Review of Sell-on Clause in Iranian football in light of int’l regulations
By Reza Gerami
Legal expert & FIFA international agent
The Sell-on Clause is a contractual commitment typically included by the selling club when negotiating the transfer of a player. Under this provision, if the buying club later transfers the player to a third club for a specified amount, the original club shares in a portion of the proceeds from that resale. Simply put, this mechanism ensures that the original club benefits from the appreciation of the player’s value and any potential future transfers.
In recent years, FIFA’s Dispute Resolution Chamber (DRC) and the Court of Arbitration for Sport (CAS) have frequently stepped in to clarify the legal and practical aspects of this clause. Its prevalence can be attributed to reasons such as covering the costs of player development, managing risk, and encouraging investment in young talents.
While FIFA’s Regulations on the Status and Transfer of Players do not explicitly refer to the Sell-on Clause as a standalone provision, Articles 18 bis (prohibition of third-party influence or ownership) and regulations regarding transfer fees could impact the formulation or execution of the clause. According to FIFA’s general interpretation, as long as this clause does not imply third-party economic ownership of the player and does not conflict with principles of fair competition, FIFA recognizes it as a valid contractual clause.
The most common form of the Sell-on Clause stipulates that the original club receives 20% of the transfer fee for any future transfer. A common challenge here lies in defining the “transfer fee.” Is it the net transfer amount (excluding taxes and commissions) or the gross amount? FIFA and CAS generally lean toward interpreting this as the gross amount unless the contract explicitly specifies net or gross. In some contracts, it is specified that the original club participates in the “profit” from the transfer, meaning the initial transfer amount is deducted from the subsequent transfer fee, and a percentage of the remainder belongs to the original club. This model can introduce additional complexities, as disputes may arise over details like the “previous purchase costs” or “ancillary expenses.”
Regarding the timing of when the clause is realized and related interpretations, disputes sometimes arise over whether the payment obligation arises immediately upon signing the subsequent transfer contract or after the full payment of the resale installment is received. In the absence of contract stipulations, CAS tends to follow current practice; a practice that often states that as soon as the transfer is formalized and registered with the national federation, the original club’s share becomes claimable.
The Sell-on Clause has increasingly become a common fixture in player transfer agreements, serving as a tool to safeguard the financial interests of the original club should the player’s value rise over time. Practical experiences indicate that FIFA and the Court of Arbitration for Sport generally recognize this clause, provided it does not contradict third-party ownership prohibitions and is clearly articulated. The primary legal challenges in this context revolve around three core issues: ambiguity in defining transfer amounts, compliance with good faith principles, and avoiding conflicts with regulations against third-party economic ownership.
From a practical standpoint, clubs are advised to clarify the details when drafting the Sell-on Clause to prevent future disputes. It is essential to frame the clause in consideration of FIFA’s prevailing practices and the precedents set by the Court of Arbitration for Sport, minimizing the potential for contradictory interpretations. Moreover, it is recommended that this clause be incorporated into the contract with utmost care before signing, ensuring that clear and credible evidence can be referenced in the event of a dispute.