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 20 May 2020

Decision of the

Dispute Resolution Chamber

passed in Zurich, Switzerland, on 20 May 2020,

in the following composition:

Geoff Thompson (England), Chairman

Jerome Perlemuter (France), member

Angela Collins (Australia), member

on the claim presented by the club,

CD Leganés, Spain,

as Claimant

against the player,

Leonardo Miramar Rocha, Portugal,

represented by Mr Feliciano Casanova Guasch

as First Respondent

and the club,

KAS Eupen, Belgium,

represented by MCA Sports Law LLP

as Second Respondent

regarding an employment-related dispute

between the parties

I. Facts of the case

1. On 1 August 2017, the Spanish club, CD Leganés (hereinafter: the Claimant) and the Portuguese player, Leonardo Miramar Rocha (hereinafter: the player or First Respondent) signed an employment contract (hereinafter: the contract) valid as from the date of signature until 30 June 2019. Pursuant to the contract, the player was entitled to 10 monthly salaries per year of EUR 3,000 each.

2. Furthermore, in accordance with clause 5 of the contract, “in case the contract is terminated by the player […] the player will compensate [the Claimant] with the amount of EUR 20,000,000 payable at the moment of contract termination.”

3. On 31 December 2017, the Claimant and the First Respondent signed a termination agreement “at the will of the player”, by means of which the parties agreed that, rather than compensating the Claimant with the amount of EUR 20,000,000, the player would pay “20% of the economic rights” deriving from a hypothetical future transfer of the player until 22 May 2022 (hereinafter: the termination agreement).

4. Pursuant to the termination agreement, the payment of the said compensation would be done within 30 days following the signing of any transfer agreement involving the player. The parties further agreed that, in case a transfer of the player took place but the aforementioned was not respected, the player would have to pay the Claimant a penalty of EUR 100,000.

5. On 7 January 2017, the player and the Spanish club, Ontinyent CF, executed an employment agreement valid from 2 February 2017 until 30 June 2018.

6. On 19 July 2018, the player and the Belgian club, Lommel SK, executed an employment agreement valid from 19 July 2017 until 30 June 2019. Such agreement foresaw an extension option, which was timely exercised.

7. On 22 July 2018, Lommel SK and the Belgian club, KAS Eupen (hereinafter: the Second Respondent) executed a transfer agreement, by means of which the player’s services were transferred from the former to the latter against, inter alia, the payment of EUR 350,000.

8. On 23 July 2019, the First Respondent and the Second Respondent executed an employment agreement valid from the same date until 30 June 2022, for a monthly remuneration of EUR 10,000.

9. On 30 October 2019, the Claimant sent an e-mail to the First Respondent, the Second Respondent, and Lommel SK, in which it referred to the transfer of the player to the Second Respondent for the amount of EUR 500,000, requesting the amount of EUR 200,000 plus 5% interest p.a. as from 23 August 2019 to be paid by 10 November 2019, corresponding to the following:

- EUR 100,000 as compensation;

- EUR 100,000 corresponding to the penalty for late payment.

10. On 31 October 2019, Lommel SK replied to the said e-mail, holding that the Claimant was referring to an agreement signed between the player and the Claimant only, of which Lommel SK had no knowledge. Lommel SK further stated that “Given that Lommel SK is not a party to this agreement, it is obvious that [the Claimant] cannot claim any amount from Lommel SK based on this agreement”. Neither the player nor the Second Respondent responded to the said Claimant’s e-mail.

11. On 11 November 2019, as amended, the Claimant lodged a claim in front of FIFA against the player and the Second Respondent for breach of contract, requesting EUR 170,000 plus 5% p.a. over said amount as from 23 August 2019 until the date of effective payment, corresponding to the following:

- EUR 70,000 as compensation corresponding to “the 20% of the economic rights of the player transferred by Lommel SK to [the Second Respondent], taking into account a transfer amount of EUR 350,000”;

- EUR 100,000 corresponding to the “penalty for not paying within the deadline”.

12. According to the Claimant, it is entitled to receive such amount in light of the contents of the termination agreement. In addition, the Claimant holds that the Second Respondent is to be considered the player’s new club in the sense of art. 17 par. 2 of the FIFA Regulations on the Status and Transfer of Players, therefore being jointly liable for the payment of the amounts established under the termination agreement.

13. The player, for his part, rejected the Claimant’s claim. Firstly, he argued that the termination of the contract took place by mutual consent in accordance with the termination agreement, therefore the Claimant was not entitled to any compensation by the player.

14. Secondly, the player submitted that clauses IV and V of the termination agreement were both ambiguous and disproportionate. In this regard, the player was of the position that such clauses should be considered null and void as they generated a meaningful doubt as to the amount of compensation payable to the Claimant, were not reciprocal, and were manifestly unbalanced in favour of the Claimant.

15. Additionally, the player denied having received any previous communication from the Claimant, and further stated that no penalty was due by him to the Claimant as he was not obliged to make any payments.

16. Lastly, the player argued that he could not assign his economic rights to third parties as he was not the owner of such rights. Accordingly, the First Respondent requested the claim to be dismissed.

17. The Second Respondent, for its part, contested the competence of the FIFA Dispute Resolution Chamber to hear the dispute. In this sense, the Second Respondent submitted that it was not the new club of the player in the sense of art. 17 par. 2 of the FIFA Regulations on the Status and Transfer of Players, therefore concluding that it should be the FIFA Players’ Status Committee the competent adjudicatory body. What is more, the Second Respondent observed that, in light of such situation, the Claimant should have paid the advance of costs, and by not doing it the claim was to be held inadmissible.

18. As to the substance, the Second Respondent firstly stated that the termination agreement did not have any effect on it as such contract could only generate inter partes consequences, and that the Second Respondent was naturally not a party to such contract. The Second Respondent further pointed out that it had never been made aware of the contents of the termination agreement until the Claimant filed its claim.

19. Secondly, the Second Respondent reiterated that it was not the player’s new club in the sense of art. 17 par. 2 of the FIFA Regulations on the Status and Transfer of Players – it was in fact the third club the player was registered with since he departed from the Claimant. Hence, the Second Respondent submitted that the effects of a breach by the player, if any, could not be jointly applicable to it. It further underlined that the player joined the Second Respondent after the original term of the contract had expired.

20. Thirdly, the Second Respondent argued that the claim filed against it by the Claimant lacked “any legal basis”, and that no principle or doctrine supported the Claimant’s claim as directed against the Second Respondent.

21. The Second Respondent requested that the claim be deemed inadmissible or, in the alternative, fully rejected. It also requested that the Claimant be ordered to pay a contribution towards the Second Respondent’s legal expenses.

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 11 November 2019. 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 in combination with art.

22 lit. b) of the Regulations on the Status and Transfer of Players (edition March 2020), the Dispute Resolution Chamber shall adjudicate on employment-related disputes between a club and a player that have an international dimension.

3. As a consequence, the Dispute Resolution Chamber would, in principle, be competent to decide on the present litigation which involves a Spanish club, a Portuguese player, and a Belgian club regarding an employment-related dispute.

4. However, the Chamber acknowledged that the Second Respondent contested the competence of the FIFA DRC on the basis that it was not the player’s new club in the sense of art. 17 of the FIFA Regulations on the Status and Transfer of Players, alleging that the competent body to hear the dispute was the FIFA Players’ Status Committee.

5. Contrariwise, the Chamber noted that the Claimant insisted on the competence of the FIFA DRC to adjudicate on the claim lodged by it against the First Respondent and the Second Respondent.

6. Consequently, the Chamber deemed that it should first of all examine its competence in relation to the contract at the basis of the employment relationship between the parties of the present dispute.

7. In this regard, the Chamber was eager to emphasize that the dispute at hand unequivocally is an employment-related one, as it derives from the termination agreement, which ended the employment relation between the Claimant and the First Respondent. What is more, the Chamber observed that the argument raised by the Second Respondent, i.e. that it is not the player’s new club, pertains to the merits of the case.

8. Consequently, the Chamber concluded that the case at hand is an employment-related one, and one with an international dimension. As such, it decided that it is competent to entertain the claim.

9. Subsequently, 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 Player (edition March 2020), and considering that the present claim was lodged on 11 November 2019, the October 2019 edition of said regulations (hereinafter: the Regulations) is applicable to the matter at hand as to the substance.

10. 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 documentation on file. However, the DRC 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.

11. In this regard, the DRC observed that the Claimant argued it is entitled to receive compensation from the player in light of the contents of the termination agreement. In addition, the DRC noted that the Claimant holds the Second Respondent to be considered the player’s new club in the sense of art. 17 par. 2 of the Regulations, therefore being jointly liable for the payment of the amounts established under the termination agreement.

12. In continuation, the Chamber took into account the player’s arguments, according to which the Claimant was not entitled to receive compensation from the player on the basis that the termination of the contract took place by mutual consent.

13. Additionally, the DRC observed that the player submitted that clauses IV and V of the termination agreement were both ambiguous and disproportionate. In this regard, the members of the Chamber were observant of the player’s position that such clauses should be considered null and void as they generated a meaningful doubt as to the amount of compensation payable to the Claimant, were not reciprocal, and were manifestly unbalanced in favour of the Claimant.

14. Turning then to the position of the Second Respondent, the DRC noted that it deems not to be the new club of the player in the sense of art. 17 par. 2 of the Regulations. Further, the Chamber was observant of the argument brought forward by the Second Respondent that claim filed against it by the Claimant lacked “any legal basis”, and that no principle or doctrine supported the Claimant’s claim as directed against the Second Respondent.

15. In light of the foregoing considerations, the DRC concluded that the centre of the dispute is the collection, by the Claimant, of 20% of the player’s economic rights, plus a contractual penalty of EUR 100,000 against the player and his alleged new club.

16. In this sense, the DRC observed that such “economic rights”, a commonplace concept in the world of football, did not appear in the context of a regular transfer, given the fact that the Second Respondent did not participate in the termination agreement, nor is in fact the player’s new club as it did not acquire the player’s services subsequently to the Claimant.

17. Accordingly, the DRC concluded it must firstly examine the true meaning of the “economic rights clause” contained in the termination agreement, and secondly its consequences.

18. Subsequently, the DRC turned its attention to the contents of the relevant contracts and evidence brought forward by the parties, and firstly observed that the contract originally had a compensation clause in favour of the Claimant, payable by the player in case of termination by the latter, of EUR 20 million.

19. Secondly, the DRC observed that the player unilaterally terminated the contract, which was accepted by the Claimant.

20. Thirdly, the members of the Chamber noted that the Claimant and the player executed the termination agreement, therein replacing the EUR 20 million compensation clause for the 20% economic rights one, as per the wording of clauses III and IV of the termination agreement. Further, according to such agreement, a penalty of EUR 100,000 in case of late payment was also established.

21. Having taken due consideration for the foregoing, the Chamber concluded that as per the contents of the termination agreement, the 20% economic rights clause in fact means that the parties agreed the player would compensate the Claimant for the termination of the contract by paying the equivalent of 20% of the transfer fees paid between clubs in connection with his hiring until 22 May 2022. As such, the Chamber concluded that the parties, unequivocally, agreed on an amount to be liquidated in the future as compensation.

22. Consequently, the Chamber proceeded to examine if such termination clause is valid. To do so, and in line with the well-established jurisprudence of the DRC, the members of the Chamber verified whether the clause at hand is reasonable and proportionate.

23. With regards to reasonability, the DRC observed that the said clause generates an undue influence on the player’s employment situation as he would have to pay compensation to the Claimant based on something that the player has no control over.

24. In this regard, the DRC stressed that a player has, in general, no influence on the amount of the transfer fees agreed between clubs, and does not receive a portion of those fees. The DRC outlined that, in principle, it can be considered reasonable that a player shall pay compensation based on his/her remuneration, but emphasized that this was not the case of the dispute at hand.

25. Accordingly, the DRC was resolute that such clause cannot be considered reasonable.

26. In continuation, the DRC turned to the matter of proportionality, and concluded that such clause cannot be deemed proportionate since (i) by the time the termination agreement was executed, the player had only received EUR 15,000 from the Claimant, and (ii) the original clause in the contract foresaw an absurd compensation amount of EUR 20,000,000. The Chamber further stressed that the compensation sought by the Claimant grossly exceeded the remuneration due to the player under the contract.

27. What is more, the Chamber did not find acceptable that the compensation payable by the player, as established in the termination agreement, involved any and all transfers the player might be engaged in until 22 May 2022, for this also included transfers that would fall outside the original term of the contract, i.e. 30 June 2019. The DRC found this to be highly disproportionate and in favour of the club only.

28. Based on the foregoing, the DRC was adamant that the clause at stake is clearly abusive, thus cannot be considered valid nor enforceable.

29. Consequently, the DRC decided that no amount is due by the player to the Claimant, neither as compensation nor as penalty for late payment, and that the Claimant’s claim must be rejected.

30. Lastly, the DRC recalled the contents of article 18 par. 4 of the Procedural Rules, according to which no procedural compensation shall be awarded in proceedings before the DRC, and decided to also reject any other claims from the parties in this regard.

III. Decision of the Dispute Resolution Chamber

31. The claim of the Claimant, CD Leganés, is admissible.

32. The claim of the Claimant, CD Leganés, 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 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 the Code of sports-related arbitration. 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 (CAS)

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Switzerland

Tel: +41 21 613 50 00

e-mail: info@tas-cas.org

For the Dispute Resolution Chamber:

______________________________________

Emilio García Silvero

Chief Legal & Compliance Officer