F.I.F.A. – Dispute Resolution Chamber / Camera di Risoluzione delle Controversie – labour disputes / controversie di lavoro (2018-2019) – fifa.com – atto non ufficiale – Decision 4 October 2018
Decision of the
Dispute Resolution Chamber
passed in Zurich, Switzerland, on 4 October 2018,
in the following composition:
Geoff Thompson (England), Chairman
Philippe Diallo (France), member
Abu Nayeem Shohag (Bangladesh), member
Alexandra Gómez Bruinewoud (Uruguay), member
Stijn Boeykens (Belgium), member
on the claim presented by the player,
Player A, Country B
as Claimant
against the club,
Club C, Country D
as Respondent
regarding an employment-related dispute
between the parties
I. Facts of the case
1. On 19 August 2015, the player of Country B, Player A (hereinafter: the player or Claimant) and the club of Country D, Club C (hereinafter: the club or Respondent) signed an employment contract, valid as from 20 August 2015 until 30 June 2018 (hereinafter: the contract), according to which the player was entitled to receive:
a monthly salary of 10,000 in the currency of Country D (approximately EUR 906) and;
an amount of 3,150,000,000 in the currency of Country D (approximately EUR 285,000) to be paid in 12 instalments of 262,500,000 in the currency of Country D (approximately EUR 23,800) during the contract.
2. On 23 June 2016, the player and the club concluded a termination agreement (hereinafter: the termination agreement), according to which the contract would be terminated as per 23 June 2016. Furthermore, article 2.1 of the termination agreement stipulates that the player is entitled to the total amount of USD 72,000, payable as follows:
- the amount of USD 18,000, due on 10 September 2016;
- the amount of USD 18,000, due on 10 December 2016;
- the amount of USD 18,000, due on 10 March 2017;
- the amount of USD 18,000, due on 10 May 2017.
3. Moreover, article 2.2 stipulates: ‘In order to ensure that the club will pay the amounts as stipulated in art. 2.1 the parties agree that the club will pay the player for every day of delay a penalty in the amount of 500.00 US$’.
4. On 26 March 2018, the player lodged a claim before FIFA against the club, claiming outstanding remuneration, as follows:
USD 18,000, as the fourth instalment due under the termination agreement;
USD 500 ‘for every day that has passed since 10 May 2017 until date of payment, with a maximum of USD 255,000’;
5% interest p.a. ‘as of 10 May 2017’.
Further, the player asked for sanctions in line with article 12bis of the FIFA Regulations to be imposed on the club, as well as that the club be ordered to pay procedural costs.
5. In his claim, the player explains that after the club was repeatedly in breach of its contractual obligations towards him (allegedly because the new head coach of the club no longer wanted to make use of his services), on 23 June 2016, he signed the abovementioned termination agreement. According to the player, one of his main reasons not to lodge a claim for outstanding remuneration and compensation for breach of contract, but rather sign a termination agreement ‘was a choice for quicker payment’.
Furthermore, the player points out that ‘in the event the defendant would again default and make a mockery out of its obligations, the penalty clause would undo the benefits gained by the defendant under the termination agreement’.
6. Furthermore, the player explains that the club failed to pay him (on time) each of the 4 instalments due under the termination agreement, however that on 8 September 2016, the club confirmed receipt of the player’s reminders and explained that it was waiting for the authorization of the ‘Change Office of Country D’, as well as that it was willing to fulfil its obligations towards the player.
7. With regard to the outstanding instalments, the player explains that he already claimed the payment of the first instalment (case ref. nr. XXX, decided on 7 April 2017) and the second and third instalments (case ref. nr. XXX, decided on 13 July 2017) before the DRC. In the decision dated 7 April 2017, the DRC did not award the player the claimed penalty fee, whereas this penalty fee was not claimed in the case with ref. nr. XXX. In addition, the player argues that these decisions do not lead to a res iudicata situation, as the current claim is only related to the fourth instalment, and is ‘no attempt to appeal or effort to alter’ the previous decisions of FIFA.
8. Moreover, the player explains that the club failed to pay him the fourth instalment of USD 18,000, due under the termination agreement, and that on 6 December 2017, he put the club in default, asking for the payment of said amount, however to no avail.
9. In relation to the claimed amounts, the player explains that first of all, he is entitled to the outstanding instalment of USD 18,000. Moreover, the player argues that he is also entitled to the penalty fee of USD 500 per day, as the penalty clause in article 2.2 of the termination agreement was validly agreed upon.
10. In relation to the validity of the penalty clause in relation to Swiss law, the player argues that in general, a penalty clause as agreed upon in article 2.2 of the termination agreement is valid under Swiss law, because:
- article 160 par. 2 of the Swiss Code of Obligations, foresees ‘a penalty in addition to performance in case of failure to comply with the provided time and place of the performance, in which case the penalty is cumulative’;
- under Swiss law, penalties may accrue alongside the delay of a payment, there is no need to prove damages (art. 161 par. 2 of the Code of Obligations) and in addition to the penalty, it is possible to ask for default interest (art. 104 Code of Obligations);
- the parties in the current dispute had the intention to agree upon a penalty clause, because the player wanted to avoid that the club would gain profit of not making the payments as per the termination agreement on time.
11. In relation to the specific circumstances of the case in relation to the validity of the penalty clause, the player argues that the penalty as agreed upon in article 2.2 of the termination agreement is valid and reasonable, because:
- the parties agreed ‘to put a severe penalty in place for the event that the defendant would again fail to meet his obligations’ and to ‘enforce that the debtor would pay in time’;
- the player could have also claimed USD 77,000 as outstanding salaries and potentially USD 255,000 as compensation for breach of contract, instead of concluding a settlement agreement for the total amount USD 72,000, plus a penalty fee of USD 500 per day;
- The parties agreed upon a fixed fee per day, which is ‘totally different from a percentage as used in interest clauses’.
12. Furthermore, the player argues that he is aware that the DRC panel is entitled to reduce a penalty, if it deems that this penalty is excessive, however that he deems that in this specific situation a reduction to less than USD 255,000 is not justified, because:
- the residual value of the contract after the termination on 23 June 2016, amounted to USD 255,000, which amount the player could have also claimed in a procedure before the DRC but which he did not do, because he expected a faster payment under the termination agreement;
- of the club’s ‘persistent ignoring of the claimant’, as well as the ‘persistent ignoring of DRC orders’ and the lack of good faith on the side of the club:
o the fact that the club of Country D is the stronger party compared to the player;
o the fact that the club apparently argued that it could not yet make the payments due to the player, because the player had failed to fulfil his fiscal obligations, whereas the termination agreement did not contain any fiscal obligation for the player;
o the fact that the ‘permit issuing body of the government of Country D’ refused to confirm that the player had still any fiscal obligations to fulfil.
13. In conclusion, the player holds that his claim for both the amount of USD 18,000, as well as the penalty fee and the 5% interest p.a. have to be upheld.
14. Despite being invited to do so, the club did not reply to the player’s claim.
II. Considerations of the Dispute Resolution Chamber
1. First of all, the Dispute Resolution Chamber (hereinafter also referred to as Chamber or DRC) analysed whether it was competent to deal with the matter at hand. In this respect, it took note that the present matter was submitted to FIFA on 26 March 2018. Consequently, the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (edition 2018; hereinafter: Procedural Rules) are applicable to the matter at hand (cf. art. 21 of the Procedural Rules).
2. Subsequently, the members of the Chamber referred to art. 3 par. 1 of the Procedural Rules and confirmed that in accordance with art. 24 par. 1 in combination with art. 22 lit. b of the Regulations on the Status and Transfer of Players (edition 2018), the Dispute Resolution Chamber is competent to deal with the matter at stake, which concerns an employment-related dispute with an international dimension between a player of Country B and a club of Country D.
3. Furthermore, the Chamber analysed which regulations should be applicable as to the substance of the matter. In this respect, it confirmed that in accordance with art. 26 par. 1 and 2 of the Regulations on the Status and Transfer of Players (edition 2018), and considering that the present claim was lodged on 26 March 2018, the 2018 edition of said regulations (hereinafter: Regulations) is applicable to the matter at hand as to the substance.
4. The competence of the Chamber and the applicable regulations having been established, the Chamber entered into the substance of the matter. In this respect, the Chamber started by acknowledging all the above-mentioned facts as well as the arguments and the documentation submitted by the parties. However, the Chamber emphasised that in the following considerations it will refer only to the facts, arguments and documentary evidence, which it considered pertinent for the assessment of the matter at hand.
5. First, the Chamber acknowledged that the parties had terminated their employment relation by mutual consent by entering into the termination agreement on 23 June 2016. In accordance with the termination agreement, the club inter alia undertook to pay to the player the amount of USD 72,000 in four instalments.
6. In continuation, the members of the Chamber noted that according to the player, the club failed to remit the fourth instalment of USD 18,000, which fell due on 10 May 2017. Consequently, the player asked that the club be ordered to pay him the amount of USD 18,000, as well as a penalty of USD 500 for every day that has passed since 10 May 2017, until a maximum of USD 255,000, based on article 2.2 of the termination agreement. Moreover, the player requested 5% interest p.a. ‘as of 10 May 2017’.
7. Subsequently, the Chamber noted that the club failed to present its response to the claim of the player, in spite of having been invited to do so. By not presenting its position to the claim, the Chamber was of the opinion that the club renounced its right of defence.
8. Furthermore, as a consequence of the aforementioned consideration, the members of the Chamber concurred that in accordance with art. 9 par. 3 of the Procedural Rules, it shall take a decision upon the basis of the documentation already on file, in other words, upon the statements and documents presented by the player.
9. In continuation, the Chamber acknowledged that in the termination agreement the parties agreed upon the payment of the total amount of USD 72,000, in four instalments, and focussed its attention on the arguments brought forward by the player, as well as the articles 2.1 and 2.2 of the termination agreement.
10. In this context, and taking into account the documentation presented by the player in support of his claim, the Chamber first of all concluded that the player had substantiated his claim pertaining to the outstanding fourth instalment in the amount of USD 18,000 with sufficient documentary evidence. In particular, the members acknowledged that the player duly explained that the club should have paid him the amount of USD 18,000 by no later than 10 May 2017, which it however failed to do.
11. Consequently, the members of the Chamber first concluded that the club had failed to pay to the player the amount of USD 18,000 as agreed upon in article 2.1 of the termination agreement and that, in accordance with the general legal principle of “pacta sunt servanda”, the club is liable to pay the player the amount of USD 18,000.
12. In continuation, the Chamber turned its attention to the clause in article 2.2 of the termination agreement, providing for a penalty in the amount of USD 500 per day in case of a delay in payment of one of the amounts, as well as the argumentation brought forward by the player in this respect.
13. In this regard, the majority of the Chamber, namely the clubs’ representatives as well as the DRC Chairman, making use of his casting vote (cf. art. 14 par. 1 of the Procedural Rules), considered that such alleged penalty clause is in fact an interest rate, corresponding to a daily interest of 2.77% over the amount of USD 18,000, which in turn would correspond to an interest rate of 1,011.05% per year, albeit up until a maximum of USD 255,000 (which amount is approximately almost 14 times higher than the amount of USD 18,000 claimed by the player).
14. As a result, the majority of the members of the Chamber found that the hidden interest rate provided for in article 2.2 of the termination agreement is clearly excessive and disproportionate as per Swiss law.
15. Taking into account the foregoing circumstances, as well as FIFA’s jurisprudence in this respect, the Chamber, in its majority, determined that the player’s request for the hidden interest rate foreseen in art. 2.2 of the contract had to be reduced to 18% p.a. on the amount of USD 18,000, as from 11 May 2017 until the date of effective payment, in accordance with Swiss law.
16. Consequently and based on the all the above mentioned circumstances, the Chamber decided that the club is liable to pay to the player the amount of USD 18,000, plus interest at the rate of 18% p.a. as from 11 May 2017.
17. Subsequently, the Dispute Resolution Chamber decided to reject the player’s claim pertaining to procedural costs in accordance with art. 18 par. 4 of the Procedural Rules and the Chamber’s respective longstanding jurisprudence in this regard.
18. The Chamber concluded its deliberations in the present matter by rejecting any further request filed by the Claimant.
III. Decision of the Dispute Resolution Chamber
1. The claim of the Claimant, Player A, is partially accepted.
2. The Respondent, Club C, has to pay to the Claimant, within 30 days as from the date of notification of this decision, the amount of USD 18,000, plus 18% interest p.a. as from 11 May 2017 until the date of effective payment.
3. In the event that the aforementioned sum plus interest 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.
4. Any further claim lodged by the Claimant is rejected.
5. The Claimant is directed to inform the Respondent immediately and directly of the account number to which the remittance is to be made and to notify the Dispute Resolution Chamber of every payment received.
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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
Avenue de Beaumont 2
1012 Lausanne
Switzerland
Tel: +41 21 613 50 00 / Fax: +41 21 613 50 01
e-mail: info@tas-cas.org / www.tas-cas.org
For the Dispute Resolution Chamber:
Omar Ongaro
Football Regulatory Director
Encl. CAS directives