Understanding the baffling buyout clause

Posted by Graham Hunter

The Date: Sept. 20, 1995.

The place: the small living room of Jean-Marc Bosman's parents' flat in Liege, Belgium.

The Sound: Their phone ringing over and over again, ringing off the hook.

Bosman was relishing telling me how he paid his wife back for what he considered the infidelity of abandoning him, literally, in the midst of his fight in 1993-95 for justice and freedom against his opponents Standard Liege, the Belgian FA and UEFA.

When it began to emerge that there might be some financial support for his plight -- he'd turned to drink and sold most of his belongings before moving back in with his parents -- and that there was a vague chance he could win his case, his wife bloused back onto the scene, making all kissy-kissy. He treated her to a sunshine weekend on the romantic island of Reunion, where what will happen happened and then, cruelly enough, he told here to go forth and multiply. Or words to that effect.

STF/AFP/Getty ImagesJean-Marc Bosman's landmark ruling began the transfer market -- and all its confusion -- as we know it.


So fervently was he describing his revenge that he had no interest in who might be phoning -- at least until his mother, sick of the incessant ringing, answered to find that one by one, the world's sporting media were clamouring to get his reaction to the fact that advocate general Carl Otto Lenz had given an "interim" verdict in favour of Bosman.

Bosman had charged me every cent I had on me (in reality, not very much) for the interview and said, proudly, "I'm not speaking to anyone, no matter who they are, until this guy gets all the interview he came for."

Believe me, it made great copy the next day -- and to have been with him on the day of his breakthrough, a moment that irrevocably changed European football, was a coup.

By December, the interim verdict had been ratified, and we had what are now glibly termed "Bosmans" -- meaning that, such as in the case of Victor Valdes this year, a player can fulfill the length of his contract and then leave, free of transfer fee, to play for whichever employer signs him.

Back in 1995, there was a good deal of panic. If football had a soundtrack that autumn and winter, it was R.E.M.'s "It's The End of The World As We Know It."

Without going into too many retrospective details, there were two overriding reactions to the "freedom of movement" development. Firstly, clubs thought that the enormous loss of transfer revenue caused when their stars chose to run down their contracts and leave for free would be utterly ruinous. Obviously, it hasn't turned out quite that drastically.

Secondly, the concept of footballers having "workers' rights" under the European Community treaties led to very strong speculation that a player could seek to exercise his "workers' freedom" by formally notifying his club that after working a reasonable notice period -- say, six months -- he wanted to unilaterally break their contract and go, without restraint or fee, to work for another club. Like a worker in a factory, an office or a school could do.

Ross Kinnaird/Allsport Luis Figo's move from Barca to Real Madrid showed that the "buy-out" system worked. At least in theory.


In Spain, the football authorities -- league, association and clubs -- thought they had a solution. One that was protective to a certain degree, was palpably fair under the gaze of the new European Court of Justice ruling, and could be mutually agreed between employer and employee.

The solution was called the "cláusula de rescisión." In English, we tend to call it the "get-out" or "buyout" clause. It had existed in Spain for nearly 10 years, but post-Bosman, it became a way that nervous clubs thought they could assure themselves that a legal and financial Armageddon wasn't heading their way with players coming and going as they chose.

The concept is that when a player signs for his new club, he and the club agree on a set fee (let's say 50 million euros) that, if paid, means the player is free to leave and his employers have no power to prevent his doing so.

Usually the buyout clause will be agreed with an actuarial relationship to the player's wages, length of contract and the cost of his purchase. If you are bought for 2.5 million euros, your buyout clause won't be 150 million euros and, equally, if you are about to hit the prime of your career, you've cost €70m to buy and the contract is for five years then don't expect the "cláusula de rescission" to be anything other than a substantial eight-figure sum.

So, here's the summary. Clubs could say to legal authorities, "Look! You don't have to intervene! The player, with his agent or lawyer, has voluntarily set the price of his own liberty -- it's workers' rights (of a sort)!"

To a certain extent, as Luis Figo showed when walking out on FC Barcelona in 2000 to join the Florentino Perez revolution at Real Madrid without a transfer transaction -- Madrid paid Figo's "cláusula de rescisión," which Barça had foolishly set too low at 45 million euros -- the claim held water.

A player's unilateral liberty was available for purchase. But there is one particular rule that has caused clubs, agents, lawyers, accountants, players and, more recently, England's avaricious Premier League clubs some major headaches.

If a player in La Liga wants to leave without his employers being able to stop him and his "cláusula de rescisión" is within the realms of acceptability, the only barrier is that it should be him, and not the club he wants to join, who pays it.

If it were the club desiring the player who was always paying the buyout clause and not the player doing so, then where were the unilateral workers' rights? If that was the case, then the Armageddon of the European Court of Justice interfering and dictating that football had no rights to consider itself a "special case" might very quickly reappear.

Apart from hoping that this is clear -- and even occasionally interesting -- I raise all this because there has been a good deal of confusion and frustration from eager fans and journalists in and around the Premier League. Particularly, as Spain's feeble financial situation made buying excellent players at knockdown prices look as easy as shooting fish in a barrel.

For example, there was widespread expectation surrounding Manchester United that Thiago could be bought on the cheap because of a clause in his contract, and that a straightforward bid of 35 million euros could secure Ander Herrera.

Juan Manuel Serrano Arce/Getty ImagesAnder Herrera's interest from the Premier League has sparked fresh talk -- and confusion -- about buy-out clauses.


Not a day goes by without my being asked about the accessibility of Diego Costa or Koke's respective buyout clauses.

But here's the rub. Given that it must be the player who pays the (let's say) 50 million euros to the Liga offices, who then devolve it to the club he's leaving, and that most players don't have seven figures in cash just lying around, it's usually the "buying" club that stumps up the money.

If they transfer that to the player so he can pay for his freedom, the Spanish authorities will deem that tax should be generated on the movement of that money. Which type of tax, and how much (potentially anywhere from 21 to 45 percent), will be dictated by a number of factors that I, decidedly not an accounting or legal specialist, decline to try to explain.

However, let's say that the buyout clause of Herrera is 35 million euros and there's 25 percent tax on it; the real fee will be 43.75 million euros. When a Spanish club deal is taking place and a player determinedly wants to go but the outfit he belongs to doesn't want to sell, then what often happens is a wee "scratch my back, and I'll scratch yours" arrangement.

If the Valencia president under no circumstances wants to sell Jonas to Barcelona but knows that Jonas (a) won't renew his contract and (b) is dead set on the move of his lifetime, the president will make public noises about "letting the player go only if every penny of the buyout contract is met."

Behind the scenes, the buying club will say, "OK, we'll give you 99.9999 percent of the buyout clause, but if we make it a purchase rather than an actual buyout then we won't have to pay extra tax on the whole move, and we'll do the same for you one day or we'll look well on your next move for one of our fringe players."

The president of the club losing its star will make very loud noises about how he forced Barcelona to pay the maximum amount possible -- i.e., the buyout -- and the fans look at him as a winner in the transaction rather than someone who let them down and sold the family jewels.

But for this kind of "quickness of the hand deceives the eye," there needs to be a relationship between the clubs and an acknowledgement that the player is likely to go -- an acceptance that the whole thing is pretty much inevitable.

In the instances of Koke, Costa, Ander and one or two others -- Alberto Moreno at Sevilla, Cristian Tello at Barcelona -- these "cláusulas de rescisión" have become a defensive weapon.

Angel Martinez/Real Madrid/Getty ImagesAsier Illarramendi's sale to Real Madrid might prohibit a string of deals involving Atletico were Koke or Herrera to be sold.


A rich, ambitious, predatory Premier League club sizes up the player, fancies him, sees a buyout clause of anywhere from 30 million to 45 million euros as "doable" -- possibly under the advice of an intermediary agent who's dying for his commission, or club scouts who know almost all the details but who have failed to take the extra tax into account -- yet then have to baulk at the fee going up by anywhere from a quarter to nearly half as much again.

Right now, the fishing is good in La Liga. Valencia sold David Villa, David Silva, Roberto Soldado and Juan Mata because their vital need for cash outweighed any thought of protectionism. However, right now, Atletico Madrid and Athletic Bilbao need to protect their stars to an almost equal degree.

Atletico earned nearly 18 million from UEFA for their Champions League group exploits and can begin to think of doubling that if they go well in the spring. They are heavily in debt, but earning money is a far better way to pay the interest than selling stars. The ground is nearly full for every home match, and manager Diego Simeone has demanded that his squad be consistent and stable -- selling Costa or Koke now, potentially even in the summer, seems anathema.

Meanwhile, Athletic have a new stadium to pay for and the fourth wall of the new San Mames stadium still to construct. But they are hamstrung by the fact that they will sign only Basque players. If they were to sell Ander now, or in the summer, how on earth would they replace him? If United gave them 45 million euros instead of 35 million, would that make it any easier to find the right calibre of central midfielder when the club is aiming hard for a return to the Champions League next season?

Right now, only Real Sociedad seem to have midfielders sufficiently attractive for Athletic to sell to United and then buy again, but ... La Real, of course, earned some UEFA revenue themselves this season thanks to the Champions League and also took in some 40 million euros from Real Madrid for Asier Illarramendi in the summer, so they are in a financial position where they can be brutally obstinate in refusing to sell to their "enemy" neighbour.

Of course, in this crazy, cash-rich world of Premier League football, none of this means that these deals are outright impossible.

But Jean-Marc Bosman, pretty much a pure victim of his fight for freedom, has certainly made it much easier for clubs like Atletico and Athletic to defend the players around whom they are basing an interesting and enjoyable push for the upper echelons of La Liga this season.

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