Q: Why is reform necessary?
A: The current transfer system is contrary to European law which guarantees workers freedom of movement.
Until recently professional footballers did not have the same employment rights as other workers but several test cases, most famously by the Belgian player Jean-Marc Bosman, have successfully challenged this.
Q: Who is taking part in these talks?
A: There are four main participants: European Commission, world football governing body Fifa, European governing body Uefa, and Fifpro, the global union of professional footballers.
Transfers are governed by Fifa regulations but it is Uefa which represents the European leagues and clubs, hence the split.
The players' union has already distanced itself from Fifa and Uefa so we are now in a position where the three footballing parties want to negotiate separately with the EC.
The EC, on the other hand, wants them to agree a joint solution.
This issue is further complicated by the fact there is more than one EC department involved in the issue.
The Competitions Commission appears to be driving negotiations but the Social Affairs Commission, which last week ruled proposals for giving clubs extra compensation for younger players were unlawful, also has a stake.
Q: What do the football authorities want?
A: They cannot agree on what they want.
Both Fifa and Uefa claim that major changes to the transfer system could cause chaos within the game but they cannot agree on a compromise.
They claim that if players can move between clubs at will, many smaller clubs will go out of existence as they will no longer have income from transfer fees.
Critics say Uefa and Fifa are just trying to maintain the big clubs' hold over their star players and have been dragging their heels over negotiations in a bid to maintain the status quo.
Clubs that have paid tens of millions of pounds for a player are worried they could see their investment wiped out if he is allowed to leave mid-contract for a fraction of the fee.
Q: What do the EC say?
A: European Commissioners have accepted that football is a special case, but insist the current system is unworkable and must be reformed to guarantee the fundamental freedom of workers.
The EC wants a system which gives players the right to leave their club at any time provided they give enough warning and/or compensation - just like any other employee.
At the moment players can only leave before the end of their contract if their club agrees to sell them.
The EC will only agree to a compromise which has been ratified by the players' union Fifpro, as they are wary about future legal challenges - such as Bosman.
Q: What does the players union say?
A: The Fifpro chief Gordon Taylor walked out of Fifa-led talks last year and though he has since returned to negotiations, the organisation has been playing its cards close to its chest.
Fifpro believe Uefa has been using misleading arguments to try and con the EC into retaining the transfer fee by another name.
Fifpro want contracts to be short-term with a five-year maximum.
Players would be free to leave clubs after one year for a variety of agreed reasons - which could include impending relegation - but would have to pay compensation based on their salary, age and length of remaining contract.
Q: What is the current row between Fifa and Uefa about.
A: Having until now presented a united front, Fifa have sent some new proposals to the EC without first consulting Uefa.
The proposals would allow players to walk out on their clubs at three months' notice for any "just sporting cause" and would appear to be more in line with what Fifpro and the EC are calling for.
But Uefa claim the new proposal is unthinkable as it would mean players could move around at will simply by claiming they disagree with a coach about tactics or team selection.
Q: What is the new transfer system likely to be?
A: A compromise solution is the likeliest, with players allowed to leave clubs during contracts after an agreed period of notice.
The current dispute involves the length of that notice period.
Fifa now seem to be open to the suggestion of three months, while Uefa would prefer a much longer time period, and for new contracts to be honoured for at least three years.
There will be a compensation system, based on the player's salary, if he wants to move from one club to another. How that sum is decided is also open to debate.
Q: What effect will that all have on football?
A: Transfer fees will decline as clubs will be unwilling to spend vast sums on players who could walk out if they feel like it.
Players' salaries will continue to increase - the wealthiest clubs will attract the top players by paying the highest salaries, and will not have to spend as much on transfer fees.
It has been claimed that in the lower leagues, if there is no transfer fee income, clubs may have to pay less to the players or face going bust.
But some parties believe the big clubs are simply scaremongering because they are desperate to maintain their hold on highly-valuable investments - their players.
Q: Will all transfers be affected?
A: In theory, only cross-border European deals will be affected although Fifa has now hinted it wants a 'global solution'.
The European Commission has no authority to over-ride domestic laws.
This means deals such as Luis Figo's £37m transfer within Spain from Barcelona to Real Madrid would be unaffected - but Nicolas Anelka's £22.5m move from London to Spain in 1998 would have been.
This raises the prospect of a two-tier transfer system which would appear to be unworkable and open a whole new can of worms.
For instance it would mean a player at a British club would be free to move to a club abroad whenever they liked provided their new club met their wage demands, but not within their own country.
That could give players a huge incentive to move abroad.
It would also give clubs a huge incentive to recruit players from outside Europe - as Villa chairman Doug Ellis admitted when he signed Colombian striker Juan Angel - as the new regulations would only affect EU citizens.
These issues have yet to be addressed.