F.I.F.A. – Players’ Status Committee / Commissione per lo Status dei Calciatori – club vs club disputes / controversie tra società – (2020-2021) – fifa.com – atto non ufficiale – Decision 29 September 2020

Decision of the

Single Judge of the Players' Status Committee

Passed on 29 September 2020,

regarding a contractual dispute concerning the player Derlis Alberto Gonzalo Galeano

BY:

Roy Vermeer (Netherlands), Single Judge of the PSC

CLAIMANT:

DYNAMO KYIV, Ukraine

RESPONDENT:

CLUB OLIMPIA, Paraguay

I. Facts of the case

1. On 7 February 2020, the Ukrainian club Dynamo Kyiv (hereinafter “the Claimant”) and the Paraguayan club Club Olimpia (hereinafter “the Respondent”) concluded a transfer agreement (hereinafter: “the Agreement”) in connection with the definitive transfer of the player Derlis Alberto Gonzalez Galeano (hereinafter “the Player”).

2. In accordance with Clause 2.3.2 of the Agreement, the Respondent undertook to pay the following amounts as transfer fee in the amount of USD 5,000,000 payable by the Respondent to the Claimant as follows:

• USD 1,000,000 by 30 March 2020;

• USD 1,000,000 by 30 December 2020;

• USD 1,000,000 by 30 April 2021;

• USD 1,000,000 by 30 December 2021 and

• USD 1,000,000 by 30 July 2022.

3. Additionally, as per Clause 4.2 of the Agreement, the parties agreed upon the following: “In view of the fact that [the Claimant] agreed to split payment of the transfer compensation into instalments as per the payment schedule requested by [the Respondent], the Parties agreed that in case of untimely or incomplete execution by the [the Respondent] of any of the payments under the present Contract with a delay of 15 or more days, the [the Respondent] shall be obliged to additionally pay to [the Claimant] a fine of 10% p.a. interest on the outstanding amount. [the Respondent] confirms that such penalty sanction is fair and proportionate and waives any rights to challenge it”.

4. Furthermore, in Clause 4.3 of the Agreement the parties agreed upon the following “In case of any delay in the payment for 45 or more days or in case of incomplete execution by [the Respondent] of any of the payments under the Contract, [the Respondent] would be obliged to immediately pay to [the Claimant] all payments of residual transfer compensation, provided by the Contract except for the sell on fees, which shall be payable on the terms and conditions provided in the present Contract”.

5. On 25 March 2020, the Respondent sent a letter to the Claimant stating that due to the Covid-19 situation, the suspension of matches in Paraguay and the lack of income, it requested the postponement of the payment of the first instalment for 180 days.

6. On 26 March 2020, the Claimant replied to the Respondent´s letter rejecting its request of postponement.

7. On 31 March 2020, the Claimant sent a default notice to the Respondent requesting the payment of the first instalment and informing that in case of a delay for more than 15 or 45 days the penalties established in clause 4.2 and 4.3 would apply accordingly.

8. On 2 April 2020, the Respondent replied to the Claimant’s letter reiterating that they had financial problems and requesting a time extension of 90 days to do the relevant payment.

9. On 13 April 2020, the Respondent sent a new letter to the Claimant in justification of the non-payment and exposing the measures approved by its government.

10. On 29 April 2020, the Claimant lodged a claim before FIFA against the Respondent, and requested the payment of the following amounts:

• USD 1,000,000 as first instalment plus a 10% interest from 31 March 2020 until the date of effective payment.

• USD 100,000 as penalty.

• Imposition of sanctions to the club.

11. On 1 June 2020, the Claimant sent a new default notice to the Respondent requesting the payment of the entire transfer fee amounting to USD 5,000,000 plus a penalty of 10% and 10% annual interest and granting it 10 days to remedy the default.

12. On 1 July 2020, the Claimant added to its previous claim the residual part of the transfer compensation in accordance with clause 4.3 of the agreement and requested the total amount of USD 5,000,000; USD 500,000 as fine of 10% (cf. clause 4.2 of the Agreement) plus a 10% annual interest applicable as follows:

• over USD 1,000,000 as from 31 March 2020 until the date of effective payment and

• over USD 4,000,000 as from 1 June 2020 until the date of effective payment.

13. In addition, the Claimant requested the imposition of sporting sanctions to the Respondent in accordance with art. 12bis of the RSTP.

14. Furthermore, the Claimant stated that the circumstances related to this dispute cannot be recognized as “force majeure” as regards the execution of the financial obligations under the Agreement. In particular, the Claimant argued that “force majeure is an event which leads to non-performance of a part of a contract due to causes which are outside the control of the parties and which could not be avoided by exercise of due care”.

15. In addition, the Claimant stated that since the first instalment of the transfer compensation was due on 30 March 2020 the 46th day of delay occurred on 15 May 2020 and therefore the Respondent became obliged to pay the entire transfer compensation based on clause 4.3 of the agreement.

16. In its reply, the Respondent alleges a situation of force majeure, due to the Covid-19 pandemic, to justify the non-payment of the amounts claimed. The Respondent further refers to its several attempts to solve the situation in an amicable matter, which were however not accepted by the Claimant.

17. In particular, as to the force majeure, the Respondent claims that the FIFA Covid-19 Guidelines reinforce their position and encloses in support of it a “report detailing the effect of Covid-19 on the accounts of Olympia, which can be summarized in the simple fact that OLIMPIA has lost since March up to date over 5.000.000.-USD of revenues, which implies more than 60% (SIXTY PER CENT) of the budget for the total year”.

18. Furthermore, the Respondent alleges that it sent three different formal letters to the Claimant apologising for the delay and explaining the situation, and begging for them to accept a payment postponement. Moreover, the Respondent alleges that whilst it was “struggling to re-schedule payments (including both inflows and outflows) with other participants of the industry, the Claimant refused to hear, understand or even cooperate”.

19. The Respondent also points out that it “has been severally affected by the closures imposed by the sanitary crisis and has not yet resumed its normal activity to start recovering from the damages. Income has been reduced to close to nothing (ZERO) over the months of March, April, May and June, while the Club had to carry on paying the salaries agreed. Needless to say that this decision was based on our understanding that workers must be placed as absolute priority regardless of employment contracts not having penalty clauses, as workers’ rights must prevail above anything”.

20. Specifically, as to the application of the penalty, the Respondent deems that it should be able to raise the exception of “clausula rebus sic stantibus”, as the present situation is not “only extremely onerous, but it was also unforeseeable when the contract was concluded”. Thus, the penalty clauses should not apply.

21. Finally, the Respondent deems that “even if it was concluded that there’s a breach of the financial duties, this would be only for ONE OF FIVE instalments, which would make the penalties demanded totally disproportionate”. In this regard, the Respondent considered that the wording of the contractual penalty clause included a double penalty with the application of a default interest and an automatic penalty amount.

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

1. First of all, the Single Judge of the PSC analysed whether he was competent to deal with the case at hand. In this respect, he referred to 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”), as well as to the fact that the present matter was submitted to FIFA on 29 April 2020 and decided on 29 September 2020. Therefore, the Single Judge concluded that the June 2020 edition of the Procedural Rules is applicable to the matter at hand.

2. Subsequently, the Single Judge of the PSC referred to art. 3 par. 1 of the Procedural Rules and emphasised that, in accordance with art. 24 par. 1 in combination with art. 22 lit. f) of the Regulations on the Status and Transfer of Players, the Single Judge of the PSC is competent to deal with matters which disputes between clubs belonging to different associations that do not fall within the cases provided for in a), d) and e).

3. In continuation, the Single Judge of the PSC analysed which edition of the Regulations of the Status and Transfer of Players should be applicable to the present matter. In this respect, the Single Judge of the PSC confirmed that in accordance with art. 26 par. 1 and 2 of the Regulations on the Status and Transfer of Players, and considering that the claim was lodged on 29 April 2020, the March 2020 edition of the aforementioned regulations (hereinafter: “the Regulations”) is applicable to the matter at hand.

4. With the above having been established, the Single Judge of the PSC entered into the substance of the matter. In doing so, it started to acknowledge the facts of the case as well as the documents contained in the file. However, the Single Judge of the PSC emphasized that in the following considerations it will refer only to facts, arguments and documentary evidence which it considered pertinent for the assessment of the matter at hand.

5. Within this context, the Single Judge noted that it is uncontested that the Parties signed the Agreement on 7 February 2020; and that the terms, contents or validity of the Agreement are not in dispute.

6. In continuation, the Single Judge took note that the Respondent alleged suffering a situation of force majeure, due to the Covid-19 pandemic, justifying the non-payment of the amounts claimed. Moreover, the Single Judge observed that the Respondent referred to its several attempts to solve the situation in an amicable manner with the Claimant, which were however not accepted by the latter. Thus, the Single Judge acknowledged that the Respondent recognizes its debts towards the Claimant, but proposes to re-schedule the relevant payments and not to apply the contractual penalty, in view of the circumstances.

7. Subsequently, the Single Judge took note that the Claimant lodged the present claim before FIFA against the Respondent, first requesting the first instalment of the transfer fee and subsequently it amended its claim requesting the payment of a total amount of USD 5,500,000 corresponding to the entire transfer fee (cf. clause 4.3 of the Agreement) and an alleged contractual penalty (cf. clause 4.2 of the Agreement).

8. After analysing the parties’ submissions, the Single Judge of the PSC determined that the underlying issue in this dispute, considering the diverging position of the parties, is the assessment as to whether is justifiable for the Respondent not to have paid the outstanding amounts based on the ongoing sanitary crisis.

9. In this respect, the Single Judge of the PSC considered that, in line with its well-established jurisprudence, a club’s financial difficulties cannot be considered a valid justification for non-compliance with its essential contractual obligations deriving from the signature of a binding agreement.

10. In addition, the Single Judge underlined that contrary to the understanding of the Respondent, the FIFA Covid-19 Guidelines do not establish a general situation of force majeure.

11. Therefore, the Single Judge concluded that in spite of the difficult circumstances, clubs are not exempted from their financial obligations undertook towards other clubs. The Single Judge decided that this argumentation of the Respondent cannot be followed on this point.

12. Consequently, in strict application of the principle of pacta sunt servanda, the Single Judge of the PSC established that the Respondent should honour its obligations towards the Claimant based on the Agreement.

13. In this context, the Single Judge observed that the Respondent has to pay to the Claimant, the total outstanding amount of EUR 5,000,000, as agreed in the clause 2 of the Agreement.

14. Moreover, the Single Judge pointed out that the clause 4.3 of the Agreement provided that in case of delay in payment for more than 45 days of any of the instalments of the transfer fee by the Respondent, the rest of the instalments would become due.

15. The Single Judge underlined that the Respondent failed to pay the first instalment of the agreed transfer fee which was originally due on 30 March 2020 and therefore, on 15 May 2020, the rest of the transfer fee became due in accordance with clause 4.3 of the agreement.

16. In view of the above, the Single Judge decided that the Respondent should pay to the Claimant the entire transfer fee amounting to EUR 5,000,000.

17. In continuation, the Single Judge focussed its attention to the request of the Claimant to impose a fine to the Respondent amounting to 10% of the outstanding transfer fee (cf. clause 4.2 of the Agreement).

18. In relation to clause 4.2 of the Agreement, the Single Judge of the PSC proceeded to analyse it and took note that said clause established “…a fine of 10% p.a. interest on the outstanding amount…”.

19. Therefore, the Single Judge came to the conclusion that despite of its unclear wording, it shall be considered as an interest clause and not as a contractual penalty clause.

20. In addition, the Single Judge was keen to emphasise that the wording of the clause 4.2 of the Agreement is clear and only establishes one way to compensate the possible delay in paying amounts contractually agreed, i.e. an annual interest of 10%.

21. Therefore, the Single Judge stated that the double request of the Claimant to apply a fine of 10% and an annual interest of 10% over the outstanding amount does not correspond to the terms agreed by the parties in the clause 4.2 of the Agreement.

22. In light of the aforementioned, the Single Judge concluded that the parties agreed on a default interest of 10% per annum to be applied in the event of non-payment of any amount established in the Agreement.

23. In this context, the Single Judge underlined that according to the long-standing practice of the Players’ Status Committee an annual rate of 10% of interest seems to be a reasonable amount to compensate late payments.

24. At this stage, the Single Judge took note that the Claimant requested the application of the annual interest of 10% over the amount of USD 4,000,000 from 1 June 2020 and not from the 46th day of delay in accordance with the wording of the clause 4.2 of the Agreement.

25. The Single Judge underlined that, in strict application of the principle of non ultra petita, the relevant interest shall be granted as from the date requested by the Claimant (i.e. 1 June 2020).

26. In conclusion, the Single Judge decided to partially accept the claim of the Claimant and determined that the latter is entitled to receive from the Respondent a transfer fee amounting to USD 5,000,000 plus an annual interest at a rate of 10% which shall apply as follows:

a. Over the amount of USD 1,000,000 from the due date, i.e. 31 March 2020 until the date of effective payment;

b. Over the amount of USD 4,000,000 from the due date, i.e. 1 June 2020 until the date of effective payment.

27. The Single Judge concluded its deliberations in the present matter by establishing that any further claim lodged by the Claimant is rejected.

28. Furthermore, taking into account the previous considerations, the Single Judge of the PSC 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.

29. In this regard, the Single Judge of the PSC pointed out that, against clubs, the consequence of the failure to pay the relevant amounts in due time shall consist of a ban from registering any new players, either nationally or internationally, up until the due amounts are paid and for the maximum duration of three entire and consecutive registration periods.

30. Therefore, bearing in mind the above, the Single Judge of the PSC decided that, in the event that the Respondent does not pay the amounts due to the Claimant within 45 days as from the moment in which the Claimant, following the notification of the present decision, communicates the relevant bank details to the Respondent, 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.

31. Finally, the Single Judge of the PSC recalled that the above-mentioned ban 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.

32. 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 proceedings before the Players’ Status Committee including its Single Judge, costs in the maximum amount of CHF 25’000 are levied. The relevant provision further states that the costs are to be borne in consideration of the parties’ degree of success in the proceedings (cf. art. 18 par. 1 of the Procedural Rules).

33. Moreover, the Single Judge referred to art. 18 par. 1 ii. of the Procedural Rules according to which “For any claim or counter-claim lodged prior to 10 June 2020 which has yet to be decided at the time of this temporary amendment, the maximum amount of procedural costs levied shall be equivalent to any advance of costs paid”.

34. In respect of the above, and taking into account that the Claimant is the successful party in the present proceedings, as its claim is partially accepted, the Single Judge concluded that the Respondent has to bear the costs of the current proceedings before FIFA.

35. Furthermore, and according to art. 18 par.1 ii. of the Procedural Rules the costs of the current proceedings shall be equivalent s the maximum amount paid by the Claimant as advance of costs.

36. On that basis, the Single Judge held that the amount paid by the Claimant as advance of costs in the present proceedings is CHF 5,000. Consequently, the Single Judge concluded that the maximum amount of costs of the proceedings correspond to CHF 5,000.

37. In conclusion and considering the specific circumstances of the case, the Single Judge determined the costs of the current proceedings to the amount of CHF 5,000 to be borne entirely by the Respondent.

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

1. The claim of the Claimant, Dynamo Kyiv, is partially accepted.

2. The Respondent, Club Olimpia, has to pay to the Claimant, the following amounts:

- USD 1,000,000 plus 10% interest p.a. as from 31 March 2020 until the date of effective payment;

- USD 4,000,000 plus 10% interest p.a. as from 1 June 2020 until the date of effective payment.

3. Any further claims of the Claimant are rejected.

4. The Claimant is directed to immediately and directly inform the Respondent of the relevant bank account to which the Respondent must pay the due amount.

5. The Respondent shall provide evidence of payment of the due amount in accordance with this decision to psdfifa@fifa.org, duly translated, if applicable, into one of the official FIFA languages (English, French, German, Spanish).

6. In the event that the amount due, plus interest as established above is not paid by the Respondent within 45 days, as from the notification by the Claimant of the relevant bank details to the Respondent, the following consequences shall arise:

1.

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. The aforementioned ban mentioned will be lifted immediately and prior to its complete serving, once the due amount is paid.

(cf. art. 24bis of the Regulations on the Status and Transfer of Players).

2.

In the event that the payable amount as per in this decision is 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 the FIFA Disciplinary Committee.

7. The final costs of the proceedings in the amount of CHF 5,000 are to be paid by the Respondent to FIFA (cf. note relating to the payment of the procedural costs below).

For the Players' Status Committee:

Emilio García Silvero

Chief Legal & Compliance Officer

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) within 21 days of receipt of the notification of this decision.

NOTE RELATED TO THE PUBLICATION:

FIFA may publish this decision. For reasons of confidentiality, 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 Procedural Rules).

NOTE RELATING TO THE PAYMENT OF THE PROCEDURAL COSTS:

If applicable, payments to FIFA should be made by wire transfer in Swiss francs (CHF) to the following bank account:

366.677.01U (FIFA Players’ Status) UBS Zurich,

SWIFT: UBSWCHZH80A, Clearing number 230, IBAN: CH 27 0023 0230 3666 7701U

Please mention the applicable reference number

CONTACT INFORMATION:

Fédération Internationale de Football Association

FIFA-Strasse 20 P.O. Box 8044 Zurich Switzerland

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