F.I.F.A. – Dispute Resolution Chamber / Camera di Risoluzione delle Controversie – labour disputes / controversie di lavoro (2019-2020) – fifa.com – atto non ufficiale – Decision 31 October 2019

Decision of the

Dispute Resolution Chamber

passed in Zurich, Switzerland, on 31 October 2019,

in the following composition:

Geoff Thompson (England), Chairman

Roy Vermeer (the Netherlands), member

Daan de Jong (the Netherlands), member

on the claim presented by the player,

Juan Torres Ruiz, Spain

represented by Mr Alejandro Pascual and Mr Juan de Dios Crespo Pérez

as Claimant

against the club,

Henan Jianye FC, China PR

represented by Mr Tomas Pereda and Mr Giandonato Marino

as Respondent

regarding an employment-related dispute

between the parties

I. Facts of the case

1. On 25 February 2018, the player concluded an employment contract (hereinafter: the contract) with the club, valid as from the date of its signature until 31 December 2020.

2. Article 2 of the contract provided that the player was to receive from the club “each season a total annual net salary of EUR 1,700,000 (…), unless the Contract is prematurely terminated in accordance with Article 8 and 9”, as follows:

i. EUR 300,000 net payable no later than 25 March 2018;

ii. EUR 800,000 net payable in 4 equal monthly installments of EUR 200,000 each from March 2018 until June 2018;

iii. EUR 600,000 net payable in 6 equal monthly installments of EUR 100,000 each from July 2018 until December 2018;

iv. EUR 1,699,992 net payable in 12 equal monthly installments of EUR 141,666 each for the season 2019;

v. EUR 1,699,992 net payable in 12 equal monthly installments of EUR 141,666 each for the season 2020.

3. Article 8 of the contract with the title “Buy-out clause” stipulated the following, “Party A” being the club and “Party B” the player:

4. Article 9 of the contract named “Special buy-out clause in case of registration with Chinese club” reads for its part as follows, “Party A” being the club and “Party B” the player:

5. On 13 June 2018, the club informed the player in writing that it “executes its right to prematurely terminate the contractual relationship as mutually agreed at Article 8 (..)”. In addition, the club stated that it would pay the player in the amount of EUR 450,000 within the next 10 days in accordance with the above-mentioned clause and that it would provide him with an additional agreement to settle the employment relationship in accordance with the same clause.

6. On the same day, the player refuted the club’s action, disputed the unlawful termination due to the date of notification and claimed that the contract was terminated without just cause.

7. Between 14 June and 22 June 2018, the parties exchanged correspondence, though sustaining each their own position. Among those exchanges, the club provided on 20 June 2018 proof that it paid EUR 450,000 on 14 June 2018 and that it had also provided the player with the tax certificates. In addition, the club provided the player with a settlement agreement to be signed and returned by the player.

8. On 23 June 2018, the club confirmed that it had duly proceeded according to the contract as to the termination and requested the player to sign the agreement previously submitted.

9. On the same day, the player acknowledged receipt of said letter and, again, informed the club of his disapproval with the club’s early termination.

10. On 19 and 31 July 2018, the club complied with the player’s request as to the relevant tax certificates.

11. On 14 November 2018, the player put the club in default of payment of the full residual value of the contract, setting a 10-day deadline in order to remedy the default.

12. On 26 November 2018, the club replied to the player’s default rejecting it entirely as, according to the club, it had respected the contract in full.

13. On 7 December 2018, the player lodged a claim in front of FIFA for breach of contract without just cause and requested the payment of the following amounts:

I. EUR 3,596,667 “net” as compensation for breach of contract, according to the player’s calculation, it equals to EUR 6,539,394.54 “gross” due to 45% gross-up tax rate in China;

II. EUR 850,000 as additional compensation.

14. The player further requested 5% interest p.a. “to any amount granted” as of 23 June 2018, “when the club effectively (…) terminated the contract without just cause”.

15. The player further requested the imposition of sporting sanctions against the club, the payment of his legal costs and of the procedural fees as well as the provision of the “pertinent official tax certificate from the Chinese Authorities once the amounts of compensation have been paid”.

16. In his claim the player firstly considered that articles 8 & 9 of the contract had to be considered as “liquidated damages clauses” as a “clause intending to regulate the compensation to be paid between the parties in case of unlawful termination (i.e. buy-out clause, penalty clause, indemnity clause or likewise) are irrelevant (…) they legally correspond to liquidated damages provisions”.

17. In this respect, the player considered that both articles had to be considered as null and void due to a lack of reciprocity as well as their disproportionality and imbalance of rights.

18. In continuation, the player explained that “if the club wanted to prematurely terminate the contract it had to pay either EUR 450,000 or EUR 300,000; however, if the player wanted to terminate the contract prematurely and sign with a Chinese club, it was obliged to pay a compensation of EUR 7,000,000”.

19. In addition, the player also underlined that article 9 of the contract also limits the personal and economic freedom of the player and is obviously contradictory to the Swiss civil rights. It further deemed that by connecting article 8 and 9, the club would be the only party benefiting from such provisions.

20. Moreover, the player also underlined the article’s disproportionality explaining that by paying the player EUR 450,000 at the time the club exercised article 8, “the residual value of the contract amounted to EUR 4,046,667, [i.e.] the compensation only corresponded to the 11% of the remaining contractual salaries”.

21. Furthermore, the player argued that the club could as a consequence terminate easily the player’s contract after a “try-out time” as he actually performed in “only” 11 games.

22. The player further held that the club was conscious that, in the event he wanted to play in another club in China, “a compensation of EUR 7,000,000 which could only be paid by a third club on behalf of the player, was a burden impossible to overcome and therefore the player was at the full mercy of the club”.

23. Thereafter, the player also underlined that the club “intended to sign a settlement agreement (…) in order to settle the dispute and being afterwards free of all responsibilities” alleging that the player had been pressured to do so.

24. What is more, the player explained that even if article 8 of the contract should be considered as valid, it had clearly been incorrectly applied by the club. In support of his argument, the player sustained that according to the wording of article 8.1 “the club would have been required to notify the player at the latest on the 5th of June, as the termination must be within the period between the 1st and the 15th of June 2018”. Basing himself on the principle of Swiss law that the contract must be interpreted firstly on the factual will of the parties, the player deemed that considering the transfer window in China opened from 17th of June to 12th of July, it would have been detrimental for the player to find a new club seen that, according to the club, the termination occurred on 23 June 2018, i.e. the transfer window being already opened for several days.

25. Finally, the player concluded that the club terminated the contract without just cause and referred to various FIFA decisions, CAS awards and Chinese taxation rules in order to justify his calculation of the claimed compensation.

26. In its response to the claim, the club firstly stated that prior to signature of the contract, it had provided the player with a first draft of the contract including article 8 in order for the player to be informed of its content, for which it provided evidence.

27. Moreover, contrary to the player’s allegations, article 8 of the contract is a clear example of a “buy-out clause” which is to be considered valid as “the parties must have clearly specified in the contract that the relationship will be terminated upon notification and payment of such amount and that the termination will be without any further conditions, entitlement to damages or liability for sporting sanctions”.

28. In this respect, the club referred to FIFA and CAS jurisprudence in order to distinguish “Buy-out clauses” from “liquidated damages clauses” and to conclude that the contract had such clause in the present case (CAS 2016/A/4576).

29. Moreover, the club referred to Swiss law as the criteria used in order to interpret contracts was to explain the mutual intention of the parties. In this respect, the club deemed that the parties’ behaviour throughout the negotiations, perform and post-termination of the contract contradicts the player’s position.

30. In this respect, the club further deemed that the parties negotiated as of the arrival of the player and his advisers in China on 24 February 2018, exchanged correspondence and drafts of the contract, and, as a consequence, all parties clearly mutually agreed to include the relevant articles as drafted upon signature of the contract.

31. In addition, the club referred to interviews given by the player to Spanish media after signature of the contract allegedly proving his awareness of its content.

32. Thereafter, the club underlined that in the player’s correspondence of 13 and 14 June 2018, he only excluded the right application of the clause in a timely manner instead of referring to its validity, which contradicted his arguments as to the termination without just cause of his claim.

33. As to the reciprocity and proportionality of article 8, the club rejected the player’s position by arguing that “both parties are granted the same right to terminate prematurely the employment relationship, upon notification and payment of the same amount as consideration”.

34. In this respect, the club held that the player’s argument as to the alleged disproportionality of article 8 was not reasonable as, under another prospective, “from 25 February 2018 until 23 June 2018 (…), the player received 1,100,000 EUR (…) net as salaries, as well as additional 450,000 EUR net as buy-Out Fee, making a total of 1,550,000 EUR net during four months of employment (…), plus bonuses (…) (approximately 19,038 EUR net)”, and that “the duration of performance of the employment contract from 25 February 2018 to 23 June 2018 was equal to 11% of the (…) basic contractual duration. However (…) the player received in such short period more than 30% of the entire contractual value of 5,100,000 EUR net”.

35. In addition, the club underlined that the player could have afforded, or any other third club interested in him, to pay EUR 450,000 in order to terminate the contract himself and, as a consequence, that said sum was indeed proportionate in contrary to the player’s allegations.

36. Furthermore, the club rejected the relation between article 8 and 9 as presented by the player as well as the argument that the invalidity of one clause would mean the same for the other one.

37. This said, the club pointed out that both articles were two separate clauses, article 9 having been also accepted by the player upon signature and that, in the present case, article 9 was out of the scenario as having not been triggered by the parties.

38. What is more, the club rejected entirely the player’s arguments as to the incorrect application of article 8: according to the club it properly proceeded according to the wording of article 8 as the facts prove it without any doubts.

39. Further to this, the club deemed that the contract had been correctly and mutually terminated by the parties in accordance with the validly concluded article 8.

40. In addition, the club held that, in the alternative that a termination without just cause should be decided in the present, the compensation should be lowered in any case as the player was able to mitigate any alleged damages by signing with another club just after termination, and as well, any sporting sanction should be lowered as much as possible.

41. Finally, the club rejected all the player’s request entirely as to any other topic and requested the proceedings costs to be paid by the player.

42. In his replica, the player rejected the club’s argumentation as to the validity of article 8 understood as a “buy-out” clause reiterating his previous position as to said topic and referring to further FIFA and CAS jurisprudence allegedly sustaining his explanations.

43. In this respect, the player insisted on the reciprocity and the proportionality of such clause being the fundamental criteria of validity, which, in the present, was not the case, in particular: “a right for the parties to terminate in advance an employment contract by simple notice and by paying a stipulated amount does not mean at all that any notice or any stipulated amount will just suffice to make such right/clause valid”.

44. Furthermore, as to the mutual intentions of the parties, the player deemed that he had only limited bargaining power during the negotiations prior to the signature of the contract as he was represented by a non-specialized lawyer in football matters, in contrary to the club, but also as the contract was signed in only two days.

45. Moreover, the player reiterated his position as to the clear disproportionality and non-reciprocity of article 8 and 9 by providing further examples of jurisprudence allegedly sustaining his position.

46. In addition, the player confirmed that in his opinion article 8 and 9 are intrinsically linked by their wording, essence and effects.

47. What is more, the player rejected the club’s position as to the correct application of article 8 in the present case as well as any mutual termination of the contract, i.e. “such mutual consent could be never based on an illegal provision contrary to the FIFA Regulations, as it is the case at stake”.

48. As to the compensation calculation, the player explained that after mitigation due to a contract signed with the Spanish club UD Las Palmas, he would be entitled to EUR 2,799,167 “net of any taxes“.

49. Finally, the player reiterated his initial claim in full, except of the calculation of the requested compensation amount as previously described.

50. In its duplica, the club reiterated its position as to its consideration of article 8 as a valid buy-out clause and referred for its part to further FIFA and CAS jurisprudence, with as a consequence that it rejected, once again, the player’s argumentation.

51. Moreover, the club deemed that it cannot be held responsible for the player’s strategy used during the negotiations prior to signature and his alleged limited bargaining power as a consequence of his own choice of lawyer/representative.

52. As a consequence, for the club, the player’s interpretation of article 8 of the contract was “crystal clear”.

53. Furthermore, the club reiterated its position also on the fact that article 8 is a reciprocal and proportionate clause and has not to be linked with article 9, which is to be considered as a separate clause.

54. What is more, the club confirmed that in its point of view, article 8 had been duly executed contrary to the player’s opinion.

55. Finally, the club reiterated its position as expressed in its reply to the claim and added that it asked its own lawyers’ fees to be reimbursed by the player and, in the alternative of a decision concluding to the termination without just cause, a compensation calculated in consideration of the mitigation.

56. After being requested by FIFA, the player informed that he signed an employment contract with the Spanish club, UD Las Palmas, valid as from 6 July 2018 until 30 June 2020, according to which he was entitled to receive a monthly salary of approx. EUR 33,230 net.

II. Considerations of the Dispute Resolution Chamber

1. First, the Dispute Resolution Chamber (hereinafter also referred to as the DRC or the Chamber) analysed whether it was competent to deal with the matter at stake. In this respect, it took note that the present matter was submitted to FIFA on 7 December 2018. Consequently, 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 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 (editions 2018 and 2019), 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 Spanish player and a Chinese club.

3. In continuation, the Chamber 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 Chamber confirmed that in accordance with art. 26 par. 1 and 2 of the Regulations on the Status and Transfer of Players (editions 2018 and 2019), and considering that the Claimant’s claim was lodged on 7 December 2018, the June 2018 edition of the aforementioned regulations (hereinafter; the 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, and entering into the substance of the matter, the Chamber started by acknowledging the above-mentioned facts as well as the documentation contained in the file. 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 so doing, the members of the Chamber first noted that on 25 February 2018 the player and the club concluded an employment contract valid as from the date of signature until 31 December 2020. Furthermore, the Chamber noted that such contract contained two clauses, which referred to the early termination of the contract by either party, namely clauses 8 and 9 of the contract, as detailed in points I.3 and I.4 above.

6. Subsequently, the Chamber acknowledged that it remained undisputed by the parties that the contract was terminated on 23 June 2018, based on the application of clause 8 of the contract. The DRC however noted that while the club claims that clause 8 is a buy-out clause, duly executed and complied with by the club, and that the contract was mutually terminated, the player claims that clause 8 is a liquidated damages clause and, considered in combination with clause 9, it would be disproportionate and thus inapplicable. Thus the player deems that the contract was unilaterally terminated by the club without just cause and he should be entitled to receive an amount of compensation for the club’s unjustified breach.

7. With that in mind, the Chamber deemed that the fundamental issue in the present dispute was to determine whether clause 8 indeed consisted of a buy-out clause. If so whether it was duly exercised by the club and, if not, what would be the financial and/or sporting consequences of such unjustified breach.

8. In this respect, the Chamber deemed it appropriate to begin its analysis by recalling what CAS considers as a valid buy-out clause. In accordance with CAS, a valid buy-out clause is one that provides that “the parties to the contract agree that one party (…) shall grant the other party (…) an option to prematurely terminate the contract, upon serving notice and payment of the agreed option price” (CAS 2016/A/4576).

9. In this respect, the DRC first noted that clause 8 of the contract provides for the right of both the player and the club to, during certain periods of time (June 2018 and December 2018), upon a previous notification of 10 days sent to the other party between 1 to 15 June 2018, respectively between 1 and 31 December 2018, and upon payment of the amount of EUR 450,000, to prematurely terminate the contract. Upon payment of the amount, the party receiving it acknowledges that the other party has no further debts towards it and 3 days after the payment a mutual termination agreement is formally concluded.

10. The Chamber carefully analysed the wording of clause 8 of the contract as well as its consequences applied to both parties, and concluded that the principles of proportionality and balance, as well as parity and equal repartition of rights are met. In this respect, the DRC further pointed out that the player could also have triggered the clause himself by serving notice and paying the due amount to the club, as provided in clause 8.

11. In view of the foregoing, the Chamber deemed that clause 8 of the contract, in accordance with CAS’s jurisprudence and its own, is considered a valid buy-out clause and therefore can be applied.

12. Subsequently, the Chamber focused its attention on the argument of the player, according to which clause 8 is linked to clause 9 and, since the latter provided for a higher amount to be paid by the player in case he would buy himself out of the contract and join another Chinese club, those clauses would provide for unbalanced and disproportionate conditions of termination for the player or the club. In this respect, the DRC considered that both clauses were to be treated separately and analysed in accordance with the concrete circumstances of the case. In the case at hand, the Chamber deems that clause 9 seems clearly to be a separate clause which has not been triggered in the present case, and as such, does not need to be considered in the analysis of the present claim.

13. After deciding that clause 8 was to be considered as a valid and applicable buy-out clause, the Chamber went on to analyse whether the clause had in fact been correctly executed by the club. Having checked all the documentation on file as provided by the parties, the Chamber concluded that the club had indeed executed clause 8 in a correct manner, by serving the player a notice on 13 June 2018, paying him the due amount on 14 June 2018 and requesting the player to conclude the mutual termination agreement within three days of the triggering of the clause and the subsequent payment.

14. Following all the aforementioned discussions, the Chamber concluded that the club correctly executed the valid buy-out clause – agreed in the contract by the parties – and therefore their employment relationship was legally terminated in June 2018.

15. Therefore, the claim of the player is entirely rejected.

*****

III. Decision of the Dispute Resolution Chamber

1. The claim of the Claimant, Juan Torres Ruiz, is rejected.

*****

Note related to the publication:

The FIFA administration may publish decisions issued by the Players’ Status Committee or the DRC. Where such decisions contain confidential information, FIFA may decide, at the request of a party within five days of the notification of the motivated decision, to publish an anonymised or a redacted version (cf. article 20 of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber).

Note related to the appeal procedure:

According to article 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. 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

For the Dispute Resolution Chamber:

Emilio García Silvero

Chief Legal & Compliance Officer