDC nor the Appeal Committee has used the above rationale to distinguish between penalties and bonuses. In fact, the FDC has not established any firm criteria on that subject. As such, the best guide may be the cases’ results. These are consistent with the position that extra payments are bonuses when they are triggered by more playing time and penalties when they are triggered by less playing time.
For example, in January 2020, Portimonense (in Portugal) loaned Japanese attacker Takuma Nishimura to Sendai, in his home country’s J-League. To ensure Nishimura played, Portimonense included a provision in his loan agreement imposing a €100k fine on Sendai if he played in fewer than 50% of the club’s matches. The FDC ruled that the clause constrained Sendai’s right to “freely” decide which players to “select in a match with the aim of achieving the best possible result.” Thus, it violated the third-party influence rules.
The Panel distinguished between this clause and one promising a club a bonus for playing a player a certain amount. In their view, bonus clauses still allow the club freedom to “decide whether the player plays.” So unlike penalty clauses, they do not violate the rule. 
Continuing with this point, the FDC upheld a clause in Arsenal’s 2020 loan agreement with Cork City for then-20-year-old defender Joseph Olowu. In relevant part, the clause gave Arsenal a £15k “performance fee,” which Cork City could reduce if Olowu hit certain benchmarks during his time with the club. These related to starting appearances and minutes played.
Notably, as Olowu’s starts and minutes went up, the performance fee was reduced by less. For example, if Olowu started 8 games and played 800 minutes, the fee would be reduced by £10k. But if Olowu started 13 games and reached 1300 minutes, the fee would only go down by £4k. In short, Arsenal was the beneficiary of the clause – paying less for supplying a better player.
The Panel deemed this a bonus system and upheld the clause. The result is consistent with the argument above in that Cork would not have a genuine incentive to leave Olowu on the bench if he showed the ability to help the club on the field. But the Panel did not necessarily mean this.
Most notably, while the Panel acknowledged that the fee reduction could “affect” Cork’s decisions regarding Olowu, they still upheld the clause because it did not grant Arsenal “real” influence over Cork. But the Panel did not elaborate on this point. So it is difficult to know what they meant by “real” influence. It could mean that Arsenal’s only influence over Cork was to push them into an option that only exists on paper: benching a player who can help the club get results. Or it could support several other rationales.
FIFA jurisprudence may not be clear on how a penalty clause differs from a bonus clause. But for now, it may be enough that the results follow the distinction between incentives to play and incentives to bench. The FDC and the Appeal Committee have treated the former as a penalty clause and, therefore, impermissible third-party influence. Conversely, the latter is a bonus clause, which does not cross that line. And until a FIFA judicial body says otherwise, this distinction is likely to prevail.
 Udinese, FIFA Case No. APC-200093, at ¶2 (June 24, 2020)
 Id. at ¶3
 Id. at ¶6
 Id. at ¶23
 Id.at ¶35
 Technically, this was a sub-loan, following an earlier transaction where Portimonense loaned Nishamura to CSKA Moscow. Club Vegalta Sendai, FIFA Case No. DC-FDD-5760, at ¶¶2-3, (July 23, 2020)
 Id. at ¶3
 Id. at ¶13
 Id. at ¶16
 Id. at ¶14
 The Panel did not expand on their conclusion that the clause did not allow Sendai enough freedom to decide which players to “select in a match with the aim of achieving the best possible result.” Id. at ¶13 (Emphasis added). A standard prohibiting third-party influence only so far as it limits a club’s ability to pursue the best sporting result would make for a cleaner distinction between penalty and bonus clauses. A bonus clause would only incentive clubs to work against their sporting goals and, therefore, would not constitute wrongful third-party influence. But the Panel did not claim to make “the best possible result” language part of the third-party influence rule. So it is unclear whether that language applies going forward.
 Arsenal, FIFA Case No. DC-FDD-5844, at ¶2, (July 23, 2020)
 Id. at ¶¶17, 19-20
 Id. at ¶19