F.I.F.A. – Players’ Status Committee / Commissione per lo Status dei Calciatori – club vs club disputes / controversie tra società – (2019-2020) – fifa.com – atto non ufficiale – Decision 24 July 2019

Decision of the Single Judge

of the Players’ Status Committee

passed in Zurich, Switzerland, on 24 July 2019,

by

Roy Vermeer (the Netherlands)

Single Judge of the Players’ Status Committee,

on the claim presented by the club

Club A, Country B

as “Claimant”

against the club

Club C, Country D

as “Respondent”

regarding a contractual dispute arisen between the parties

and relating to the player Player E

I. Facts of the case

1. On 11 July 2018, the club of Country B, Club A(hereinafter: the Claimant), the club of Country D, Club C (hereinafter: the Respondent) and Player E (hereinafter: the player) entered into an agreement for the permanent transfer of the player from the Claimant to the Respondent (hereinafter: the transfer agreement).

2. In accordance with art. 2 of the transfer agreement, the Respondent agreed to pay to the Claimant the amount of USD 15,000,000 as transfer fee for the player's permanent transfer. Said amount was payable in three instalments as follows:

a. USD 7,500,000 by no later than 16 July 2018;

b. USD 3,750,000 by no later than 4 January 2019 and

c. USD 3,750,000 by no later than 5 July 2019.

3. Furthermore, pursuant to art. 7 of the transfer agreement, “should [the Respondent] fail to pay any amount(s) herein agreed in the fixed date, the Parties hereby agree that [the Respondent], in addition to the outstanding amounts and default interest to be paid to [the Claimant], will be obliged to pay as a penalty freely and expressly agreed by the Parties, 10% (ten per cent) of the defaulted payment”.

4. On 3 November 2018, the Claimant and the Respondent signed a document entitled “SETTLEMENT AGREEMENT” (hereinafter: the settlement agreement), according to which they agreed that: “Whereas a. […] b. […] c. [the Claimant] and [the Respondent] subscribed a transfer agreement on July 11, 2018 regarding the player Player E (hereinafter "the Transfer Agreement"). d. [The Respondent] did not pay the first instalment of the Transfer Agreement as agreed and therefore the penalty stipulated in Article 7 of said Transfer Agreement is applicable. e. [The Claimant] sent through their lawyers on October 11, 2018 a formal request for the payment of said penalty amount of USD 750,000.00 (Seven Hundred and Fifty Thousand Dollars of The United States of America). f. After negotiations and in areas of maintaining a good relationship during the execution of the Transfer Agreement, the Parties have agreed to settle any dispute under the terms and conditions stipulated herein”.

5. Moreover, the settlement agreement established the following in respect to the amount to be paid as penalty: “1.1. [The Respondent] hereby recognizes the breach of the Transfer Agreement by not meeting on time the first instalment of the Transfer Agreement […]. Additionally, [the Respondent] recognizes that it is essential for [the Claimant] that the payments are met on time […]. 1.2. However, as described in the Whereas, the Parties have agreed to settle [the Respondent]’s breach with the payment of USD 380,000 […] as follows – USD 350,000 to the principal of the Penalty of Article 7; and – USD 30,000 to the legal costs. 1.4. Should the [Respondent] fail to properly execute […] the payments stipulated in clause 1.2 and Article 2, respectively, [the Claimant] shall be entitled to claim all the amounts stipulated in this Settlement Agreement, in the Transfer Agreement and specifically what is detailed in clause 2 herein agreed. This clause constitutes an essential and determining factor of this Settlement Agreement, without with it the present document would not have been executed by the parties”.

6. Art. 2 of the settlement agreement described the “Consequences of the breach of the Settlement Agreement I Transfer Agreement” as follows: “2.2. in the hypothetical case that the [Respondent] fails to pay any of the payments stipulated in Article 2b and c of the Transfer Agreement, totally or partially and/or because of a delay the following conditions shall be applicable:

 Article 7 of the Transfer Agreement shall be applicable; and

 Additionally, USD 370,000 which corresponds to the reduction herein agreed”.

7. The same provision clarified, “for the avoidance of doubt”, that “should for instance the [Respondent] breach Article 2.b of the Transfer Agreement, Article 7 of said document will apply (USD 380,000) plus the penalty herein reduced (USD 370,000) so the total amount that the [Respondent] would have to pay to [the Claimant] would be of USD 750,000 for that breach and notwithstanding any applicable penalties for future breaches should it be the case”.

8. On 8 January 2019, the Claimant sent a default notice to the Respondent, requesting the latter to proceed with the payment of USD 4,495,000, consisting of:

(i) USD 3,750,000 corresponding to the second instalment of the transfer agreement;

(ii) USD 375,000 corresponding to 10% penalty agreed in accordance with art. 7 of the transfer agreement;

(iii) USD 370,000 corresponding to the “reduction” agreed by means of art. 2 of the settlement agreement.

9. On 22 January 2019, the Claimant lodged a claim against the Respondent in front of FIFA, requesting the total amount of USD 4,495,000 plus 5% interest p.a. on said amount as from 8 January 2019. The Claimant further requested to order the Respondent to pay legal costs and “all other expenses of these proceedings”.

10. More in particular, the Claimant held, first of all, that only on 18 November 2018 the Respondent paid the amount provided in the settlement agreement of EUR 380,000. Moreover, the Claimant explained that the Respondent breached the transfer agreement by failing to pay the second installment of USD 3,750,000 as agreed and that, as a result, the consequences provided in art. 7 of the Transfer Agreement are applicable, i.e. the payment of the 10% penalty in the amount of USD 375,000, together with the payment of the reduction applied in accordance with art. 2 of the settlement agreement, i.e. the amount of USD 370,000.

11. Moreover, the Claimant maintained that the penalties were freely agreed by both clubs and that the parties expressly agreed that the penalty is additional and cumulative to any consideration amount.

12. Furthermore, the Claimant explained that that the payment of the reduction in accordance with art. 2 of the settlement agreement, is equal to the initial penalty due by the transfer agreement and, therefore, is fully proportional and responds to the necessity to pay in due time.

13. In reply, the Respondent requested to “dismiss the request of 10%penalty amounting to USD 375,000…for the lack of justice” and to “adopt the payment of second instalment USD 3,750,000 plus 5% interest per annum”.

14. The Respondent did not contest that the second instalment under the transfer agreement remained unpaid, however, it stated that it does not find ”fair and reasonable to request Additionally Penalty of 10%, taking into account that the penalty on default of 5% has been already requested by the Claimant as from January 8th, 2019”. Moreover, the Respondent asked the rejection of the payment of the “reduction applied to the Respondent” as allegedly “unfair, unreasonable and very excessive”.

II. Considerations of the Single Judge of the Players’ Status Committee

1. First of all, the Single Judge of the Players’ Status Committee (hereinafter also referred to as: the Single Judge) analysed whether he was competent to deal with the matter at hand. In this respect, he took note that the present matter was submitted to FIFA on 22 January 2019. Consequently, the Single Judge concluded that the 2018 edition of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (hereinafter: the Procedural Rules) is applicable to the matter at hand (cf. art. 21 of the Procedural Rules).

2. Subsequently, the Single Judge referred to art. 3 par. 1 and 2 of the Procedural Rules and confirmed that in accordance with art. 23 par. 1 and 4 in combination with art. 22 lit. f) of the Regulations on the Status and Transfer of Players (edition June 2019), he was competent to deal with the present matter since it concerned a dispute between clubs affiliated to two different associations.

3. In continuation, the Single Judge analysed which edition of the Regulations on the Status and Transfer of Players should be applicable as to the substance of the matter. In this respect, he referred, on the one hand, to art. 26 par. 1 and 2 of the Regulations on the Status and Transfer of Players (edition June 2019), and on the other hand, to the fact that the present claim was lodged with FIFA on 22 January 2019. In view of the foregoing, the Single Judge concluded that the June 2018 edition of the Regulations on the Status and Transfer of Players (hereinafter: the Regulations) is applicable to the case at hand as to the substance.

4. His competence and the applicable regulations having been established, and entering into the substance of the matter, the Single Judge started his analysis by acknowledging the facts of the case and the arguments of the parties as well as the documents contained in the file. The Single Judge, however, emphasised that in the following considerations he will refer only to the facts, arguments and documentary evidence which he considered pertinent for the assessment of the matter at hand.

5. In this respect and first of all, the Single Judge acknowledged that, on 11 July 2018, the Claimant and the Respondent signed an agreement over the transfer of the player from the Claimant to the Respondent.

6. In continuation, the Single Judge noted that, according to the transfer agreement, the Respondent undertook the obligation to pay a transfer fee of USD 15,000,000 in three instalments as follows: a. USD 7,500,000 by no later than 16 July 2018; b. USD 3,750,000 by no later than 4 January 2019 and c. USD 3,750,000 by no later than 5 July 2019.

7. Furthermore, the Single Judge observed that, pursuant to art. 7 of the transfer agreement, “should [the Respondent] fail to pay any amount(s) herein agreed in the fixed date, the Parties hereby agree that [the Respondent], in addition to the outstanding amounts and default interest to be paid to [the Claimant], will be obliged to pay as a penalty freely and expressly agreed by the Parties, 10% (ten per cent) of the defaulted payment”.

8. In continuation, the Single Judge took note that, on 3 November 2018, the parties signed a settlement agreement, according to which – inter alia – it was established that the Respondent “did not pay the first instalment of the Transfer Agreement as agreed and therefore the penalty stipulated in Article

7 of said Transfer Agreement is applicable. e. [The Claimant] sent through their lawyers on October 11, 2018 a formal request for the payment of said penalty amount of USD 750,000.00 (Seven Hundred and Fifty Thousand Dollars of The United States of America). f. After negotiations and in areas of maintaining a good relationship during the execution of the Transfer Agreement, the Parties have agreed to settle any dispute under the terms and conditions stipulated herein”.

9. Moreover, the Single Judge took note that, by means of the settlement agreement, the parties “have agreed to settle [the Respondent]’s breach with the payment of USD 380,000 […] as follows – USD 350,000 to the principal of the Penalty of Article 7; and – USD 30,000 to the legal costs. 1.4. Should the [Respondent] fail to properly execute […] the payments stipulated in clause 1.2 and Article 2, respectively, [the Claimant] shall be entitled to claim all the amounts stipulated in this Settlement Agreement, in the Transfer Agreement and specifically what is detailed in clause 2 herein agreed. This clause constitutes an essential and determining factor of this Settlement Agreement, without with it the present document would not have been executed by the parties”.

10. Moreover, the Single Judge noted that, pursuant to the settlement agreement, the parties agreed that, in case the Respondent failed to meet the financial obligations enshrined in the transfer agreement, totally or partially and/or because of a delay, the Claimant would be entitled to demand the penalty envisaged at art. 7 of the transfer agreement, i.e. 10% of the defaulted payment, as well as the additional amount of USD 370,000.

11. In continuation, the Single Judge took note that the Claimant maintained that, in light of the fact that the second instalment of the transfer agreement in the amount of USD 3,750,000 remained unpaid, it was entitled to the penalty envisaged at art. 7 of the transfer agreement, i.e. USD 375,000 representing 10% of the defaulted payment and the payment of the reduction applied in accordance with art. 2 of the settlement agreement, i.e. USD 370,000.

12. In continuation, the Single Judge observed that, for its part, the Respondent acknowledged its failure to comply with the payment of the second instalment of the transfer fee and only contested the application of the penalty of 10% of the defaulted payment as allegedly unjust.

13. That said, the Single Judge underlined that it remained undisputed that the Respondent was in default of payment of the second instalment of transfer fee to the Claimant in the amount of USD 3,750,000.

14. However, the Single Judge observed that, in light of the diverging position of the parties on the point, it remained to be established what consequences were deriving from the above and whether the said consequences were to be deemed lawful.

15. In this respect, the Single Judge highlighted that, according to art. 2 of the settlement agreement, in case of any delays in the payment of the instalments indicated in the transfer agreement, the Respondent would be obliged to pay the penalty indicated in art. 7 of the transfer agreement, i.e. 10% of the defaulted payment, as well as an additional amount of USD 370,000.

16. Having remained undisputed that the Respondent failed to remit to the Claimant the second instalment of the transfer fee in the amount of USD 3,750,000, the Single Judge concluded that the consequences envisaged in art. 2 of the settlement agreement had been triggered. In other words, in addition to the second instalment of the transfer fee, the Respondent was contractually bound to remit to the Claimant USD 375,000, representing the penalty of 10% of the defaulted payment established at art. 7 of the transfer agreement, and USD 370,000, in accordance with art. 2 of the settlement agreement.

17. In relation to the above, the Single Judge went on to analyse whether the application of the said consequences could be deemed lawful and considered appropriate to preliminary remark, on a general level, that penalty clauses may be freely entered into by the contractual parties and may be considered acceptable, in the event that the pertinent written clause meets certain criteria such as proportionality and reasonableness. In this respect, the Single Judge highlighted that, in order to determine whether a penalty clause is to be considered acceptable, the specific circumstances of the relevant case brought before him shall also be taken into consideration.

18. That said, the Single Judge firstly recalled that the settlement agreement explicitly provided that in case “the [Respondent] fails to pay any of the payments stipulated in Article 2b and c of the Transfer Agreement, totally or partially and/or because of a delay the following conditions shall be applicable: - Article 7 of the Transfer Agreement shall be applicable; and Additionally, USD 370,000 which corresponds to the reduction herein agreed”.

19. Having clarified that the parties unequivocally agreed to apply both the penalties in cases of default in payments, the Single Judge observed that, in the context of the total outstanding amount and the time it was overdue, the combination of the two penalties as a whole is both proportionate and reasonable and, thus, valid and applicable.

20. In light of the above, the Single Judge decided that, in accordance with the general legal principle of pacta sunt servanda, the Respondent is liable to pay to the Claimant the amount of USD 3,750,000 as outstanding transfer fee, as well as USD 745,000 as penalty fee, in light of the Respondent’s failure to pay the second instalment of the transfer fee indicated in the transfer agreement in a timely manner.

21. With respect to the Claimant’s request to apply 5% interest p.a. on the penalty fee, the Single Judge determined that, in accordance with the longstanding jurisprudence of the FIFA deciding bodies, interest on penalty fees do not apply. Consequently, the Single Judge dismissed the Claimant’s request on that point.

22. In addition, as regards the claimed legal expenses, the Single Judge referred to art. 18 par. 4 of the Procedural Rules as well as to the longstanding and well-established jurisprudence of the Players’ Status Committee (PSC), in accordance with which no procedural compensation shall be awarded in proceedings in front of the PSC. Consequently, the Single Judge decided to reject the Claimant’s request relating to legal costs and “all other expenses of these proceedings”.

23. The Single Judge concluded his deliberations in the present matter by establishing that any further claim lodged by the Claimant is rejected.

24. Lastly, the Single Judge referred to art. 25 par. 2 of the Regulations in combination with art. 18 par. 1 of the Procedural Rules, according to which in the proceedings before the Players’ Status Committee and the Single Judge, costs in the maximum amount of CHF 25,000 are levied. The costs are to be borne in consideration of the parties’ degree of success in the proceedings and are normally to be paid by the unsuccessful party.

25. In this respect, the Single Judge highlighted that the claim was almost entirely accepted and that the Respondent was the party at fault. Therefore, the Single Judge decided that the Respondent has to bear the costs of the current proceedings in front of FIFA.

26. Furthermore and according to Annexe A of the Procedural Rules, the costs of the proceedings are to be levied on the basis of the amount in dispute. Consequently and taking into account that the total amount at dispute in the present matter is higher than CHF 200,001, the Single Judge concluded that the maximum amount of costs of the proceedings corresponds to CHF 25,000.

27. In conclusion and in view of the specific circumstances of the case, the Single Judge determined the costs of the current proceedings to the amount of CHF 25,000.

28. Consequently, the Respondent has to pay the amount of CHF 25,000 in order to cover the costs of the present proceedings.

29. Furthermore, taking into account the consideration under number II./3. above, the Single Judge referred to par. 1 and 2 of art. 24bis of the Regulations, which stipulate that, with its decision, the pertinent FIFA deciding body shall also rule on the consequences deriving from the failure of the concerned party to pay the relevant amounts of outstanding remuneration and/or compensation in due time.

30. In this regard, the Single Judge pointed out that, against clubs, the consequence of the failure to pay the relevant amounts in due time shall consist of a ban from registering any new players, either nationally or internationally, up until the due amounts are paid and for the maximum duration of three entire and consecutive registration periods.

31. Therefore, bearing in mind the above, the Single Judge decided that, in the event that the Respondent does not pay the amounts due to the Claimant within 45 days as from the moment in which the Claimant, following the notification of the present decision, communicates the relevant bank details to the Respondent, a ban from registering any new players, either nationally or internationally, for the maximum duration of three entire and consecutive registration periods shall become effective on the Respondent in accordance with art. 24bis par. 2 and 4 of the Regulations.

32. Finally, the Single Judge recalled that the above-mentioned ban will be lifted immediately and prior to its complete serving upon payment of the due amounts, in accordance with art. 24bis par. 3 of the Regulations.

III. Decision of the Single Judge of the Players’ Status Committee

1. The claim of the Claimant, Club A, is partially accepted.

2. The Respondent, Club C, has to pay to the Claimant the amount of USD 3,750,000 plus 5% interest p.a. as from 8 January 2019 until the date of effective payment.

3. The Respondent has to pay to the Claimant the amount of USD 745,000 as penalty fee.

4. Any further claim lodged by the Claimant is rejected.

5. The Claimant is directed to inform the Respondent, immediately and directly, preferably to the e-mail address as indicated on the cover letter of the present decision, of the relevant bank account to which the Respondent must pay the amount mentioned under points 2 & 3 above.

6. The Respondent shall provide evidence of payment of the due amount in accordance with points 2 & 3 above to the e-mail address psdfifa@fifa.org, duly translated, if need be, into one of the official FIFA languages (English, French, German, Spanish).

7. In the event that the amounts due plus interest in accordance with points 2 & 3 above are not paid by the Respondent within 45 days as from the notification by the Claimant of the relevant bank details to the Respondent, the Respondent shall be banned from registering any new players, either nationally or internationally, up until the due amounts are paid and for the maximum duration of three entire and consecutive registration periods (cf. art. 24bis of the Regulations on the Status and Transfer of Players).

8. The ban mentioned in point 7 above will be lifted immediately and prior to its complete serving, once the due amounts are paid.

9. In the event that the aforementioned sums plus interest in accordance with points 2 & 3 above are still not paid by the end of the ban of three entire and consecutive registration periods, the present matter shall be submitted, upon request, to FIFA’s Disciplinary Committee for consideration and a formal decision.

10. The final costs of the proceedings in the amount of CHF 25,000 are to be paid by the Respondent, within 45 days as from the date of notification of the present decision, as follows:

10.1. The amount of CHF 20,000 has to be paid to FIFA to the following bank account with reference to case nr. XX-XXXXX/XXX:

UBS Zurich

Account number 366.677.01U (FIFA Players’ Status)

Clearing number 230

IBAN: CH27 0023 0230 3666 7701U

SWIFT: UBSWCHZH80A

10.2. The amount of CHF 5,000 has to be paid directly to the Claimant.

11. In the event that the aforementioned amount of costs is not paid within the stated time limit, the present matter shall be submitted, upon request, to FIFA’s Disciplinary Committee for consideration and a formal decision.

*****

Note relating to the motivated decision (legal remedy):

According to art. 58 par. 1 of the FIFA Statutes, this decision may be appealed against before the Court of Arbitration for Sport (CAS). The statement of appeal must be sent to the CAS directly within 21 days of receipt of notification of this decision and shall contain all the elements in accordance with point 2 of the directives issued by the CAS, a copy of which we enclose hereto. Within another 10 days following the expiry of the time limit for filing the statement of appeal, the appellant shall file a brief stating the facts and legal arguments giving rise to the appeal with the CAS (cf. point 4 of the directives).

The full address and contact numbers of the CAS are the following:

Court of Arbitration for Sport (CAS)

Avenue de Beaumont 2

CH-1012 Lausanne

Switzerland

Tel: +41 21 613 50 00

Fax: +41 21 613 50 01

e-mail: info@tas-cas.org

For the Single Judge of the

Players’ Status Committee

Emilio Garcia Silvero

Chief Legal & Compliance Officer