When creating player contracts in esports or advising teams, I always get asked about transfer fees. But what are transfer fees in general and what are the legal bases for them?

When it comes to transfer fees, many people always think of the dream sums that are paid in professional football, for example. But in reality, purely from a legal point of view, transfer fees are something very boring.

A transfer fee is in principle nothing more than a voluntary waiver of the rights under a contract (whether employment contract or freelancer), whereby this very waiver is remunerated by a third party.

Thus, if Esport Team A has a player under contract and such a contract binds the player for a longer period of time – effective – to the team, the player may not be able to enter into the same contract with Team B and, for example, play for them, act as a manager or advisor, or make similar commitments. Since we in the Federal Republic of Germany and indeed in all the countries of the world have freedom of contract, contracts can of course be terminated properly or extraordinarily if the law, or the treaty, gives the parties the right to do so. In the absence of this right, it is possible, as a contracting party, to agree on the termination of the contract which, under certain conditions, terminates the mutual obligations. It is precisely such termination agreements that often include transfer fees or at least a link to a transfer agreement with a third party. In principle, three parties are involved here and it is important to take careful legal care that no contracts are concluded at the expense of third parties.

But what are the conditions for a termination of the contract to be necessary at all and for a player not to be able to simply terminate the contract on a regular basis or simply ignore the current contract, in the absence of sanctions? Well, the most important condition is that the player contract is so secure that it can really tie a player, a manager or another person over a longer period of time. In most cases, only employment contracts with correspondingly long durations and/or notice periods are eligible. In theory, service provider contracts are also conceivable (but all the other social security problems should be considered). However, the effectiveness and binding power of such contracts must be taken into account as a matter of urgency. Contracts that bind players to a team without adequate consideration are usually inadmissible and then no longer have a binding effect. The same applies to contracts with competition clauses which do not comply with the comprehensive case-law on non-compete issues.

It is therefore essential that someone with legal knowledge be involved in the drafting of such contracts. In addition, the economic situation (sponsors, other income) must allow regular remuneration of players, managers, etc., since a lack of remuneration in turn is an unreasonable impairment and thus the binding effect or a termination of the player. If you are not able to reward a team/player in the long term or offer a consideration, you usually do not have to think about things like transfer fees.

In esports, too, things like performance centers are conceivable, which young players build up and then deserve that large professional teams take over these players for a transfer fee. With such a performance center, startups, teams or other providers could well finance themselves. But it is also important to pay attention to a precise legal construction. If a performance centre acts purely as an intermediary, a player can probably change without any remuneration for the performance center/team of the receiving team. Commissions by the player are only possible to a very limited extent. While in the case of professional athletes up to 14 of the gross annual salary can be agreed as a commission, this is the case for e-athletes in accordance with Section 296 para. 3 SGB III to 2,000.00 euros (or 1,500 euros). In fact, the role here is that the DOSB does not recognize esport.