F.I.F.A. – Players’ Status Committee / Commissione per lo Status dei Calciatori – club vs club disputes / controversie tra società – (2018-2019) – fifa.com – atto non ufficiale – Decision 15 November 2018

Decision of the

Single Judge

of the

Players’ Status Committee

passed in Zurich, Switzerland, on 15 November 2018,

by

Johan van Gaalen (South Africa)

Single Judge of the Players’ Status Committee,

on the claim presented by the club,

Club A, Country B

as Claimant

against the club,

Club C, Country D

as Respondent

regarding a contractual dispute between the parties

relating to the player, Player E

I. Facts of the case

1. On 11 July 2014, the Club of Country B, Club A (hereinafter: Club A or Claimant), and the Club of Country D, Club C (hereinafter: Club C or Respondent), concluded a transfer agreement for the transfer of the player, Player E (hereinafter: player), from Club A to Club C against the payment of EUR 2,500,000 (hereinafter: basic transfer fee).

2. Clause 3.2 of the transfer agreement stipulates the following:

“In the event that [Club C] is promoted to the Division F on the first occasion during the period of the Player’s initial contract with [Club C], [Club C] will pay to [Club A] the sum of €1,000,000. This amount will be paid on 1st August following such promotion” (hereinafter also referred to as: conditional transfer fee).

3. Clause 4 of the transfer agreement stipulates, inter alia, the following:

“If [Club C] agrees to transfer the registration of the Player on a permanent basis […] to any other football club, [Club C] shall pay to [Club A] an amount in cash equal to 15% of the amount by which the future transfer fee exceeds the transfer fee.

[…]

Transfer fee means the basic transfer fee […] together with any [conditional transfer fee] which has been paid, or which has become payable, by the relevant payment date, by [Club C] to [Club A]” (hereinafter: sell-on fee).

4. Clause 11 of the transfer agreement reads as follows:

“This Agreement shall be governed by, and construed and interpreted in accordance with, Law of Country D and, subject to the jurisdiction of CAS in respect of any dispute relating to Player Exchange Value […], any claim or dispute arising out of or in connection with this Agreement shall be settled in accordance with the rules and regulations of FIFA or if in membership of the same League, then in accordance with the League rules”.

5. On 14 July 2014, the player and Club C concluded an employment agreement for three seasons, expiring on 30 June 2017.

6. In February 2016, the player was transferred from Club C to the Club of Country B, Club G (hereinafter: Club G).

7. At the end of the season 2015/2016, Club C won promotion to the Division F.

8. On 21 October 2016, Club A lodged a claim before FIFA against Club C, requesting to be awarded the conditional transfer fee in the amount of EUR 1,000,000, plus 8.5% interest p.a. in accordance with the “Late Payment of Commercial Debts Act” as from 2 August 2016 until the day on which a decision is passed and 5% interest p.a. as from the date of the decision until the date of effective payment. Alternatively, Club A requested that, should the spirit of the clause be interpreted in the sense that it is aimed at rewarding Club A for the player’s participation in the achievement of Club C’s promotion to the Division F, then Club A should receive an amount proportionate to the player’s participation. In this respect, Club A alleged that the player was with Club C for half of the relevant season and that, consequently, it should receive at least EUR 500,000 and 5% interest p.a..

9. In this context, Club A provided a copy of an exchange of correspondence with Club C occurred between 9 August and 16 September 2016, according to which, on 16 September 2016, Club C informed Club A of the economic terms of the transfer of the player from Club C to Club G and rejected having to pay the conditional transfer fee on the basis that the player was definitely transferred and his employment contract with Club C terminated before Club C won promotion to the Division F.

10. In this respect, Club A pointed out that the contractual notion at the basis of the present dispute is “during the initial period of the player’s contract” and referred to Law of Country D, which, in its opinion, is the governing law. Club A further referred to the Dictionary H.

11. Equally, Club A underscored that the context available to the parties surrounding the conclusion of the transfer agreement does not prove that the parties intended to link the payment of the conditional transfer fee to the player’s registration with Club C, his contribution to Club C’s promotion or his performance.

12. In particular, Club A submitted statements of Mr JJJ, the player, Mr KKK and Mr LLL, declaring that they were involved in the transfer negotiations and that the conditional transfer fee was payable even when the player was no longer a Player of Club C at the time it obtained the promotion to the Division F. In addition, according to these statements, i) Club C accepted to transfer the player against the payment of a fixed fee plus a conditional transfer fee related to its promotion, whereas Club A lowered its economic aspirations in exchange of the sell-on clause, ii) during the negotiations it was expressly agreed that the conditional transfer fee would be due regardless of whether or not the player was contractually bound to Club C.

13. In this context, Club A argued that, as it was the player’s first professional experience abroad, it was likely that he would be subsequently loaned. As a result, Club A held that the parties were not in a position to know the initial duration of the employment contract, thus, its wording guaranteed that the conditional transfer fee would fall due regardless of the hypothetical event that the player would no longer be employed by Club C.

14. In addition, as to the purpose of the conditional transfer fee, Club A stated that Club C could not afford the transfer fee that Club A considered appropriate for the transfer of the player. As a result, the parties agreed upon a conditional transfer fee linked to Club C’s promotion, when Club C’s income would significantly increase. Consequently, Club A held that it is understandable that Club C included the conditional transfer fee without being dependent on the player’s employment contract with Club C.

15. Subsequently, Club A argued that, since the employment contract between the player and Club C was concluded after entering into the transfer agreement, the wording of the relevant clause could not be more specific and that there were no facts outside Club C’s knowledge that would prevent it from including a more specific wording in the transfer agreement.

16. Moreover, Club A stated that Club C’s interpretation lacked commercial sense as it would allow Club C to entirely control the situation, avoiding the payment by mutually terminating the employment contract in order to transfer him or enter into a new contract.

17. Furthermore, Club A maintained that Club C drafted the contract and that, in the event of doubts concerning its interpretation, it shall be construed against the party which drafted it. Equally, Club A asserted that Club C could have drafted the contract in a way that would have made its alleged construction irrefutable.

18. In its reply, Club C rejected Club A’s claim by arguing that, at the time it was promoted to the Division F, the player’s employment contract with Club C had already been terminated, i.e. on 1 February 2016, as a result of his subsequent transfer to Club G. In light of the foregoing, Club C is of the opinion that its promotion to the Division F did not occur whilst the player remained under contract with Club C.

19. Moreover, Club C concurred with Club A in deeming that Law of Country D governs the transfer agreement. In particular, Club C argued that the meaning of the transfer agreement is to be sought in the transfer agreement itself, including checking each of the rival meanings against other provisions of the agreement.

20. In this context, Club C asserted that, according to the Dictionary H, the wording of clause 3.2 of the transfer agreement shall be interpreted in the sense of an event that takes place in the course of the player’s contract, or whilst it continues. Hence, Club C argued that if the player’s employment contract has terminated in any way, the event does not take place during its period.

21. In addition, Club C rejected the witness statements submitted by Club A and provided declarations of Mr. MMM, Club C’s Chief Executive, disputing allegations made by Club A’s witnesses.

22. Moreover, Club C asserted that the commercial purpose of such a conditional clause is to reward Club A for the player’s contribution to Club C’s promotion and the financial rewards that promotion brings. In this context, Club C claimed that an analysis of clauses 4 and 3.2 leads to the conclusion that the conditional transfer fee is only payable if the promotion occurs whilst the player is under contract with Club C and not thereafter, since the sell-on fee at the time of the transfer already takes into consideration whether the obligations relating to the conditional transfer fee have been fulfilled.

23. In particular, Club C stated that, in case of promotion and the player transferred at a profit, i.e. taking into account the conditional transfer fee, the sell-on fee falls due and is determined in relation to said profit. Club C stated, however, that if Club A’s interpretation is accepted on the basis that the player is transferred before Club C’s promotion, Club A would make a bigger profit since the conditional transfer fee would not be included in the calculation of the sell on fee. Club C considered that Club A would then be rewarded twice: once when the player is transferred at a profit before promotion takes place, and again after Club C is promoted during the time the player’s original contract was set to last, even if said contract has been terminated due to his subsequent transfer. In light of the foregoing, Club C held that it could not be the parties’ intention to agree upon the payment of the conditional transfer fee if Club C is promoted the year after transferring the player as it does not make sense from a commercial perspective.

24. As to Club A’s argument that the purpose of the conditional transfer fee is to compensate Club A for the transfer of the player at an undervalue, Club C stated that Club A transferred the player for the best price it could achieve. In this respect, Club C recalled that 18 months after the player’s transfer to Club C against the payment of EUR 2,500,000, the player was subsequently transferred to a Club of Country B that plays in a lower division for EUR 1,800,000. As a result, Club C submitted that, if anything, the player was transferred to Club C at an overvalue. In this context, Club C explained that the purpose could not have been to compensate Club A for a transfer at an undervalue as, at the time of the transfer, there was no guarantee that Club C would achieve promotion. Equally, Club C pointed out that Club A did not know and could not influence the duration of the player’s employment contract with Club C, so if the contract had been for one year, Club A’s alleged purpose would not have been met.

25. Club C rejected Club A’s argument that it transferred the player to avoid payment of the conditional transfer fee by stating that if the player was of such value to Club C it would have either retained his services or transferred him against a higher transfer fee, likely resulting in the payment of the sell-on fee. In this respect, Club C argued that at the time it transferred the player to Club G it did not know it was going to be promoted and that the economic benefits of the promotion are obviously greater than the EUR 1,000,000 compensation. Consequently, had Club C thought the player could contribute to its promotion it would not have transferred him and would only have paid Club A the conditional transfer fee if it was indeed promoted and had received the consequential income rather than transferring him in order to avoid paying the conditional transfer fee.

26. As to Club A’s allegation that Club C could have drafted the transfer agreement differently in order to support its interpretation, Club C explained that the inclusion of this condition was unnecessary as the normal meaning of the words is that the payment is only due if promotion takes place during the contract.

27. As to the context surrounding the conclusion of the transfer contract, Club C provided a declaration of Mr. MMM, according to which, inter alia, Club A rejected Club C’s draft of clause 3.2 of the transfer agreement, which originally conditioned the payment of the conditional transfer fee to the player’s participation in 50% of the games in the season of promotion, resulting in the omission of this minimum contribution.

28. In this regard, Club C stated that this circumstance proves that the clause is intended to be a bonus, rewarding Club A for Club C’s promotion as a result of the player’s contribution to that promotion. Consequently, and even if the minimum percentage of the player’s contribution was omitted, Club C insisted that the conditional transfer fee is linked to the player’s contribution to promotion and, as a result, it falls due only if Club C’s promotion takes place during the player’s contract.

29. Also, Club C argued that Club A’s rejection of the player’s minimum contribution in Club C’s promotion results in the inapplicability of the contra proferentem principle as Club A had an input in the drafting of the contract. In this regard, Club C further held that Club A was in a position to request the addition of words in order to make clear that the conditional transfer fee would be payable even if the player’s contract ended prematurely, but failed to do so.

30. Furthermore, Club C concluded that, as both parties were aware of the likelihood and frequency of football transfers and contracts terminating early, they included the sell-on clause using the wording “during the period of”. In particular, Club C argued that, should the parties have assumed that the contract was bound to continue for its whole term, they would not have thought to add to “during the period of” the words “the contract as it was originally intended to run”.

31. Lastly, and as to Club A’s alternative request to be granted EUR 500,000, Club C alleged that there is no legal basis for such a payment.

32. In spite of the parties’ efforts, on 31 May 2017, Club A informed that no amicable settlement was reached and requested a formal decision.

II. Considerations of the Single Judge of the Players’ Status Committee

1. First of all, the Single Judge of the Players’ Status Committee (hereinafter: Single Judge) analysed which edition of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber is applicable to the matter at hand. In this respect, he referred to art. 21 of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (edition 2018) as well as to the fact that the present matter was submitted to FIFA on 21 October 2016. Consequently, the Single Judge concluded that the 2015 edition of said Procedural Rules is applicable to the matter at hand (hereinafter: Procedural Rules).

2. Subsequently, the Single Judge confirmed that, on the basis of art. 3 par. 1 and par. 2 of the Procedural Rules in connection with art. 23 par. 1 and par. 4 as well as art. 22 lit. f) of the 2018 edition of the Regulations on the Status and Transfer of Players, he is competent to deal with the matter at stake since it concerns a dispute between two clubs affiliated to different associations.

3. In continuation, the Single Judge analysed which edition of the Regulations on the Status and Transfer of Players is applicable as to the substance of the matter. In this respect, he referred to art. 26 par. 1 and par. 2 of the Regulations on the Status and Transfer of Players (edition 2018) and to the fact that the present matter was submitted to FIFA on 21 October 2016. In view of the foregoing, the Single Judge concluded that the 2016 edition of the Regulations on the Status and Transfer of Players (hereinafter: Regulations) is applicable in the matter at hand as to the substance.

4. His competence and the applicable regulations having been established, and entering into the substance of the matter, the Single Judge started by acknowledging the above-mentioned facts as well as the arguments and the documentation submitted by the parties. However, the Single Judge emphasized that in the following considerations he will refer only to the facts, arguments and documentary evidence, which he considered pertinent for the assessment of the matter at hand.

5. The Single Judge acknowledged that, on 11 July 2014, Club A and Club C signed an agreement over the transfer of the player to Club C against the payment of, inter alia, a transfer compensation of EUR 2,500,000.

6. In addition, in accordance with clause 3.2 of the transfer agreement, Club A and Club C agreed that “In the event that [Club C] is promoted to the Division F on the first occasion during the period of the Player’s initial contract with [Club C], [Club C] will pay to [Club A] the sum of €1,000,000. This amount will be paid on 1st August following such promotion”.

7. The Single Judge further noted that, on 14 July 2014, Club C and the player signed an employment contract for three sporting seasons, expiring on 30 June 2017. Furthermore, the Single Judge took note that the player was transferred on a definitive basis from Club C to Club G in February 2016.

8. In continuation, the Single Judge took into account that, according to Club A, the condition set out in clause 3.2 of the transfer agreement was fulfilled, in that Club C won promotion to the Division F at the end of the 2015/2016 season. Consequently, Club A asked to be awarded, inter alia, the amount of EUR 1,000,000 on the basis that Club C’s promotion occurred “during the initial period of the player’s contract”.

9. Alternatively, should clause 3.2 of the transfer agreement be interpreted in the sense that it was linked to the player’s participation in the achievement of Club C’s promotion, Club A asked to be awarded, inter alia, an amount proportionate to the player’s participation during half of the relevant season, i.e. EUR 500,000.

10. Furthermore, the Single Judge noted that Club C, for its part, rejected the claim arguing that at the time it was promoted to the Division F, the player’s employment contract had already been terminated as a result of his transfer to Club G in February 2016. In short, Club C held that the fee of EUR 1,000,000 claimed by Club A in accordance with clause 3.2 of the transfer agreement fell due on the condition that the player remained under contract with Club C when the latter’s promotion to the Division F transpired.

11. Having said that, the Single Judge recalled the wording of clause 3.2 of the transfer agreement, which reads “In the event that [Club C] is promoted to the Division F on the first occasion during the period of the Player’s initial contract with [Club C], [Club C] will pay to [Club A] the sum of €1,000,000. This amount will be paid on 1st August following such promotion”.

12. In light of the parties’ conflicting position in this respect and considering that Club C’s promotion to Division F is an undisputed fact, the Single Judge concluded that the main issue in the matter at stake was to determine whether the circumstance that the player remained under contract with Club C when promotion to the Division F occurred forms part of the condition set out in the aforementioned clause 3.2 or not and to decide on the consequences thereof.

13. In this respect, the Single Judge noted that the parties seem to agree that Law of Country D applies to the present matter in light of clause 11 of the transfer agreement, according to which “this Agreement shall be governed by, and construed and interpreted in accordance with, Law of Country D […]”. Although persuaded that the issue was not critical in order to decide present matter, the Single Judge wished, however, to point out as a general remark that that when deciding a dispute before FIFA judicial bodies, FIFA’s regulations – and subsidiarily Swiss law – prevail over any national law chosen by the parties. In this regard the Single Judge emphasised that the main objective of the FIFA regulations is to create a standard set of rules to which all the actors within the football community are subject to and can rely on. This objective would not be achievable if the relevant FIFA deciding body had to apply the national law of a specific party on every dispute brought to it.

14. The foregoing having been clarified, the Single Judge turned his attention to the transfer agreement and deemed it worth to emphasise, first of all, that he would not take into account the witness statements produced by the parties during the course of the proceedings. In this respect, the Single Judge noted that those statements provide contradictory information and, as such, they could not validly support any interpretation nor provide any indication concerning the will of the parties when they drafted the settlement agreement.

15. That said, the Single Judge recalled, once more, the wording of the clause at stake, according to which the conditional transfer fee of EUR 1,000,000 would be due to Club A on 1 August 2016, if Club C is promoted to the Division F “on the first occasion during the period of the Player’s initial contract with [Club C]”.

16. The Single Judge was of the opinion that, in order to shed light on the clause’s meaning, he should look at its literal tenor as first means of interpretation, also bearing in mind the approach to the interpretation of contracts that Swiss law mandates. In this respect, he noted that – contrary to what Club C contended – such clause does not seem to explicitly indicate anywhere that the player must be still contractually bound to Club C, i.e. actively participating in the club’s results, in order for the conditional fee to be triggered.

17. All that the clause seems to require, instead, is that the promotion occurs within the period of the player’s initial contract, i.e. before 30 June 2017, regardless of possible further extensions. In other words, it appeared to the Single Judge that, by using that wording, the parties wanted to limit the efficacy of such clause to the duration of the player’s first employment contract, i.e. between 14 July 2014 and 30 June 2017.

18. The Single Judge concluded that the wording of the clause at stake is sufficiently clear to determine that the parties’ will when they drafted it was solely to require that the promotion to the Division F occurred within the end of the season 2016/2017. Besides, the Single Judge noted that, if the parties’ real intention was otherwise, such as to bind the efficacy of the conditional fee to the player’s presence with Club C at the time the latter got promoted to the Division F, they could have, and should have, laid it down in the agreement explicitly.

19. Consequently, the Single Judge decided that, in accordance with the general legal principle of pacta sunt servanda, Club C is liable to pay to Club A the amount of EUR 1,000,000 in accordance with clause 3.2 of the transfer agreement.

20. Moreover, concerning Club A’s request of 8.5% interest p.a. in accordance with the “Late Payment of Commercial Debts Act”, the Single Judge deemed it sufficient to recall what he previously maintained with regards to the application of national law in proceedings before FIFA judicial bodies (cf. supra, par. II.13). Consequently, he decided to reject such request and award, in accordance with the longstanding approach, 5% interest p.a. on the amount of EUR 1,000,000 as from the day following the one in which it became due, i.e. 2 August 2016.

21. Lastly, the Single Judge referred to art. 25 par. 2 of the Regulations in combination with art. 18 par. 1 of the Procedural Rules, according to which in the proceedings before the Players’ Status Committee and the Single Judge, costs in the maximum amount of CHF 25,000 are levied. The costs are to be borne in consideration of the parties’ degree of success in the proceedings and are normally to be paid by the unsuccessful party.

22. In this respect, the Single Judge highlighted that the claim is partially accepted and that Club C is the party at fault. Therefore, the Single Judge decided that Club C has to bear the costs of the current proceedings in front of FIFA.

23. Furthermore and according to Annexe A of the Procedural Rules, the costs of the proceedings are to be levied on the basis of the amount in dispute. Consequently and taking into account that the total amount at dispute in the present matter is higher than CHF 200,000, the Single Judge concluded that the maximum amount of costs of the proceedings corresponds to CHF 25,000.

24. In conclusion and in view of the fact that, although lengthy submissions had to be analysed in the present matter, the case at hand was adjudicated by the Single Judge and not by the Players’ Status Committee in corpore and it did not pose any particular legal or factual difficulty, the Single Judge determined the costs of the current proceedings to the amount of CHF 22,000.

25. Consequently, Club C has to pay the amount of CHF 22,000 in order to cover the costs of the present proceedings

III. Decision of the Single Judge of the Players’ Status Committee

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

2. The Respondent, Club C, has to pay to the Claimant, within 30 days as from the date of notification of this decision, the amount of EUR 1,000,000, plus 5% interest p.a. as from 2 August 2016.

3. If the aforementioned sum and interest are not paid within the aforementioned deadline the present matter shall be submitted, upon request, to FIFA’s Disciplinary Committee for consideration and a formal decision.

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

5. The final amount of costs of the proceedings of CHF 22,000 is to be paid by the Respondent, within 30 days of notification of the present decision, as follows:

5.1. The amount of CHF 17,000 to FIFA to the following bank account with reference to case no. XXX:

UBS Zurich

Account number 366.677.01U (FIFA Players’ Status)

Clearing number 230

IBAN: CH27 0023 0230 3666 7701U

SWIFT: UBSWCHZH80A

5.2. The amount of CHF 5,000 to the Claimant.

6. The Claimant is directed to inform the Respondent immediately and directly of the account number to which the remittances under points 2. and 5.2 above are to be made and to notify the Players’ Status Committee 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

For the Single Judge of the

Players’ Status Committee:

Emilio García Silvero

Chief Legal & Compliance Officer

Encl. CAS directives