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

Mr 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 between the parties

relating to the player Player E.

I. Facts of the case

1. In December 2016, the club of Country B, Club A (hereinafter: the Claimant) and the club of Country D, Club C (hereinafter: the Respondent), signed an agreement concerning the transfer of the player, Player E (hereinafter: the player), from the Claimant to the Respondent.

2. According to clause 4.1 of the transfer agreement, the Respondent agreed to pay to the Claimant a lump sum of EUR 2,500,000 as “transfer fee”.

3. Pursuant to clause 4.2 of the transfer agreement, “The Transfer Fee shall be due and payable by [the Respondent] (i.e. received in the accounts of [the Claimant]) in four instalments as follows: 1st instalment: EUR 750,000 on February 15th, 2017; 2nd instalment: EUR 500,000 on July 30th, 2017; 3rd instalment: EUR 750,000 on January 15th, 2018; 4th instalment: EUR 500,000 on June 30th, 2018. [The Respondent] agrees and acknowledges that under this Agreement payment in due time is of the essence and that per case of default of payment (irrespective of the amount of default), in addition to the outstanding amount [the Respondent] shall pay to [the Claimant] on first demand a contractual penalty of EUR 250,000, irrespective of the cause of default and without prejudice to other rights and remedies [the Claimant] may have”.

4. According to clause 4.5 of the transfer agreement, “Without prejudice to other rights or remedies [the Claimant] may have, in case of default of payment, [the Claimant] shall be entitled to interest of 10% p.a. above base interest of Country B rate”.

5. According to the information contained in the Transfer Matching System (TMS), the player was registered with the Respondent on 3 February 2017.

6. On 6 April 2017, the Claimant lodged a claim against the Respondent in front of FIFA, requesting to be paid the following amounts:

a. EUR 750,000 as 1st instalment, plus 10% interest p.a. applicable as of 16 February 2017;

b. EUR 250,000 as penalty in accordance with art. 4.2 of the transfer agreement, plus 10% interest p.a. applicable as of 17 February 2017;

c. EUR 6,146.90 as legal fees and “all costs accrued in connection with the proceedings”.

7. On 18 February and 2 August 2018 respectively, the Claimant amended its claim, ultimately requesting:

a. EUR 2,500,000 as total outstanding transfer fee, plus 10% interest p.a. as from the respective due dates of each of the instalments;

b. EUR 1,000,000 as total penalty fee, plus 10% interest p.a. as from the respective due dates of each of the instalments;

c. EUR 6,146.90 as damages based on the legal fees and “all costs accrued in connection with the proceedings”.

8. In its claim, the Claimant held that the Respondent had not remitted the transfer fee, despite having been put in default of payment several times.

9. Consequently, the Claimant stated that, since the Respondent did not pay the transfer fee on time, the penalty and the interest contractually agreed should apply.

10. In reply, the Respondent acknowledged its failure to comply with the payment of the transfer fee due to financial difficulties.

11. With regard to the penalty request, however, the Respondent deemed that a penalty of EUR 250,000 should apply to the total amount of compensation, otherwise it would be clearly abusive.

12. The Respondent added that, if the penalty applies to each of the instalments in delay, the total amount of the penalty might reach EUR 1,000,000, which corresponds to almost 60% of the transfer fee set by the parties.

13. The Respondent further argued that an annual interest of 10% requested by the Claimant is abusive, disproportionate, and harmful to the debtor.

14. Moreover, the Respondent explained that the conditions agreed for the transfer were not met by the Claimant, since the latter transferred a player with severe health conditions and limitations.

15. Furthermore, the Respondent argued that such medical conditions decreased the player’s market value of 40%, from EUR 2,500,000 to EUR 1,500,000.

16. In conclusion, the Respondent requested the deciding body to dismiss the claim, asking the recognition of an unfair advantage for the Claimant, which deliberately omitted information regarding the player’s clinical condition at the time of the transfer and which conditioned the signature of the transfer agreement upon the authorization for exams of the player.

17. Alternatively, the Respondent requested to acknowledge a decrease in the player’s market value and to reduce the transfer fee to EUR 1,500,000.

18. Furthermore, the Respondent requested the deciding body to dismiss the claims for penalty, interest rate of 10% and legal fees.

19. In its duplica, the Claimant stated that the wording of clause 4.2 of the transfer agreement is clear and unambiguous, i.e. “per case of default”. According to the Claimant, it is not true that the parties intended to define a penalty of EUR 250,000 in total. The intention was to establish a security over the entire transfer fee and, since the Respondent requested to pay it in four instalments, it was indispensable to apply the penalty to every single payment.

20. Moreover, the Claimant pointed out that the contractual penalty was mutually agreed between the parties and deemed that it is not disproportionate. The Claimant further explained that the inclusion of the penalty was “due to bad experiences in the past, it had to fear that the Respondent would not pay, and unfortunately, the Respondent delivered proof that this fear was and is fully justified. Up to date, the Respondent has not paid a single penny –nothing more than two years after it committed itself to the payment plan and explicitly agreed and acknowledged that “payment is of the essence”.

21. Regarding the interest, the Claimant argued that the parties freely negotiated it. In addition, the Respondent deemed that an annual interest of 10% (“base interest of Country B”) is neither excessive nor abusive.

22. Besides, the Claimant stated that it never violated the principle of bona fide by any means whatsoever. The Claimant further explained that it never had an unfair advantage in connection to the transfer agreement and that, in fact, the parties had equal bargaining power and freely negotiated the terms of the transfer agreement.

23. The Claimant argued that there has not been any abusive conduct from its side and that the Respondent did not provide any evidence supporting its allegations.

24. The Claimant remarked not having withheld any medical information about the player. The Claimant added that the player was examined by the Respondent’s medical department, which highlighted certain problems and finally approved the transfer. The Claimant concluded that the Respondent freely decided to sign an employment contract with the player.

25. In its rejoinder, the Respondent entirely reiterated its position and added, with regard to the interest rate, that this dispute is governed by the FIFA regulations and Swiss Law, and not law of Country B, therefore an interest of 5% p.a. should apply.

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 6 April 2017. Consequently, the Single Judge concluded that the 2017 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 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 2019), and on the other hand, to the fact that the present claim was lodged with FIFA on 6 April 2017. In view of the foregoing, the Single Judge concluded that the 2016 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, in December 2016, 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 EUR 2,500,000 in four instalments as follows: (i) EUR 750,000 on 15 February 2017; (ii) EUR 500,000 on 30 July 2017; (iii) EUR 750,000 on 15 January 2018; (iv) EUR 500,000 on 30 June 2018.

7. Furthermore, the Single Judge observed that, pursuant to clause 4.2 of the transfer agreement, “per case of default of payment (irrespective of the amount of default), in addition to the outstanding amount [the Respondent] shall pay to [the Claimant] on first demand a contractual penalty of EUR 250,000, irrespective of the cause of default and without prejudice to other rights and remedies [the Claimant] may have”.

8. Subsequently, the Single Judge moved to analyse the claim and took notice, first and foremost, that – according to the information contained in the TMS – the player was duly registered with the Respondent on 3 February 2017.

9. In continuation, the Single Judge took note that the Claimant maintained that, in light of the fact that the Respondent never paid the transfer fee, notwithstanding having been put in default, it was entitled to claim the transfer fee in the amount of EUR 2,500,000 as well as the penalty fee in the total amount of EUR 100,000,000 and procedural costs.

10. Furthermore, the Single Judge noted that, according to the Claimant, the penalty in the amount of EUR 250,000 had been intended to apply to each of the four instalments of the transfer fee in case of the Respondent’s failure to pay them.

11. In continuation, the Single Judge observed that, for its part, the Respondent acknowledged its failure to comply with the payment of the transfer fee due to financial difficulties and only contested the Claimant’s argument that the penalty fee envisaged at clause 4.2 of the transfer agreement applies to each and every instalment. Furthermore, the Single Judge took note of the additional arguments brought forward by the Respondent, namely that the player had allegedly been transferred with diminished physical conditions and that his value had consequently decreased compared to the transfer fee.

12. That said, the Single Judge underlined that it remained undisputed that the Respondent was in default of payment of the entirety of transfer fee to the Claimant until the moment the latter lodged its claim and its subsequent amendments before FIFA.

13. Consequently, the Single Judge concluded that the conditions set by the transfer agreement to trigger the penalty fee had been met. However, the Single Judge noticed that it remained to be established whether the amount indicated therein as penalty applied to delays in the payment of each and every instalment, as maintained by the Claimant, or to the entirety of the transfer fee as claimed by the Respondent.

14. That said, the Single Judge focused his attention on the said penalty clause 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.

15. In the specific case at hand, the Single Judge moved to analyse the literal tenor of clause 4.2 of the transfer agreement as principal mean of interpretation in order to assess the will of the parties when they drafted it. Therefore, the Single Judge deemed it worth to recall the text of the said clause, which reads “payment in due time is of the essence and that per case of default of payment (irrespective of the amount of default), in addition to the outstanding amount [the Respondent] shall pay to [the Claimant] on first demand a contractual penalty of EUR 250,000, irrespective of the cause of default and without prejudice to other rights and remedies [the Claimant] may have”.

16. Against this draft, the Single Judge pointed out that, by explicitly indicating that the penalty would apply “per case of default of payment (irrespective of the amount of default)”, the parties’ intention could only have been to refer it to each of the 4 instalments, which provided for different amounts. The Single Judge noted that, in light of that and the fact that the clause also indicated that “payment in due time is of the essence”, it would not be an adherent representation of the parties real will to conclude that the penalty would apply only to a delay of payment of the entirety of the transfer fee.

17. Consequently, the Single Judge concluded that the payment of each instalment provided for a penalty of EUR 250,000 in case of delays in the payment and, thus, considering that the Respondent had failed to pay all of them, a total amount of EUR 1,000,000 applies as penalty fee. The Single Judge further considered that, in the context of the total outstanding amount and the time it was overdue, such a penalty fee – which the parties contractually agreed upon in the context of the transfer agreement – is both proportionate and reasonable and, thus, valid and applicable.

18. Prior to establishing the financial consequences of the foregoing, the Single Judge wished to emphasise that the alleged medical conditions of the player do not constitute a valid reason not to pay the agreed transfer fee, also in light of the fact that proper examinations had been carried out, following which the Respondent had duly proceeded to sign an employment contract with the player.

19. 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 EUR 2,500,000 as outstanding transfer fee, as well as EUR 1,000,000 as penalty fee, in light of the Respondent’s failure to pay the four instalments of the transfer fee indicated in the transfer agreement in a timely manner.

20. With respect to the Claimant’s request to apply 10% 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. However, considering that such interest on the transfer fee was agreed by the parties upon the signature of the transfer agreement, the Single Judge decided to award to the Claimant 10% interest on the outstanding transfer fee as of the day following the due date of each instalment.

21. 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 fees and “all costs accrued in connection with the proceedings”.

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

23. 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.

24. 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.

25. 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.

26. In conclusion and in view of the numerous submissions that had to be analysed in the present matter as well as considering the specific circumstances of the case, the Single Judge determined the costs of the current proceedings to the amount of CHF 25,000.

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

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, Club A, within 30 days as from the date of notification of this decision, the amount of EUR 2,500,000 as outstanding transfer fee plus interest as follows:

 10% annual interest on the amount of EUR 750,000 as from 16 February 2017 until the date of effective payment;

 10% annual interest on the amount of EUR 500,000 as from 31 July 2017 until the date of effective payment;

 10% annual interest on the amount of EUR 750,000 as from 16 January 2018 until the date of effective payment and

 10% annual interest on the amount of EUR 500,000 as from 1 July 2018 until the date of effective payment.

3. If the aforementioned amount plus interest, is not paid within the aforementioned deadline, the present matter shall be submitted, upon request, to FIFA’s Disciplinary Committee for consideration and a formal decision.

4. The Respondent, Club C, has to pay to the Claimant, Club A, within 30 days as from the date of notification of this decision, the amount of EUR 1,000,000 as penalty fee.

5. If the aforementioned amount is not paid within the aforementioned deadline, an interest rate of 5% per year will apply as of the expiry of the fixed time limit and the present matter shall be submitted, upon request, to FIFA’s Disciplinary Committee for consideration and a formal decision.

6. Any further claims lodged by the Claimant, Club A, are rejected.

7. The Claimant, Club A, is directed to inform the Respondent, Club C, directly and immediately, of the account number to which the remittances under point 2. and 4 above are to be made and to notify the Players’ Status Committee of every payment received.

8. The final costs of the proceedings in the amount of CHF 25,000 are to be paid by the Respondent, Club C, within 30 days as from the date of notification of the present decision, as follows:

8.1 The amount of CHF 5,000 has to be paid to the Claimant, Club A;

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

UBS Zurich

Account number 366.677.01U (FIFA Players’ Status)

Clearing number 230

IBAN: CH27 0023 0230 3666 7701U

SWIFT: UBSWCHZH80A

*****

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