MLS Transfer Agreements & European Moves: Non-Assignability and other Key Clauses

Major League Soccer (MLS) has a unique single-entity structure, which means that instead of clubs owning player contracts, the league itself owns all player contracts. This structure leads to differences in how transfers, particularly to European clubs, are handled.

1. Single-Entity System and Its Impact on Transfers

• MLS signs players directly, not the clubs.
• When a player is transferred to a European club, the agreement is between MLS and the European club, not the MLS team the player plays for.
• MLS clubs participate in negotiations but do not hold final authority on player sales.

2. Non-Assignability Clause: Why It Matters

• In most football leagues, clubs can assign player contracts freely, meaning they can sell the contract to another club.
• In MLS, player contracts are not assignable by the individual club because MLS is the sole employer.

This means:

• The club cannot directly sell a player; MLS must approve and execute the transfer.
• Even if a club reaches an agreement with a European club, MLS can reject the deal if it does not align with league interests.
• Sometimes, MLS itself may negotiate separate terms that differ from what the club wants.

3. Transfer Fees: Who Gets What?

• Since MLS owns the contract, the league receives the transfer fee.
• However, MLS clubs typically receive a percentage of the fee, which has varied over time:

– Previously: 75% to the club, 25% to MLS.

– Now: In many cases, MLS takes less (often around 5-10%) if a club sells a homegrown player.

– If a player was signed via Targeted Allocation Money (TAM) or Designated Player (DP) rules, the fee distribution can be different.

4. Sell-On Clauses

• MLS often negotiates sell-on clauses when players move to Europe.
• However, since MLS owns the contract, the league—not the individual club—benefits from future transfers unless negotiated otherwise.
• This can sometimes frustrate clubs that develop players but see MLS take a cut from future sales.

5. European Clubs’ Frustrations with MLS Transfers

• Lack of direct negotiation with clubs: European teams often prefer to deal directly with clubs rather than a centralized league.
• Lengthy approval processes: Since MLS has internal approval mechanisms, deals can take longer to finalize.
• High asking prices: MLS has been increasingly demanding higher fees for top talents, which sometimes prices them out of mid-level European transfers.

6. Exceptions & Workarounds

• Free Transfers: If a player’s contract expires, he can move to Europe without a transfer fee, though MLS sometimes retains rights of first refusal (meaning an MLS club can claim them if they return to the league).
• Loan Deals: Some players move on loan with a pre-agreed purchase option, allowing European clubs to avoid MLS’s rigid structure at first.

Summary

The single-entity league as we have now seen is a completely different structure from the european leagues. The non-assignability means the MLS controls transfers, not individual clubs, therefore, clubs get a portion of the transfer fee, but the MLS takes a share as well. Similarly, sell-on clauses primarily benefit MLS as a league, not the originating club. This can lead european clubs to eventually struggle to navigate the MLS’s centralized structure.