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12 December 2011

Sports Contracts in Ukraine


Author: Oleksiy Kolchanov
Source: The Ukrainian Journal of Business Law. – 2011. – December. – p.32-33

Ukrainian sports law is in the early stages of its development and the prospects for its future growth directly depend on resolution of certain conceptual problems. One such problem is regulation of contracts in sports law.

The pressing nature of this problem is evidenced by the fact that today the investment into both professional and amateur sports is on the rise in Ukraine.

This includes sponsorship of individual athletes, clubs, players, leagues and federations and general rise in the commercialization of sports. There is perhaps no professional sports club in Ukraine today without at least one foreign player, coach or consultant. In this environment the stability of contracts and their proper performance are increasingly important for all parties involved: athletes, clubs, sponsors, advertisers, and others. This article looks at some types of contracts: the contract between an athlete and sports organization (club) and the so-called transfer contract (the contract providing for transfer of the athlete from one sports organization to another).

The current edition of the Physical Culture and Sports Actof Ukraine (the Sports Act) pays relatively little attention to contractual matters, especially as compared to the previous edition of the Sports Act. We believe that this approach is not correct. The Sports Act is the key source of legal regulation in this matter and, in essence, needs to be the foundation of legal regulation in this sphere. The SportsAct provides that activities of athletes, coaches and other specialists related to training for and participation in professional sports competitions which is their primary source of income are governed by the Sports Act,

the Labor Code of Ukraine and other legislation and by statutes and by-laws of respective Ukrainian and international sports organizations. The next and final mention of contractual relations in the Sports Act can be found in Article 38(3) of the Sports Act which states that an athlete acquires the status of a professional upon signing of the contract with an entity engaged in sports and physical culture activities providing for his or her participation in professional sports competitions.

Several matters remain uncertain and need clarification in order to remove this legal uncertainty. First, does the fact that the Labor Code refers to certain “contracts” with entities operating the field of sports and physical culture providing for participation in professional sports competitions mean that the relations between athletes and their clubs are relations subject to labor laws? Second, what is the contract providing for participation in competitions, what is its legal subject matter, who must be a party to it, what are essential terms of such a contract, etc. Moreover, a number of questions are raised by the need to accommodate special nature of professional sports. For example, the status of athletes serving in the Ministry of Interior troops, in the military, athletes in solo sports, minors, etc. Until recently, Ukrainian law was more specific with respect to the nature of relations between the athlete and the club, including the legal nature of contract between the club and the athlete. Namely, it used to classify the sports contract between a professional athlete and sports organization (club) is a type of employment contract. As a practical matter, there was no doubt that the contract between the professional athlete and the club for which he plays had to be formed, terminated and interpreted in light of labor legislation. This approach has both positive and negative aspects.

It is possible that the recent amendments to the Sports Act were aimed at liberalizing the practice of signing contracts in professional sports making it no longer subject to labor law. However, the actual contemporary practice regulates the contracts in professional sports in a much more liberal fashion, getting ahead of the current Ukrainian law and following rather advanced international practices. In fact, parties often entering into contracts having a very complex structure and combining elements regulated by different branches of the law, the so-called "mixed" or "inter-branch" contracts.

Although under existing law such contractual structures and their elements enjoy only rather week protection, we are confident that such a practical solution will soon acquire the status of established precedents. This way they can direct the development of the law.

The transfer contract is another important type of contract in professional sports. It should be stressed that the need for transfers is caused by the peculiarities of this field. If we attempt to pinpoint the legal nature of this contract, we immediately find that all efforts to place this contract within the system of the existing legal rules inevitably run into difficulties associated with the complex nature of athlete’s transfers, including leases. For example, divergent interpretations exist regarding the legal status of such contracts, their tax implications, and currency restrictions on transfer payments. A transfer contract is, in essence, an agreement between the clubs regulating the athlete's transfer from one club to the other in exchange for compensation for training and increased skills of the athlete acquired at the first club. The transfer involves, as a rule, the undertaking by one club to terminate the athlete's employment contract and the obligation of the second club to accept and enter into an employment contract with athlete. Transfer contracts have impact on the labor relations between the athlete and the respective clubs and materially limit the athletes' labor rights granted to them by law as well as their freedom to enter into employment contracts. Therefore, even the very obligations of the clubs to terminate and hire the athlete can arguably be invalid under Ukrainian law.

Transfer relations play a key role in the system of professional relations on which professional sport is based. Increasing commercialization of professional sport makes better legislation regulating these matters essential.

In any case Ukrainian sports clubs are rapidly acquiring experience of transfer contracts by borrowing from Western legal experience.

Globalization and growing internationalization of sports have a significant impact on the development of the contractual practices in professional sports. They largely determine the existing trends in legal regulation of professional sports relations. A key element in the legal structure of these relations is the legal status of the contract in professional sports, which in this context acquires paramount importance.



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