Termination Clauses in Sports Contracts – Differences between Spanish and German Law

26 July 2022 - Sven Wassmer

While termination clauses are not very common in contracts of professional football players in Germany, in Spain there is virtually no contract between a club and a professional athlete without such a clause.

Sven Wassmer, PhD Abogado & Rechtsanwalt +34 91 319 96 86

The reason for this difference lies in Spanish law, in particular Article 16.1 of Royal Decree 1006/1985, which provides that an athlete’s employment contract with the club may be terminated by the athlete without just cause, provided that a monetary compensation is paid. The amount has to be determined by the competent court if it has not been agreed on previously by the parties. In order to avoid leaving it to the court’s discretion to define the quantity and in order to ensure that the amount is high and optimal legal safeguards are in place, clubs usually fix the compensation in their employment contracts by means of buy-out clauses. On the basis of such a clause, there can only be an early termination of a player’s employment contract if the stipulated amount is paid. Therefore, when one club signs a player from another club by paying the amount established in the buy-out clause, what is happening at the legal level is that the player–not the new club–is paying a previously agreed compensation to his/her former club. Even so, in the vast majority of cases it is effectively the new club that bears the cost.

Though the amount fixed in the clause can be revised by a court, there are very few judgments in which courts have reduced the compensation. Thus, buy-out clauses do give clubs some security, especially taking into account that the new club is secondarily liable for the payment. On the downside, a club cannot do anything about the departure of an athlete if he/she has paid the amount specified in the clause.

In Germany, on the other hand, neither clubs nor players are allowed to terminate their employment relationship without just cause, so there is no need for clubs to include release clauses in their employment contracts. Therefore, if a German club states that a player is “not sellable,” this is legally valid, since there can be no transfer prior to the expiry of a player’s employment contract, unless the club in question gives its consent. However, in Germany there are also contracts that do contain termination clauses, which is usually because the athlete has insisted on the inclusion of such a clause. Such clauses in Germany are legally different from buy-out clauses under Spanish law, as they do not oblige athletes to pay compensation in case of unilateral termination on their part; instead, they oblige the club to transfer a player’s federative rights to the new club if the latter pays the amount stipulated in the clause.