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 11 April 2019

Decision of the

Dispute Resolution Chamber

passed in Zurich, Switzerland, on 11 April 2019,

in the following composition:

Geoff Thompson (England), Chairman

Alexandra Gómez (Uruguay), member

Stefano Sartori (Italy), member

Daan de Jong (The Netherlands), member

Muzammil bin Mohamed (Singapore), 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 5 August 2015, the Player of Country B, Player A, (hereinafter: the Claimant) and the Club of Country D, Club C (hereinafter: the Respondent) entered into an employment contract (hereinafter: the contract) valid as from 6 August 2015 until 31 May 2017.

2. According to clause 3.3 of the Annexe to the contract (hereinafter: the Annexe), the Claimant was entitled to receive from the Respondent, inter alia, EUR 260,000 payable in 12 monthly salaries of EUR 21,667 each for the season 2015/2016 and EUR 260,000 payable with the same modalities for the following one. Furthermore, according to the referred clause, each monthly salary was payable on “the 10th day of the following month”.

3. In accordance with clause 3.5.1 of the Annexe, the Claimant was entitled to a monthly allowance of 5,000 “to be used for living costs”.

4. On 14 June 2016, the Claimant sent a default notice to the Respondent, putting it in default of payment of the following amounts: (i) EUR 108,335 corresponding to the monthly salaries as from January 2016 until May 2016 and (ii) 50,000 as “the amount due for living expenses for the last 10 months”.

5. Subsequently, on 16 August 2016, the parties signed a mutual agreement (hereinafter: the termination agreement), in which it was declared that: “the Parties […] are now willing to terminate [the Annexe] in an amicable way”.

6. According to clause 1 of the termination agreement, the parties agreed to “definitively settle their dispute concerning the outstanding payments of the 2015/2016 season and the salaries of the 2016/2017 season against payment by the [Respondent] to the [Claimant] of the amount of EUR 270,000 net, payable in twelve [instalments] as follows:

a. EUR 20,000 by no later than 30 September 2016;

b. EUR 20,000 by no later than 30 December 2016;

c. EUR 20,000 by no later than 30 January 2017;

d. EUR 20,000 by no later than 30 March 2017;

e. EUR 25,000 by no later than 30 July 2017;

f. EUR 25,000 by no later than 30 September 2017;

g. EUR 25,000 by no later than 30 November 2017;

h. EUR 25,000 by no later than 30 January 2018;

i. EUR 30,000 by no later than 30 April 2018;

j. EUR 30,000 by no later than 30 July 2018;

k. EUR 15,000 by no later than 30 September 2018;

l. EUR 15,000 by no later than 30 December 2018”.

7. Clause 2 of the termination agreement reads as follows: “The Parties hereby undertake not to raise any claim against each other with regard to the Contract, subject to the terms of [the termination agreement] being duly complied with by the [Respondent] in due time”.

8. In addition, clauses 4 and 5 of the termination agreement provide that:

“4. In the event that any of the aforementioned obligations […] is not made by any of the parties, each party shall have every right to make any claim and/or demand at any outstanding amounts under the jurisdiction mentioned in article 5 below.

5. Any dispute arising from or related to [the termination agreement] shall be submitted to the FIFA Dispute Resolution Chamber and shall be resolved in accordance with the FIFA Regulations”.

9. By means of a letter dated 6 December 2016, the Claimant put the Respondent in default and requested the club to proceed with the payment of the first instalment in accordance with the termination agreement, in the amount of EUR 20,000, which fell due on 30 September 2016.

10. On 27 December 2016 the Claimant lodged a claim for outstanding remuneration and breach of contract against the Respondent before FIFA, requesting the total amounts of EUR 422,502.50 and 62,500, consisting of:

- EUR 162,502.50 as outstanding remuneration, corresponding to the monthly salaries as from January 2016 until 16 August 2016 in the amount of EUR 21,667 each;

- 62,500, corresponding to “living expenses allowance” for the period as from August 2015 until 16 August 2016;

- EUR 260,000 as compensation for breach of contract, corresponding to its residual value, i.e. all his salaries for the 2016/2017 season, plus interest at the rate of 5% p.a. until the date of effective payment.

11. More in particular, the Claimant held that the Respondent did not comply with the termination agreement. Hence, he argued that: “[as] the [Respondent] failed to meet any of its obligations under the Termination Agreement, the conditions of Articles 2 and 4 [of the termination agreement] would be met and, consequently, [the Claimant] would have the right to revert to requesting from the [Respondent] payment of any and all outstanding amounts and claims under the Contract, existing before concluding the termination agreement […] as well as the payment in full of all the unpaid salaries for the [remaining duration] of the employment relationship […] until the end of its term, i.e. 30 June 2017, as compensation for its early termination”.

12. In its reply to the claim, the Respondent explained that: “On December 12th 2016, insolvency proceedings were opened against the company which managed and operated [the Respondent]”.

13. Furthermore, the Respondent stressed that: “Insolvency proceedings stop all other pending proceedings, in order to give equal treatment to all creditors and in order to avoid any preference of any creditor over the others. […]. It is obvious that the continuation of proceedings against the [Respondent] may give preference to those creditors who filed a claim with FIFA over other creditors, which contradicts the applicable law”.

14. In addition to the above, the Respondent also replied as to the substance of the matter. In this regard, the Respondent admitted not having complied with its financial obligations deriving from the termination agreement and declared that: “Any claims based on [the contract] for payments of the rest of 2016/2017 playing season should be banned, since the Termination agreement cancelled [the contract] for this period. Furthermore, the [Claimant] has left Country D after the Termination Agreement was signed and began to play for another club, where he surely earned a salary”.

15. The Respondent finally stated that: “The [Respondent]’s obligation to [the Claimant] is for the 7.5 unpaid salary payments, which amounts to EUR 162,502. Any demand for Living expenses should be banned, since he had no such of those”.

16. In his replica, the Claimant asserted that, according to clause 5 of the termination agreement: “any dispute arising from or related to [the termination agreement] shall be submitted to the FIFA Dispute Resolution Chamber and shall be resolved in accordance with the FIFA Regulations”.

17. Moreover, the Claimant stressed that: “insolvency procedures in principle do not affect procedures in front of the DRC as long as the relevant club remains affiliated to its respective association”. In this regard, the Claimant affirmed that: “the [Respondent] appears to participate in the current football season 2017/2018 in the League E […]”.

18. Furthermore, the Claimant referred, once again, to clause 2 of the termination agreement and declared that, as the Respondent failed to comply with its financial obligations upon the termination agreement: “[the Claimant] is perfectly entitled to revert to requesting from the [Respondent] payment of any and all outstanding amounts and claims under the Contract, existing before concluding the Termination Agreement”.

19. The Claimant finally asked FIFA to order the Respondent to proceed with the payment of the amounts requested in his claim or, subsidiarily, order the Respondent “to pay to [him] the amount stipulated under the Termination Agreement, i.e. EUR 270,000 net plus interest of 5% p.a., until full payment”.

20. In its duplica, the Respondent referred to its previous arguments and attached a copy of “The Liquidation Order […] awarded by the district court in Capital F”. Furthermore, as to the substance of the matter, the Respondent held three different argumentative positions corresponding to different scenarios:

- Firstly, it argued that: “after [the Claimant] has stated in his claim that the termination agreement is no longer valid due to the [Respondent]’s breach, it is in fact Null and Void. Therefore, the termination agreement should be ignored and the Claim is actually based solely on [the Claimant’s] contract […]. Meaning [the Claimant] gave his services to the [Respondent] in season 2015/2016 and is due outstanding salaries for that period in the total sum of EUR 163,502. However, [the Claimant] left the [Respondent] at the summer of 2016, in mutual consent of both parties. […]. [The Claimant] cannot be compensated for the remaining of his contract while he willingly left the [Respondent] and signed, and got paid by another Club for that same season”;

- Secondly, it maintained that: “if […] the termination agreement is valid – the consequence of that is that [the contract] was cancelled by mutual agreements, no liability remained for the period beyond August 2016, that is, the date of signing the Termination Agreement”;

- Thirdly, it stated that: “if […] the [Respondent] is obliged to pay [the Claimant] the remaining of his contract for the season 2016/2017, any sums and income he had that year must be offset from the amount set to be paid to [the Claimant] for his services for season 2016/2017”.

21. In his final comments, the Claimant rejected the Respondent’s arguments regarding its liquidation, since: “The Liquidation proceedings of Country D described in [the Respondent’s] submission are not supposed to end with the liquidation of the [Respondent] itself, but seem to be supposed to serve to allow the [Respondent] to avoid insolvency so that its activities can be assumed by another entity”.

22. The Claimant further claimed that: “[the Respondent] does not dispute that it has not paid to [him] any of the amounts stipulated under the Termination Agreement, i.e. EUR 270,000 [which] has become due and outstanding in full well before the passing of the liquidation decision in Country D […]”.

23. Moreover, the Claimant argued that the Respondent is still competing in “the Top-Tier League of Country D [which] also remains undisputed by the [Respondent]”. The Claimant finally argued that even if the Respondent has changed its management, it is the same club since relevant elements such as “the name, emblem or colours” of the club have remained the same; and that “accepting the argument of [the Respondent] would lead to a situation that any club can avoid paying its debts by merely entering into liquidation proceedings and installing a different legal entity to manage its activities, which cannot be accepted under the light of the contractual stability principle”.

24. In its final position, the Respondent referred to its previous argumentations.

25. On 13 March 2019 the Claimant informed the FIFA administration that he entered into an employment relationship with the Club of Country G, Club H, as from 30 August 2016 until 31 May 2018, for a monthly salary of EUR 2,500.

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 stake. In this respect, the DRC took note that the present matter was submitted to FIFA on 27 December 2016. Consequently, the DRC concluded that the 2015 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 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 DRC 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 DRC 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, the DRC confirmed that in accordance with art. 26 par. 1 and 2 of the Regulations (edition 2018) and considering that the present claim was lodged in front of FIFA on 27 December 2016, the 2015 edition of the Regulations on the Status and Transfer of Players (hereinafter: the Regulations) is applicable to the matter at hand as to the substance.

4. The competence of the DRC and the applicable regulations having been established, the members of 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. In this respect, the DRC acknowledged that, following the conclusion of an employment contract on 5 August 2015 and a default notice, dated 14 June 2016, with which the Claimant put the Respondent in default of the payment of five monthly salaries and “living expenses”, the parties signed a termination agreement, on 16 August 2016, by means of which they regulated, inter alia, their financial relationship.

6. More specifically, the members of the Chamber observed that, by means of the said agreement, the parties had decided to set a total remuneration of EUR 270,000 to be paid by the Respondent in favour of the Claimant, in lieu of the outstanding payments of the 2015/2016 season and the totality of the Claimant’s salaries of the following one. According to the said agreement, the Respondent undertook to pay the Claimant EUR 270,000 in 12 instalments as follows: (i) EUR 20,000 by no later than 30 September 2016; (ii) EUR 20,000 by no later than 30 December 2016; (iii) EUR 20,000 by no later than 30 January 2017; (iv) EUR 20,000 by no later than 30 March 2017; (v) EUR 25,000 by no later than 30 July 2017; (vi) EUR 25,000 by no later than 30 September 2017; (vii) EUR 25,000 by no later than 30 November 2017; (viii) EUR 25,000 by no later than 30 January 2018; (ix) EUR 30,000 by no later than 30 April 2018; (x) EUR 30,000 by no later than 30 July 2018; (xi) EUR 15,000 by no later than 30 September 2018; (xii) EUR 15,000 by no later than 30 December 2018.

7. Equally, the Chamber noted that clause 2 of the settlement agreement established that “The Parties hereby undertake not to raise any claim against each other with regard to the Contract, subject to the terms of [the termination agreement] being duly complied with by the [Respondent] in due time”.

8. In continuation, the members of the Chamber noted that, according to the Claimant, the Respondent did not comply with the terms of the termination agreement as it failed to remit to him the instalment which fell due on 30 September 2016 and, therefore, he was entitled to outstanding remuneration and compensation for breach of contract on the basis of clause 2 of the settlement agreement.

9. The Chamber took into account that the Respondent, for its part, first of all asked that the proceedings before FIFA be suspended in light of the fact that the company managing it was undergoing insolvency proceedings. Moreover, the members of the DRC took note that the Respondent acknowledged having failed to comply with its financial obligations deriving from the termination agreement.

10. Furthermore, the members of the Chamber took note that, according to the Respondent – should the termination agreement be deemed null as a consequence of its breach – the Claimant was only entitled to his outstanding salaries as from January 2016 until August 2016, since he had left the Respondent in August 2016 to join another club. The members of the Chamber further noted that, subsidiarily, the Respondent asked that the Claimant be entitled only to the amounts indicated in the settlement agreement, i.e. EUR 270,000 or – as a subsequent alternative – to the amounts indicated in the employment contract, mitigated by the Claimant’s new income.

11. First and foremost, the members of the DRC analysed the Respondent’s request of suspension of the proceedings before FIFA. In this respect, the Chamber stressed that – in accordance with both its well established jurisprudence and that of the Court of Arbitration for Sport – bankruptcy/insolvency procedures do not affect procedures in front of the DRC. Consequently, and bearing in mind that – according to the information provided by the Football Association of Country D – the Respondent has remained affiliated and it is still participating in its competitions, the Chamber decided that such request had to be dismissed.

12. The foregoing having been established, the members of the DRC turned their attention to the substance of the matter and pointed out that it remained undisputed that the Respondent failed to fulfil its financial obligations enshrined in the settlement agreement.

13. Consequently, the Chamber was aware that the underlying issue in the present dispute was to establish the consequences deriving from the Respondent’s stance.

14. In this context, the members of the DRC deemed it worth to preliminary remark that, at the time of signing the termination agreement, the Claimant had accrued seven monthly outstanding salaries, i.e. as from January until July 2016. Moreover, the members of the DRC observed that the amount set by the parties in the settlement agreement as total remuneration to be paid to the Claimant, i.e. EUR 270,000, was considerably higher that the outstanding amounts he had accrued by the time of signing it.

15. Moreover, the Chamber observed that, according to clause 1 of the settlement agreement, the parties had decided to “definitively settle their dispute concerning the outstanding payments of the 2015/2016 season and the salaries of the 2016/2017 season against payment by the [Respondent] to the [Claimant] of the amount of EUR 270,000 […]”.

16. In light of the all the aforementioned considerations, bearing in mind that the Claimant had already put the Respondent in default of 5 monthly salaries and living expenses before signing the termination agreement, the members of the DRC were confident that the amount indicated in the termination agreement was meant to replace the entirety of the Respondent’s obligations towards the Claimant, i.e. outstanding remuneration and compensation.

17. Furthermore, the members of the Chamber took note of the content of clause 2 of the settlement agreement, according to which the parties undertook “not to raise any claim against each other with regard to the Contract, subject to the terms of [the termination agreement] being duly complied with by the [Respondent] in due time”.

18. As a consequence, the members of the Chamber established that the Respondent’s failure to duly comply with the terms of the settlement agreement violated the condition set by clause 2 of the settlement agreement in order for the parties not to lodge any claims based on the employment contract they had signed on 5 August 2015. Consequently, the Claimant was entitled again to lodge his claim demanding the consequences of the breach of the original employment contract.

19. Therefore, bearing in mind that the Claimant was entitled to living expenses in accordance with clause 3.5.1 of the Annexe to the employment contract in the amount of 50,000 and that also this amount remained outstanding, the Chamber decided that the Claimant was entitled to receive the amount of EUR 151,669 and 50,000 from the Respondent in accordance with the terms of the employment contract for the 2015/2016 season as outstanding remuneration for the period between 1 January and 31 July 2016.

20. In light of the above, the DRC decided that, in accordance with the general legal principle of “pacta sunt servanda”, the Respondent is liable to pay the amount of EUR 151,669 and 50,000 to the Claimant as outstanding remuneration.

21. In addition, taking into account the Claimant’s claim, the Chamber decided to award the Claimant interest of 5% p.a. as of the day in which he lodged his claim until the date of effective payment.

22. That said, the Chamber observed that it remained undisputed that, by the time the parties signed the termination agreement, the Respondent was in gross violations of his contractual obligations towards the Claimant, the latter was entitled to request compensation for the early termination of the employment contract.

23. Consequently, the Chamber focused its attention on the calculation of the amount of compensation due to the Claimant by the Respondent in the case at stake. In doing so, the members of the Chamber firstly recapitulated that, in accordance with art. 17 par. 1 of the Regulations, the amount of compensation shall be calculated, in particular and unless otherwise provided for in the contract at the basis of the dispute, with due consideration for the law of the country concerned, the specificity of sport and further objective criteria, including, in particular, the remuneration and other benefits due to the player under the existing contract and/or the new contract, the time remaining on the existing contract up to a maximum of five years, and depending on whether the contractual breach falls within the protected period.

24. In application of the relevant provision, the Chamber held that it first of all had to clarify as to whether the pertinent employment contract contained a provision by means of which the parties had beforehand agreed upon an amount of compensation payable by the contractual parties in the event of breach of contract. In this regard, the Chamber established that no such compensation clause was included in the employment contract at the basis of the matter at stake.

25. As a consequence, the members of the Chamber determined that the amount of compensation payable by the Respondent to the Claimant had to be assessed in application of the other parameters set out in art. 17 par. 1 of the regulations.

Bearing in mind the foregoing, the Chamber proceeded with the calculation of the monies payable to the Claimant under the terms of the employment contract as from its early termination and concluded that he would have been entitled to receive EUR 260,000 as remuneration had the employment contract been executed until its regular expiry date, i.e. May 2017.

26. In continuation, the Chamber assessed as to whether the Claimant had signed an employment contract with another club during the relevant period of time, by means of which he would have been able to reduce his loss of income. According to the constant practice of the DRC, such remuneration under a new employment contract(s) shall be taken into account in the calculation of the amount of compensation for breach of contract in connection with the player’s general obligation to mitigate his damages.

27. In respect of the above, the Chamber recalled that the Claimant concluded an employment contract with the Club of Country G, Club H, valid as from 30 August 2016 until 31 May 2018 for a monthly salary of EUR 2,500. Hence, he was able to mitigate his damages during the overlapping period with the contract at the basis of the present dispute for a total amount of EUR 22,500.

28. Consequently, the Chamber established that the payable compensation corresponds to the total amount of EUR 237,500.

29. On account of all the abovementioned considerations, the specificities of the case at hand as well as the player’s general obligation to mitigate his damage, the Chamber decided that the Respondent must pay the total amount of EUR 237,500 to the Claimant as compensation for breach of contract, plus 5 % interest p.a. as from the date of the claim of the player, i.e. 27 December 2016.

30. The Chamber concluded its deliberations in the present matter by rejecting any further claim of 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 outstanding remuneration in the amounts of EUR 151,669 and 50,000, plus 5% interest p.a. on said amounts as from 27 December 2016 until the date of effective payment.

3. The Respondent has to pay to the Claimant, within 30 days as from the date of notification of this decision, compensation for breach of contract in the amount of EUR 237,500 plus 5% interest p.a. on said amount as from 27 December 2016 until the date of effective payment.

4. In the event that the aforementioned sums plus interest, due to the Claimant in accordance with the above-mentioned numbers 2. and 3., are not paid by the Respondent within the stated time limit, the present matter shall be submitted, upon request, to the FIFA Disciplinary Committee for consideration and a formal decision.

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

6. 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.

*****

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:

Emilio García Silvero

Chief Legal & Compliance Officer

Encl. CAS directives