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The Pelé Law is a Brazilian law that forces professional sports clubs to observe business law and pay tax within two years.
On March 24, 1998, Law N. 9.615/98, stipulates that by 2001 clubs can sign a maximum five-year contract with a player when he turns 16 and stand to receive only a "penalty fee" of up to 100 times his monthly wage if he leaves before then. If a player fulfills the contract without renewing then he can leave and join a new club as a free agent. The previous club receives no transfer fee or compensation in this transaction with his new club.
The law also allows clubs to organise their own leagues, breaking the monopoly of official organisations such as the Brazilian Football Confederation.
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As referred to above, Pelé Law regulates all aspects of sports in Brazil. This Law embraces general rules about Brazilian Sports Law, regardless of the sports modality in question.
Due to its comprehensive nature we will restrict our analysis to the most controversial aspects. We will not discuss some aspects of Pelé Law, such as disciplinary codes, Brazilian internal sports organization, sports courts composing, gambling regulations and other.
This analysis includes the following aspects: (i) establishment of leagues; (ii) establishment of for profit sports enterprise organizations; (iii) labor contracts rules; (iv) Arena; and (v) insurance policies for athletes.
Article 20 of Pelé Law and its 5 subsections regulate the establishment of leagues. The caput of this article allows clubs that take part in any national or regional competition and are members of the Brazilian National Sports System to found leagues.
These leagues will be private legal entities, and may, among other issues, negotiate on behalf of their members, sponsorship agreements, advertising and broadcasting contracts.
The establishment of leagues must be notified to the national sports administration entities (“NSAE”) such as Federations and Confederations and such leagues are totally independent from the NSAE. Since the leagues are independent from the referred to entities, these are not allowed to interfere with the league private matters. Affiliation with a league does not imply in disaffiliation of the NSAE board. The club may participate in competitions organized by both entities, without legal restriction.
Arising form such legal permission, from 2001 football clubs started to organize themselves in leagues, which lead to the weakening of “CBF” (Brazilian Football Confederation) political power, for that body would no longer organize the Brazilian football championship, being left to organize solely the Brazil Cup, and being responsible for the national team.
The Brazilian Football Confederation is the governing body of football in Brazil. Founded in 1914 as "Confederação Brasileira de Desportos" change name in 1979. During this period, was the governing body, or at least the international reference, also for other sport, like tennis, athletics, Swimming, Waterpolo, Handball.
The Copa do Brasil is a knockout football competition played by 91 teams, representing all 26 Brazilian states plus the Federal District. It is the Brazilian domestic cup and the Brazilian equivalent of the FA Cup, Taça de Portugal, Copa del Rey, Coupe de France, Coppa Italia, DFB-Pokal, KNVB Cup, U.S. Open Cup, and Copa Argentina, among others. The Copa do Brasil is an opportunity for teams from smaller states to play against the big teams. "Giant-killing" by these smaller clubs has regularly occurred throughout the competition's history. The winner of the cup automatically qualifies for the following edition of the Copa Libertadores de América, the prestigious continental football tournament contested by top clubs in South America organized by COMNEBOL.
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However, aiming to avoid confrontation with CBF, and consequently with FIFA, as well as avoiding the possibility of being forbidden to take part in the Copa Libertadores, the teams taking part in the Brazilian Professional Football League agreed that the Brazilian Championship in 2002 will be organized and promoted by the League jointly with CBF.
The Fédération Internationale de Football Association is an organization which describes itself as an international governing body of association football, fútsal, beach soccer, and eFootball. FIFA is responsible for the organization of football's major international tournaments, notably the World Cup which commenced in 1930 and the Women's World Cup which commenced in 1991.
The CONMEBOL Libertadores, named as Copa Libertadores de América, is an annual international club football competition organized by CONMEBOL since 1960. It is one of the most prestigious tournaments in the world and the most prestigious club competition in South American football. The tournament is named in honor of the Libertadores, the main leaders of the South American wars of independence, so a literal translation of its name into English would be "America's Liberators Cup".
According to articles 27 and 27A in Pelé Law, any club – be it of football or not - has the right to shift into a corporation, such change not being mandatory. Differing from Spain and Portugal, there is no specific modality of a company destined exclusively to sports clubs in Brazil. There is no such a legal entity as called a “Sports Joint Stock Company”
In case a club should have the interest in a total change - or a change specifically in its football or volleyball department - into a corporation, the model adopted could be any of those as foreseen by law. That is, on deciding to change into a corporation, the club can make an option for a Stock Company, a Limited Liability Company, a Foundation, among other.
Following the established in FIFA Statute (article 7, N.5), taking into consideration the ENIC case, and aiming to reassure the “incertitude sportive”, Law N. 9.981/00 has imposed a veto to any simultaneous participation of an individual or a corporation in the capital stock of two or more clubs disputing the same professional competition.
Such veto also embraces the joint ownership investments, indirect capital participation, and relatives ownership in sports clubs. The sponsorship in shirts and the administration of trademark and sports events (“Stadiums”) exploitation are counted out of this veto.
Weird as it can be, that same article brings the prohibition of companies granted with the exploitation of radio and television services, be it open television or cable, to sponsor any sports club.
Article 28 of Pelé Law stipulates the most relevant aspects of the Professional Athlete’s Labor Contract (“PALC”), that are:
The absence of any of above mentioned aspects will nullify the contract. A valid contract is formed only if both parties intend the act of signing to be the last act in the formation of a binding contract.
The requirement of a written contract implies that the Athlete must be able to understand its terms and sign his or her name and also to avoid discussions about the existence of labor relation between the club and athlete.
The parties in a PALC must be an athlete and a club or a sports enterprise. This provision intents to hinder the action of agents. However, the law does not prohibit the ownership of a club by an agent.
The term of a PALC must be clearly stated in the contract, and pursuant to Article 30 of Pelé Law the minimum term of a PALC is 3 (three) months and a maximum is 5 (five) years. However, a PALC may have its terms suspended if the Athlete becomes unable to exercise his activity due to an occupational accident or disease, suffered in the club or while defending any team selection.
Article 31 of Pelé Law provides that if the club has not effected partially or totally the payment for the services for 3 (three) consecutive months, the PALC can be rescinded by the Athlete without the latter incurring in any fine. Moreover, pursuant article 32 of Pelé Law, if the mentioned partial or total late payment lasts 2 (two) or more months, the athlete is allowed to stop playing for his team.
In case the athlete is asked to integrate the national or regional team, pursuant to article 41, the NSAE responsible for the national team shall be liable for the payment of the wages of the athletes for the services during the period that he/she will be under NSAE disposal.
The payment encompasses not only wages but also gratification, bonuses, benefits and reserves. Two other forms of payment may be included in the contract. These are known as (i) “bicho” and (ii) Arena. The Arena will be explained later.
“Bicho” is a money prize paid by the club to an athlete according to the team’s performance, such as winning a championship, winning or drawing a match, qualifying to other championship phases, among others. The “bicho” may be established in the contract, but this is not usual.
Paragraph # 2 of article 28, is one of the most controversial aspects of the Pelé Law, once it has abolished the “passe”. “Passe” was a legal determination that an athlete remains “tied” to the club even after the termination of a Labor Contract. Therefore, a tie-release amount was due to the club by another club if the latter wished to offer the athlete a new labor contract. Pursuant article 93 of Pelé Law, the abolishment of “passe” only took effectiveness on March 24, 2001.
After the extinction of the “passe”, what will keep the athlete bound to a football club is his labor contract, and at the final term of this the athlete will be free to change teams without payment of any indemnification whatsoever to his former club.
However, in case the athlete wishes to change clubs during the effectiveness of his contract, or in case the club wishes to release the athlete during the contract effectiveness, the payment of penalty for rescission shall be due, according to the contract provisions for such events.
According to paragraph 3 of article 38 in Pelé Law, the amount of the penalty clause is freely established by the parties entering the contract, but shall be limited to 100 times the annual remuneration agreed to. Paragraph 4 of that same article establishes an automatic annual reduction on the penalty clause. On the first year of the accomplished contract, the penalty clause shall have a reduction of 10%; on the second year, the reduction shall be of 20%; on the third year, 40%; and on the fourth year, 80%.
It is important to note that according to Pelé Law, the limit of the penalty clause and the referred to reductions will only be applicable in the transfers between Brazilian clubs. When such transfer occurs to foreign clubs, the amount of the penalty clause is of free stipulation.
There are two more exceptions to the amount of the penalty clause, being both of them only applicable in the event of the club having formed the player from its base categories:
Arena is a right that the Club has due to the use of its image during a match. The club has the right to negotiate the broadcasting of its matches and participation on championships as established in the caput of article 42 of Pelé Law. However, pursuant to paragraph # 1 of the same article, 20% (twenty per cent) of the income related to the broadcasting of the matches must be equally distributed to all Athletes of the team.
The amounts received as transfer of the broadcasting rights are not considered wages, therefore they cannot be used as basis for calculation of the penalty clause established in article 28 of Pelé Law as explained above.
Article 45 of Pelé Law obliges the club to insure all its Athletes. The relevant insurance policies must cover personal and occupational accidents. Pelé Law provides that the indemnity must correspond to the negotiated year-wages of the Athlete.
By Oct 2002, for being a controversial law, given it changed drastically the football culture in Brazil, Pelé Law has been suffering mutilations since its promulgation. In less than 4 years of being in force, that Law has already been through 3 major alterations, most of them based financial and political interests, never sports ones. For a better understanding of the magnitude of such mutilations, only 58% of the original text remains.
Edson Arantes do Nascimento, known as Pelé, is a Brazilian retired professional footballer who played as a forward. He is regarded by many in the sport, including football writers, players, and fans, as the greatest player of all time. In 1999, he was voted World Player of the Century by the International Federation of Football History & Statistics (IFFHS), and was one of the two joint winners of the FIFA Player of the Century award. That same year, Pelé was elected Athlete of the Century by the International Olympic Committee. According to the IFFHS, Pelé is the most successful domestic league goal-scorer in football history scoring 650 goals in 694 League matches, and in total 1281 goals in 1363 games, which included unofficial friendlies and is a Guinness World Record. During his playing days, Pelé was for a period the best-paid athlete in the world.
Indemnity is a contractual obligation of one party (indemnifier) to compensate the loss occurred to the other party due to the act of the indemnitor or any other party. The duty to indemnify is usually, but not always, coextensive with the contractual duty to "hold harmless" or "save harmless". In contrast, a guarantee is an obligation of one party assuring the other party that guarantor will perform the promise of the third party if it defaults.
The Constitution of the Commonwealth of Puerto Rico is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government as well as the function of several of its institutions. The document also contains an extensive and specific bill of rights. Since Puerto Rico is a commonwealth of the United States, the Puerto Rico Constitution is bound to adhere to the postulates of the U.S. Constitution due to the Supremacy Clause, and of relevant Federal legislation due to the Territorial Clause.
The reserve clause, in North American professional sports, was part of a player contract which stated the rights to players were retained by the team upon the contract's expiration. Players under these contracts were not free to enter into another contract with another team. Once signed to a contract, players could, at the team's whim, be reassigned, traded, sold, or released.
The Contract Clause appears in the United States Constitution, Article I, section 10, clause 1. The clause prohibits a State from passing any law that “impairs the obligation of contracts” or “makes any thing but gold and silver coin a tender in payment of debts”. It states:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
Liquidated damages are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach.
An acceleration clause —or acceleration covenant— in the law of contracts, is a term that fully matures the performance due from a party upon a breach of the contract. Such clauses are most prevalent in mortgages and similar contracts to purchase real estate in installments.
A severance package is pay and benefits employees receive when they leave employment at a company unwillfully. In addition to their remaining regular pay, it may include some of the following:
The pre-existing duty rule is an aspect of consideration within the law of contract. Originating in England the concept of consideration has been adopted by other jurisdictions, including the US.
A gross-up clause is a provision in a contract which provides that all payments must be made in the full amount, free of any deductionswithout exercising any right of set-off. The provision will usually indicate that if there is a mandatory withholding or deduction by operation of law, then the paying party shall "gross up" the payment so that the receiving party receives the same net amount.
Truck Acts is the name given to legislation that outlaws truck systems, which are also known as "company store" systems, commonly leading to debt bondage. In England and Wales such laws date back to the 15th century. They have also been implemented in other countries.
Sports law in the United States overlaps substantially with labor law, contract law, competition or antitrust law, and tort law. Issues like defamation and privacy rights are also integral aspects of sports law. This area of law was established as a separate and important entity only a few decades ago, coinciding with the rise of player-agents and increased media scrutiny of sports law topics.
Affreightment is a legal term used in shipping.
The Home Equity Theft Prevention Act is a New York State law passed on July 26, 2006, to provide homeowners of residential property with information and disclosures in order to make informed decisions when approached by persons seeking a sale or transfer of the homeowner's property, particularly when homeowners are in default on their mortgage payments or the property is in foreclosure.
The Tobacco MSA with New York is the particular version of the Tobacco MSA that was signed in New York City, was enabled by means of legislation in New York State, and has been interpreted since then in New York State courts.
Anti-discrimination laws in Brazil are present in the Constitution of Brazil, in the labour law, in the child and adolescent law, in the ageing law, and in the penal code.
The Supremacy Clause of the United States Constitution establishes that the Constitution, federal laws made pursuant to it, and treaties made under its authority, constitute the supreme law of the land. It provides that state courts are bound by the supreme law; in case of conflict between federal and state law, the federal law must be applied. Even state constitutions are subordinate to federal law. In essence, it is a conflict-of-laws rule specifying that certain federal acts take priority over any state acts that conflict with federal law. In this respect, the Supremacy Clause follows the lead of Article XIII of the Articles of Confederation, which provided that "Every State shall abide by the determination of the United States in Congress Assembled, on all questions which by this confederation are submitted to them." A constitutional provision announcing the supremacy of federal law, the Supremacy Clause assumes the underlying priority of federal authority, at least when that authority is expressed in the Constitution itself. No matter what the federal government or the states might wish to do, they have to stay within the boundaries of the Constitution. This makes the Supremacy Clause the cornerstone of the whole American political structure.
The American Competitiveness and Workforce Improvement Act (ACWIA) was an act passed by the government of the United States on October 21, 1998, pertaining to high-skilled immigration to the United States, particularly immigration through the H-1B visa, and helping improving the capabilities of the domestic workforce in the United States to reduce the need for foreign labor.
Penalties in English law are contractual terms which are not enforceable in the courts because of their penal character. Since at least 1720 it has been accepted as a matter of English contract law that if a provision in a contract constitutes a penalty, then that provision is unenforceable by the parties. However, the test for what constitutes a penalty has evolved over time. The Supreme Court most recently restated the law in relation to contractual penalties in the co-joined appeals of Cavendish Square Holding BV v Talal El Makdessi, and ParkingEye Ltd v Beavis.
A buyout clause or release clause refers to a clause in a contract that imposes an obligation on another organisation wishing to acquire the services of the employee under contract to pay the fee of the clause to the organisation which issued the contract and currently employs the employee.
General Aspects of Brazilian Sports Law and Its Daily Applicability Written 2002 by Luiz Roberto Martins Castro