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 8 May 2020

Decision of the

Dispute Resolution Chamber

passed on 8 May 2020,

in the following composition:

Clifford J. Hendel (USA / France), Deputy Chairman

Alexandra Gómez Bruinewoud (Uruguay / the Netherlands), member

Stefano La Porta (Italy), member

on the claim presented by the player,

Player A, Country B & Country C

as Claimant

against the club,

Club D, Country E

as Respondent

regarding an employment-related dispute

between the parties

I. Facts of the case

1. On 2 August 2019, the Country B / Country C player, Player A (hereinafter: Claimant or player) concluded an employment contract (hereinafter: the contract) with the club of Country E, Club D (hereinafter: Respondent or club), valid as of 1 August 2019 until 30 June 2021.

2. In accordance with the contract, the Claimant was entitled to a total remuneration for the duration of the contract in the amount of EUR 3,500,000, as follows:

a) 11 monthly instalments of EUR 136,364 from 1 August 2019 until 30 June 2020;

b) EUR 200,000 on 1 September 2019;

c) 12 monthly instalments of EUR 125,000 from 1 July 2020 until 30 June 2021;

d) EUR 300,000 on 1 September 2020.

3. By means of art. 8 of the contract, the parties agreed upon the following:

“The club shall hold at its own discretion the option to extend the player’s contract for one extra year (season 2021/2022) the club has the right to exercise the option in writing no later than 01st May 2021. The basic annual wage for the season 2021/2022 shall be EUR 1,900,000 should be paid in EUR 700,000 as in advance payment and EUR 1,200,000 as salaries, payable in 12 equal and consecutive instalments of 100,000 each […] The player is well informed about this unilateral option clause, which the player accepts and considers as legal and binding. The player agree that the option is to be exercised with enough time for the player to know if it is used or not, which is acceptable for the player […] In the case that the club does not exercise this option for the season 2021/2022 then the club is obligated to pay to the player a penalty for that the fixed amount of EUR 350,000.”

4. Pursuant to art. 9.1, the parties agreed upon the following:

“If the club decides to terminate the contract unilaterally and without just cause before the termination of its duration, 30/06/2020 or 30/06/2021 will have to pay the player all the salaries and bonus pending at the date of termination until 30/06/2020 or 30/06/2021 which the case. The amount paid resulting from the anticipated termination shall be taken into consideration the tax residence of the player at the moment of termination.”

5. According to art. 9.2 of the contract, “The player will be entitled to terminate the contract if the club is in default of the payment in more than 90 days. Should this occur […] the player will be entitled to terminate the contract with a just cause reason an consequently the club shall pay the player all salaries and bonuses pending at the date of termination until the 30/06/2020 or 30/06/2021. The amount to be paid resulting from the anticipated termination shall be paid taken into consideration the tax residence of the player at the moment of termination”.

6. In accordance with art. 9.3 of the contract, “In the event that under the duration of this contract the player decides to terminate the contract without just cause, the player or the third party shall pay the penalty equivalent to transfer agreement amount paid by [the club] to Club F plus, the compensation due to player at the date of anticipated termination.”

7. Pursuant to art. 9.4 of the contract, “The club cannot terminate this contract due to player’s injury during matches or training”.

8. On 11 January 2020, the Respondent terminated the contract with the Claimant in writing. In said termination letter, the Respondent referred to art. 9.1 of the contract, and held that “if the club decides to terminate the contract unilaterally and without just cause before the termination of its duration 30/06/2020, the club shall have to pay the player all the salaries and bonus pending at the date of termination until 30/06/2020. Therefore, we hereby would like to terminate the said contract […] with effect from 11 January 2020. Thus, you will be entitled to your salaries until the date of 30/06/2020.”

9. On 12 January 2020, the Claimant sent a letter to the club confirming that the contract had been unilaterally terminated by the club on 11 January 2020. In said letter, the Claimant argued that art. 9.1 of the contract is “not admissible, since it is one-sided (in favour of the club) and contradictory […] the longer term is valid and hence the duration lasts until the end of the season 2020/2021, i.e. until 30 June 2021 […] In consequence thereof, we would have to claim for the whole value of the contract […] plus the penalty fee of EUR 350,000 for non-extension of the contract. Besides that, our client was not paid so far the December salary of EUR 136,364”.

10. On 29 January 2020, the Claimant informed the Respondent in writing that his letter dated 12 January 2020 remained unanswered and that he will have to “seek justice and legal remedy in front of the court of FIFA”.

11. On 6 February 2020, the Claimant lodged a claim against the Respondent for termination of contract without just cause requesting the following:

a) EUR 48,387 net, as outstanding remuneration corresponding to his partial salary of January 2020 (11 days); plus 5% interest p.a. as of 12 January 2020;

b) EUR 350,000 as penalty in accordance with art. 8 of the contract;

c) EUR 2,569,797 net, as compensation for breach of contract, plus 5% interest p.a. as of 12 January 2020, detailed as follows:

i) EUR 87,977 “for the salary from 12 January 2020 to 31 January 2020;

ii) EUR 681,820 “for the timeframe from 1 February 2020 to 30 June 2020”;

iii) EUR 1,500,000 “of the basic annual wage for season 2020/2021”;

iv) EUR 300,000 “of the advance payment, due on 1 September 2020”.

12. In his claim, the Claimant maintained that the Respondent did not have just cause to terminate the contract, as art. 9.1 of the contract is “abusive and unbalanced” and should not be taken into account.

13. Furthermore, the Claimant held that the Respondent terminated the contract without prior notice and without giving any reason for the termination. In addition, the Claimant suspected that the Respondent wanted to hire another foreign player in order to replace him.

14. On account of the above, the Claimant requested his outstanding remuneration as well as compensation for breach of contract and a contractually agreed penalty for the non-execution of the extension option (cf. point I./3 above).

15. In its reply to the claim, the Respondent held that as from December 2019, the Claimant expressed his wish to leave the Respondent in January 2020 and to join a club and league of higher level.

16. According to the Respondent, in accordance with the Claimant’s wish, the Respondent terminated the contract on 11 January 2020 as per art. 9.1 of the contract, allowing the Claimant to join the club of Country G, Club H, on 31 January 2020.

17. Moreover, the Respondent deemed that the termination was based on a buy-out clause which had been agreed between the parties during the drafting of the contract, and not a compensation clause. In this regard, the Respondent referred to art. 9.3 of the contract and deemed that said clause gave the opportunity for the player to terminate the contract in such a way.

18. In support of its arguments, the Respondent referred to FIFA & CAS jurisprudence and considered that the requirements for a buy-out clause were met. In particular, (1) arts. 9.1 and 9.3 of the contract were contractually agreed, (2) the amounts payable to each party after terminating the contract were settled, and (3) said termination can occur even without just cause.

19. In addition, the Respondent held that the Claimant was fully aware of his right to leave the Respondent. Moreover, and considering the interviews given to the press, the Respondent argued that the Claimant acted in bad faith claiming that said clause was not reciprocal and disproportionate.

20. Finally, the Respondent explained that the early termination of the contract cancelled the extension option and consequently, the penalty payable in case of non-extension after 1 May 2021 cannot be claimed.

21. Given all of the above, the Respondent considered that the claim should be rejected.

22. The player informed FIFA that he signed a contract with the club of Country G, Club H, valid as from 31 January 2020 until 30 June 2020. As per the player, the total value of the contract amounted to EUR 590,000 “gross”, which equaled to EUR 320,000 “net”.

23. In addition, the player sustained the following: “Due to the Corona Virus, the Claimant will not receive the normal salary payments during the period in which there is no playing activity in Country G. It is very likely that the Claimant will have to reduce or even waive certain salaries. At this stage it is not yet possible to evaluate the dimension of financial loss that the Claimant will suffer. We therefore reserve the Claimant’s rights to inform you at a later stage about the salary that the Claimant will effectively receive as from the month of March 2020.”

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 case at hand. In this respect, it took note that the present matter was submitted to FIFA on 6 February 2020. Taking into account the wording of art. 21 of the 2019 edition of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (hereinafter: the Procedural Rules), the aforementioned edition of the Procedural Rules is applicable to the matter at hand.

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 and par. 2 in combination with art. 22 lit. b) of the Regulations on the Status and Transfer of Players 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 Country B / Country C player and a club of Country E.

3. In continuation, 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 6 February 2020, the January 2020 edition of the 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 and arguments as well as the documentation on 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 this respect, the Chamber recalled that the Claimant and the Respondent signed an employment contract which was valid as of 1 August 2019 until 30 June 2021. The Chamber acknowledged that, in accordance with the employment contract, the Respondent was obliged to pay to the Claimant the total amount of EUR 3,500,000 for this period.

6. The DRC further took into consideration that the Respondent unilaterally terminated the contract with the Claimant on 11 January 2020.

7. In continuation, the DRC recalled that the Claimant lodged a claim before FIFA for breach of contract, requesting to be awarded the following: EUR 48,387 as outstanding remuneration; EUR 2,569,797 as compensation for breach of contract; and EUR 350,000 as a penalty.

8. In light of the above, the Chamber established that the primary issue at stake is determining as to whether the Respondent had a just cause to terminate the contract with the Claimant on 11 January 2020 and/or what the contractual basis was for said termination. Subsequently, the DRC understood that it would have to determine the consequences thereof. In this respect, the Chamber deemed it essential to make a brief recollection of the facts, the documentation on file, as well as the parties’ main arguments.

9. Along these lines, the DRC firstly turned to the termination letter of 11 January 2020, in which the Respondent referred to art. 9.1 of the contract, inter alia, holding that “if the club decides to terminate the contract unilaterally and without just cause”.

10. In continuation, the Chamber noted that, as per the Claimant, the Respondent did not have just cause to terminate the contract, as art. 9.1 of the contract is “abusive and unbalanced” and should not be taken into account. Similarly, the DRC took into account that, according to the Respondent, the termination was based on a buy-out clause, and not a compensation clause. In this regard, the Chamber further recalled that in its submission, the Respondent referred to art. 9.3 of the contract deeming that said clause gave the opportunity for the Claimant to terminate the contract in such a way.

11. Given the above, the DRC firstly noted that neither party disputed the fact that the Respondent terminated the employment contract on 11 January 2020 without just cause. Moreover, the Chamber pointed out that by terminating the contract on the basis of art. 9.1 of the contract, the Respondent used a potestative clause and therefore terminated the contract without just cause by essence. Consequently, the Chamber concluded that the Respondent terminated the employment contract on 11 January 2020 without just cause.

12. That said, the Chamber concluded that the Respondent is to be held liable for the early termination of the employment contract without just cause by the Respondent and should therefore bear the consequences of its unjustified breach of the employment contract.

13. Having established the above, and before entering the matter of the calculation of the compensation for breach of contract payable by the Respondent, the DRC first proceeded to establish the amount of outstanding remuneration, if any, still due to the Claimant on the date of the decision.

14. In this light, the DRC evoked that, in his claim, the Claimant requested EUR 48,387 net, as outstanding remuneration corresponding to his partial salary of January 2020. Having said this, the Chamber established that the Respondent did not contest that the amount of EUR 48,387 remained outstanding to the player.

15. On account of the aforementioned considerations, the DRC decided that, in accordance with the general legal principle of pacta sunt servanda, the Respondent is liable to pay to the player outstanding remuneration in the total amount of EUR 48,387, corresponding to the first 11 days of January 2020, during which the Claimant was still providing his services to the Respondent.

16. In addition, taking into consideration the player’s claim, the Chamber decided to award the player interest at the rate of 5% p.a. on the amount of EUR 48,387 as of the day following the day on which said instalments fell due, i.e. 1 February 2020.

17. In continuation, the Chamber focused its attention on the calculation of the amount of compensation for breach of contract payable by the Respondent to the Claimant in the case at stake. In doing so, the Chamber first 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 Claimant 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.

18. 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.

19. In this regard, the Chamber firstly noted that, in accordance with art. 9.1 of the contract, “If the club decides to terminate the contract unilaterally and without just cause before the termination of its duration, 30/06/2020 or 30/06/2021 will have to pay the player all the salaries and bonus pending at the date of termination until 30/06/2020 or 30/06/2021 which the case. The amount paid resulting from the anticipated termination shall be taken into consideration the tax residence of the player at the moment of termination.”

20. Similarly, the DRC recalled that in accordance with art. 9.3 of the contract, “In the event that under the duration of this contract the player decides to terminate the contract without just cause, the player or the third party shall pay the penalty equivalent to transfer agreement amount paid by [the club] to Club F plus, the compensation due to player at the date of anticipated termination.”

21. Having said this, the Chamber again deemed it essential to make a brief recollection of the parties’ main arguments with regard to art. 9.1 and art. 9.3 of the contract.

22. In this context, the DRC recalled that the Claimant maintained that the Respondent did not have just cause to terminate the contract, as art. 9.1 of the contract is “abusive and unbalanced” and should not be taken into account. Similarly, the Chamber referred to the Respondent’s arguments, who stated that both clauses are to be considered buy-out clauses. In particular, the Chamber noted that, as per the Respondent, arts. 9.1 and 9.3 of the contract were contractually agreed, the amounts payable to each party after terminating the contract were settled, and a contractual termination could occur even without just cause

23. After a careful analysis of the abovementioned provisions as well as the arguments brought forward by the parties, the Chamber agreed that art 9.1 and art 9.3 are both liquidated damages clauses, given that both provisions forecast the amounts payable to either party should the other party terminate the contract without just cause. Moreover, the DRC disagreed with the Respondent’s position that the provisions should be considered buy-out clauses, given that art. 9.3 of the contract does not mention that the Claimant may simply terminate the contract by paying a given amount, i.e. without referring to the absence of just cause which characterizes art. 9.3 as a liquidated damages clause.

24. Furthermore, by applying both provisions to a contractual termination dated 11 January 2020, the Chamber calculated that, in accordance with art. 9.1 of the contract, the Respondent would have to pay EUR 818,184, corresponding to six monthly salaries, to the Claimant. Meanwhile, had the Claimant terminated the contract pursuant art. 9.3 of the contract, the DRC calculated that he would have to compensate the Respondent with the amount of EUR 1,618,184 corresponding to EUR 800,000 (i.e. the transfer amount of the Respondent paid Club F for the transfer of the Claimant), plus the amount of EUR 818,184 (i.e. six monthly salaries).

25. In addition, the Chamber wished to point out that the Respondent has more latitude than the Claimant to influence how much it would have to pay as compensation, since the amount would merely depend on the date of termination, while the Claimant would always have to pay his own transfer amount at least, i.e. EUR 800,000.

26. Given the above considerations, the Chamber agreed that art. 9.1 and art. 9.3 are manifestly disproportionate, granting the Respondent a much higher compensation in case the Claimant would terminate the employment contract without just cause. Thus, following its well established jurisprudence, the Chamber concluded that it cannot take art. 9.1 of the employment contract into consideration in the determination of the amount of compensation.

27. As a consequence, 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. The DRC recalled that said provision provides for a non-exhaustive enumeration of criteria to be taken into consideration when calculating the amount of compensation payable. Therefore, other objective criteria may be taken into account at the discretion of the deciding body. In this regard, the DRC emphasized beforehand that each request for compensation for contractual breach has to be assessed on a case-by-case basis taking into account all specific circumstances of the respective matter.

28. In order to estimate the amount of compensation due to the Claimant in the present case, the Chamber first turned its attention to the remuneration and other benefits due to the Claimant under the existing contract and/or the new contract(s), which criterion was considered to be essential. The DRC deemed it important to emphasise that the wording of art. 17 par. 1 of the Regulations allows it to take into account both the existing contract and the new contract, if any, in the calculation of the amount of compensation.

29. 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 date of termination without just cause by the Respondent, i.e. 11 January 2020, until 30 June 2021, and concluded that the Claimant would have received EUR 2,569,797 in total as remuneration had the contract been executed until its expiry date.

30. Consequently, the Chamber concluded that the amount of EUR 2,569,797 serves as the basis for the final determination of the amount of compensation for breach of contract in the case at hand.

31. Subsequently, the Chamber verified 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 shall be taken into account in the calculation of the amount of compensation for the early termination of contract without just cause in connection with the player’s general obligation to mitigate his damages.

32. In this regard, the Chamber recalled that the Claimant signed a contract with the club of Country G, Club H, valid as from 31 January 2020 until 30 June 2020. Referring to said contract, the DRC established that the player was to obtain the total net amount of EUR 320,000 under his new contract. Consequently, after mitigation, the Chamber determined that the total amount of compensation due to the Claimant is EUR 2,249,797.

33. In addition, taking into account the Claimant’s request, the Chamber decided that the Respondent must pay to the Claimant interest of 5% p.a. on the amount of compensation as of the date on which the claim was lodged, i.e. 6 February 2020, until the date of effective payment.

34. In continuation, the Chamber turned to the Claimant’s request of EUR 350,000, corresponding to penalty in accordance with art. 8 of the contract. By way of reminder, the DRC evoked that said provision read as follows:

“The club shall hold at its own discretion the option to extend the player’s contract for one extra year (season 2021/2022) the club has the right to exercise the option in writing no later than 01st May 2021 […] In the case that the club does not exercise this option for the season 2021/2022 then the club is obligated to pay to the player a penalty for that the fixed amount of EUR 350,000.”

35. Having said this, the DRC further evoked the Respondent’s arguments, who had held that the early termination of the contract cancelled the extension option and consequently, the penalty payable in case of non-extension after 1 May 2021 cannot be claimed.

36. After having carefully analysed art. 8 of the contract, the Chamber firstly agreed that said provision is to be considered a unilateral extension clause. In this context, and without entering into the complexities surrounding the treatment of unilateral extension option clauses in general, and taking into account the particular circumstances of the case at hand, the DRC wished to express its discomfort as regards the application of art. 8, as well as its potential consequences, to the matter. Therefore, the Chamber decided to reject the Claimant’s request for EUR 350,000 corresponding to the penalty in accordance with art. 8 of the contract.

37. Consequently, on account of all of the above-mentioned considerations and the specificities of the case at hand, the Chamber decided that the Respondent must pay the amount of EUR 2,249,797 to the Claimant as compensation for breach of contract.

38. Furthermore, taking into account the consideration under number II./3. above, the Chamber 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.

39. In this regard, the Chamber established that, in virtue of the aforementioned provision, it has competence to impose a sanction on the club. More in particular, the DRC pointed out that, against clubs, the sanction shall consist in a ban from registering any new players, either nationally or internationally, up until the due amount is paid and for the maximum duration of three entire and consecutive registration periods.

40. Therefore, bearing in mind the above, the DRC decided that, in the event that the Respondent does not pay the amount due to the Claimant within 45 days as from the moment in which the player, following the notification of the present decision, communicates the relevant bank details to the club, 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.

41. Finally, the Chamber recalled that the above-mentioned sanction 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.

42. The Dispute Resolution Chamber concluded its deliberations in the present matter by establishing that any further claims lodged by the Claimant are rejected.

*****

III. Decision of the Dispute Resolution Chamber

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

2. The Respondent, Club D, has to pay to the Claimant outstanding remuneration in the amount of EUR 48,387, plus 5% interest p.a. as from 1 February 2020 until the date of effective payment.

3. The Respondent has to pay to the Claimant compensation for breach of contract in the amount of EUR 2,249,797, plus 5% interest p.a. as from 6 February 2020 until the date of effective payment.

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 email address as indicated on the cover letter of the present decision, of the relevant bank account to which the Respondent must pay the amounts plus interest mentioned under points III./2. and III./3. above.

6. The Respondent shall provide evidence of payment of the due amounts plus interest in accordance with points III./2. and III./3. above to FIFA to the e-mail address psdfifa@fifa.org, duly translated into one of the official FIFA languages (English, French, German, Spanish).

7. In the event that the amounts plus interest in accordance with points III./2. and III./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 amount is 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 III./7. above will be lifted immediately and prior to its complete serving, once the due amounts are paid.

9. In the event that the amounts plus interest due in accordance with points III./2. and III./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

*****

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 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. 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.

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