Friday, August 18, 2006

Malkin "defects"

With the end of communism in Russia and the fall of the Berlin Wall, I naively believed it would be the end of foreign players who wanted to play in the NHL but had significant legal and illegal hurdles placed in their way. That isn't the case. There is no player transfer agreement between Russia and the NHL. That means that players under contract in one league can jump to the other league without any formal legal recourse.

The Russians are unhappy at the low player transfer fees for talent that they produced. Evgeni Malkin would net a $200,000 transfer fee, which is likely a small amount of what he would be worth to the Russian Elite League if he stayed there. The Russians have been trying to get transfer fees raised to a level that compensates their system for te loss of a player.

The NHL's position has been this is our offer and if you don't take it we will take your players and you won't get any money in return at all. They have attempted some strongarm tactics to get Russia to agree to the deal, but it hasn't worked.

This standoff led to court cases regarding the status of Alexander Semin and Alexander Ovechkin. It is only getting worse. Players want to leave Russia to join the NHL, but it is unclear how to do it.

Alexei Mikhnov and Andrei Taratukhin have give notice that they will break their contracts and come to the NHL (under Russian labor law it takes 14 days notice to break any signed contract). Evgeny Malkin is going one step further. Although Russia is technically a free country, its not quite so simple in practise. The Russian mafia owns large portions of the country and have interest in most successful hockey franchises. If a player tries to leave they will try to use ther influences to change his opinion. In Malkin's case he was forced to sign his most recent contract at 3AM in the morning after some coercion. He was not allowed access to his passport until his Metallurg Magnitogorsk team went to their training camp in Finland. During this training camp, Malkin fleed Russia. He has now surfaced in Los Angeles.

The future holds costly legal battles between the NHL and Russia over player transfer rights. Malkin will likely play in Pittsburgh, all that isn't known is how much Pittsburgh will pay to Russia for his rights. Either both sides will settle on a figure or the courts will decide (with some possibility the figure will be zero and some possibility it will be much higher than we are used to). The Russians want a system similar to soccer where teams negotiate individually transfer costs on a player by player basis. Sometimes one player can be worth many million dollars. This structure would be far more expensive for the NHL and would upset the salary cap system. What is capped is player costs. A $20 million player transfer fee would be almost half of a team's salary cap and they won't have any players signed to play hockey.

This fight will influence the relations between the NHL and Europe in general. For example, higher transfer fees to Russia will lead to higher transfer fees to other countries.

Here is TSN's story on the matter and here is what the Moscow Times has to say.

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