Wednesday, June 11, 2008

Hockey Player Transfer Agreement Set to Expire

The International Ice Hockey Federation (IIHF) and NHL player transfer agreement is set to expire on June 15th 2008. Currently European hockey players who are under contract with a European hockey club can be “bought out” from their European club contract and sign with an NHL team. The arrangement that allows NHL teams to sign European hockey players who are under contract is referred to as a transfer agreement.

The player transfer agreement regulates transfers to the NHL for all non-North American IIHF affliated associations and leagues.” Under this agreement the NHL pays a yearly development fee of $9 million for the first 45 players to transfer and an additional $200,000 for each player signed from an IIHF affiliated country. The IIHF distributes the money to European hockey clubs that the signed player has represented over the last four years. The transfer agreement also covers signing NHL entry draft players and European players signed from North American junior clubs to the NHL.

Near the end of 2007, European members of the IIHF decided to renegotiate the current player transfer agreement - the NHL also wanted to renegotiate the player transfer agreement.

Why would European members want to renegotiate the agreement? Petr Prucha is a perfect example. Prucha who plays for the New York Rangers was one of many players who fall under the IIHF-NHL transfer agreement. His European club, HC Moeller Pardubice expected to receive the fee for allowing Prucha to play for the Rangers, but the Rangers did not pay the first installment to the IIHF within the 30 days of Prucha’s departure as specified in the transfer agreement. European clubs feel “ripped off” by the NHL. Another reason is that the fee ($200,000) is worth a lot less now given the recent US dollar depreciation.

The NHL also has reasons to have a player transfer agreement – cost certainty. Without an agreement, NHL players will have to negotiate on a player-by-player basis.

What will happen if the IIHF and NHL cannot reach an agreement? At first this seems to be a big win for European hockey clubs. NHL clubs now have to negotiate with the European clubs for each player and since the player is currently under contract with the European club, they could get more than $200,000 to release the player from the contract.

But, many of the best European players “… have a release clause stating that they can leave their European clubs the moment they are under contract to play in the NHL”, according to Rene Fasel, IIHF president. With a transfer agreement, this is minimized since NHL clubs can only do this up to June 15th – before the season starts. Now NHL clubs can poach European players any time during the season.

Without the transfer agreement, labor mobility should increase – which would be a big benefit to European hockey players. There should be more players available for NHL clubs to sign, which may but some downward pressure on salaries – especially for NHL players at the end of the bench.

NHL clubs should benefit. If a current NHL player suffers a season ending injury, signing a player from Europe is now an option. Remember NHL clubs have a payroll (sometimes called a salary) cap, so the new European players they sign still have to fit within the payroll cap. Since most NHL clubs have room under the payroll cap, this allows for more flexibility for NHL clubs.
IIHF affiliated clubs could lose out since they forfeit the NHL development funds ($9 million) and could possibility lose players to poaching hockey clubs.

What would be interesting to see if European players opt for shorter contract lengths, or to see if more European players move across the Atlantic to play hockey – not just in the NHL but also in the IHL or the AHL.

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