The system was declared illegal by the Advocate-General following a five- year-long challenge by an obscure Belgian player, Jean-Marc Bosman.
The news was greeted with gloom by small clubs who survive on profits from transfers. A spokesman for the Endsleigh League, which represents professional clubs outside the Premiership elite, said 75 per cent of players could lose their jobs. But Sir John Hall, chairman of Newcastle United, welcomed the changes: "We have always been against the restrictions on the movement of players."
The ruling, which is expected to be endorsed by the full court later this year, was greeted with undisguised glee by Eric Hall, the ubiquitous players' agent. English clubs spent pounds 80m on transfers this summer and if the system is outlawed much of that will go directly to players (and their agents).
As a consequence some smaller clubs could go bankrupt, while others become part time, or are bought up by bigger clubs, to act as talent nurseries.
Graham Kelly, the Football Association's chief executive, said he hoped a compromise could be reached but said if it was not "the implications for the smaller clubs, and the game as a whole, will be very adverse".
The ruling refers only to cases where a player is out of contract. At present, a club can still negotiate a fee if a player leaves while under contract.
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