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 23 February 2020

Decision of the

Dispute Resolution Chamber

passed by way of circulars on 23 February 2020,

in the following composition:

Omar Ongaro (Italy), Deputy Chairman

Johan van Gaalen (South Africa), member

José Luis Andrade (Portugal), member

on the claim presented by the player,

Ryan Guno Babel, the Netherlands,

represented by Mr Bora Imadoglu

as Claimant

against the club,

Besiktas Futbol AS, Turkey,

represented by Mr Koray Akalp

as Respondent

regarding an employment-related dispute

between the parties

I. Facts of the case

1. On 4 January 2017, the Dutch player Ryan Guno Babel (hereinafter: the Claimant or the player) and the Turkish club, Besiktas Futbol AS (hereinafter: the Respondent or the club) concluded an employment contract (hereinafter: contract), valid as from 4 January 2017 until 31 May 2017.

2. On 16 January 2019, the parties signed a termination agreement (hereinafter: the agreement). In accordance with the agreement, the Respondent was obliged to make the following payments to the player:

- EUR 174,200 on 15 March 2019;

- EUR 200,000 on 30 April 2019;

- EUR 200,000 on 15 June 2019;

- EUR 350,000 “within 2 days following the receipt of the transfer fee from Fulham FC”.

3. Art. 5 of the agreement reads as follows: “In case of the Club fails to pay any of the instalments under clause 2 [cf. point 2. above] in 2 days following their respective due dates, the remaining amounts will immediately become due and payable to the Club without any warning and notification requirement and the Club also agrees to pay the Player a penalty of 5% of the whole overdue amount for each month of payment until the date of effective payment”.

4. Art. 7 of the agreement reads as follows: “In case of non-payment of any receivables mentioned under article 2 and 3 [cf. point 2. above] within 10 business days allowing their respective due dates, the Club agrees to pay to the Player an extra penalty of 95.000 EUR added to articles 5 and 6”.

5. On 21 June 2019, the player lodged a claim in front of FIFA against the club requesting payment of EUR 400,000, corresponding to the second and third instalment of the agreement, and a penalty fee of EUR 95,000 in accordance with art. 7 of the agreement as well as a penalty fee of EUR 20,000 per month.

6. On 12 July 2019, the club remitted a payment in the amount of EUR 400,000 to the player.

7. In his replica, the Claimant insisted on the payment of the agreed penalty fee including the interest. According to the player, those penalty clauses were agreed by both parties.

8. While the club acknowledged that it’s a “common practice in international football” to include penalty clauses in contract, it deemed that this penalty clause is disproportionate and therefore not valid and should be reduced. In this regard, the club referred to the DRC jurisprudence of limiting the interest rate at 18% p.a., as well arguing that penalties cannot be “requested together with default interest as both requests aim at compensating the creditor for late payment”.

9. Consequently, the club argued that the “multiple penalty clauses” are “excessive and out of proportion” and go “beyond the aim of curing the damages of the Claimant but simply punishes the Respondent”. Therefore the club requested to reject the player’s claim or alternatively, to reduce the amount of the penalty.

II. Considerations of the Dispute Resolution Chamber

1. First of all, the Dispute Resolution Chamber (hereinafter also referred to as DRC or Chamber) analyzed 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 21 June 2019. Consequently, the 2018 edition of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (hereinafter: the Procedural Rules) is applicable to the matter at hand (cf. art. 21 of the Procedural Rules).

2. Subsequently, the DRC noted that, in accordance with art. 24 par. 1 and 2. in combination with art. 22 lit. b) of the aforementioned Regulations on the Status and Transfer of Players (edition January 2020), 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 Dutch player and a Turkish club.

3. Furthermore, 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 January 2020), and considering that the present claim was lodged on 21 June 2019, the June 2019 edition of said regulations (hereinafter: the Regulations) is applicable to the matter at hand as to the substance.

4. The competence of the Chamber and the applicable regulations having been established, 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 the documentation submitted by the parties. 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. First, the DRC noted that the parties entered into an employment contract valid as from 4 January 2017 until 31 May 2019, which the parties terminated on 16 January 2019 by signing a termination agreement, according to which the Respondent committed to pay the Claimant the following amounts

- EUR 174,200 on 15 March 2019;

- EUR 200,000 on 30 April 2019;

- EUR 200,000 on 15 June 2019;

- EUR 350,000 “within 2 days following the receipt of the transfer fee from Fulham FC”.

6. In this context, the members of the Chamber took note of the content of art. 5 of the termination agreement, according to which “In case of the Club fails to pay any of the instalments under clause 2 in 2 days following their respective due dates, the remaining amounts will immediately become due and payable to the Club without any warning and notification requirement and the Club also agrees to pay the Player a penalty of 5% of the whole overdue amount for each month of payment until the date of effective payment”.

7. Furthermore, the DRC noted the content of art. 7 of the agreement: “In case of non-payment of any receivables mentioned under article 2 and 3 [cf. point 2. above] within 10 business days allowing their respective due dates, the Club agrees to pay to the Player an extra penalty of 95.000 EUR added to articles 5 and 6”.

8. Furthermore, the DRC duly noted that the Respondent performed the payment of the second and third instalment in the amount of EUR 400,000 on 12 July 2019 only, namely after that the Claimant lodged his claim before FIFA.

9. With the above in mind, the DRC judge proceeded to examine the positions of the parties and took note that the Claimant, inter alia, considered that the “penalty” of 5% interest per month, in accordance with art. 5 of the termination agreement as well as the penalty stipulated in art. 7 of the termination agreement were due.

10. Moreover, the members of the Chamber noted that the Respondent held that “multiple penalty clauses” are “excessive and out of proportion”. Therefore the club requested to reject the player’s claim or alternatively, reduce the amount of the penalty.

11. On account of the above and, in particular, the diverging positions of the parties, the DRC considered that the central issue of present dispute consists in assessing whether the interest rate as well as the penalty stipulated in the termination agreement is applicable and, in case, to what extent.

12. In this respect, the members of the Chamber, before going into the merit of the aforementioned issue, wished to recall that the Respondent indeed fulfilled its obligation, even though with delay, to provide the Claimant with the payment of the second and third instalment of the termination agreement and, thus, in accordance with the general legal principle of pacta sunt servanda. In accordance with art. 5 of the termination agreement, the amount of EUR 400,000 fell due on 3 May 2019, after the Respondent failed to remit the second instalment.

13. Subsequently, the Chamber focussed its attention on the penalty clause contained in art. 7 of the agreement, in light of the Respondent having paid the second and third instalment of EUR 200,000 each, after the relevant deadline for payment had fallen due and the Claimant’s pertinent request.

14. In this context, the DRC acknowledged the arguments of both parties in respect of the penalty clause and referred to its constant jurisprudence, in accordance with which penalty clauses may be freely entered into by the parties and may be considered acceptable, in the event that the pertinent written clause meets certain criteria, such as proportionality and reasonableness. In this respect, the DRC further highlighted that, in order to determine as to whether a penalty clause is to be considered acceptable, the specific circumstances of the relevant case brought before it shall also be taken into consideration.

15. In the specific case at hand, the members of the DRC took into account the business experience of the Respondent and the interest of the Claimant by timely receiving the outstanding amounts. The DRC concluded that, with regard to these criteria, the Respondent did not present any evidence that could lead to the conclusion that the Respondent had valid reasons for the late payment of the agreed amount.

16. In the specific case at hand, the members of the Chamber deemed that the penalty fee of EUR 95,000, which the parties contractually agreed upon in the context of terminating the employment relation, is both proportionate and reasonable in the case at hand, since it represents 10.27% of the total payment due according to the termination agreement.

17. In continuation, the Chamber turned its attention to the argument of the Respondent, according to which the penalty fee shall not be applied, since art. 5 of the termination agreement constitutes 5% interest per month, which in itself constitutes a penalty.

18. In this regard, the Chamber outlined that such interest clause was explicitly and contractually agreed upon between the parties apart from the penalty fee and is therefore not per se inapplicable.

19. In addition, the members of the Chamber found that this specific interest clause of 5% per month, corresponding to a yearly interest rate of 60%.

20. In line with the Chamber’s jurisprudence, as well as CAS jurisprudence and in accordance with Swiss Law, the DRC had no other option but to conclude that the interest of 5% per month was disproportionate, and decided to reduce it to a rate of 18% p.a., a rate that shall be applicable as from 3 May 2019, i.e. the date upon which the amount of EUR 400,000 fell due, until 12 July 2019, i.e. the date of effective payment.

21. On account of all of the above, the Chamber decided that the contractual penalty fee is valid and applicable in the present matter and that the Respondent is liable to pay to the Claimant the amount of EUR 95,000 in accordance with art. 7 of the termination agreement. With regard to the Claimant’s request for interest of 5% per year on the penalty fee, the members of the DRC referred to the jurisprudence of the DRC in similar cases and concluded that the Claimant’s request for default interest on the penalty fee must be rejected.

22. Finally, the members of the Chamber established that any further claim lodged by the Claimant is rejected.

23. Furthermore, taking into account the consideration under number II./3. above, the DRC 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.

24. In this regard, the Chamber 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.

25. Therefore, bearing in mind the above, the DRC 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.

26. Finally, the Chamber 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.

III. Decision of the Dispute Resolution Chamber

1. The claim of the Claimant, Ryan Guno Babel, is partially accepted.

2. The Respondent, Besiktas Futbol AS, has to pay to the Claimant the amount EUR 95,000.

3. The Respondent has to pay to the Claimant interest of 18% p.a. on the amount of EUR 400,000 as from 3 May 2019 until 12 July 2019.

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 2. and 3. above.

6. The Respondent shall provide evidence of payment of the due amounts in accordance with points 2. and 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 due in accordance with points 2. and 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 amounts are 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 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 due in accordance with points 2. and 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.

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Note related to the publication:

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

Note related to the appeal procedure:

According to article 58 par. 1 of the FIFA Statutes, this decision may be appealed against before the Court of Arbitration for Sport (CAS). The statement of appeal must be sent to the CAS directly within 21 days of receipt of notification of this decision and shall contain all the elements in accordance with point 2 of the directives issued by the CAS. Within another 10 days following the expiry of the time limit for filing the statement of appeal, the appellant shall file a brief stating the facts and legal arguments giving rise to the appeal with the CAS (cf. point 4 of the directives).

The full address and contact numbers of the CAS are the following:

Court of Arbitration for Sport

Avenue de Beaumont 2

1012 Lausanne

Switzerland

Tel: +41 21 613 50 00

Fax: +41 21 613 50 01

e-mail: info@tas-cas.org

For the Dispute Resolution Chamber:

Emilio García Silvero

Chief Legal & Compliance Officer