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,

Michael Seroshtan, Israel,

represented by Mr Idan Casif

as Claimant

against the club,

Suphanburi FC, Thailand

represented by Mr Menno Teunissen

as Respondent

regarding an employment-related dispute

between the parties

I. Facts of the case

1. On 30 June 2019, the Israeli player, Michael Seroshtan (hereinafter: the Claimant or player) and the Thai club, Suphanburi FC (hereinafter: the Respondent or club) entered into an employment contract valid as of 1 July 2019 until 30 November 2019.

2. The financial conditions of the contract were as follows (cf. article 3 of the employment contract):

 A total of USD 126,000 net for the year 2019, paid as follows:

i. One lump sum as “settlement fee” of USD 26,000 to be paid in Thai Baht to be paid on 31 July 2019,

ii. The remaining value of USD 100,000 to be paid in monthly instalments, i.e. 5 monthly instalments of USD 20,000 each to be paid in Thai Baht each month on the last business day,

 A bonus scheme mutually agreed upon based on the achievements of the club and club policies,

 One lump sum of Thai Baht 400,000 for the use of a car, accommodation expenses and an air ticket to be paid on 31 July 2019.

3. The employment contract included the following clause regarding its extension (article 4 of the contract):

“The club agreed that contract extension clause starting from 1st December 2019 and ending on 30th November 2020 will automatically extend should the Club remain competing in the Thai League 1 for the Season 2020. Terms and conditions shall be as follows:

a) Guarantee total USD 325,000 (US Dollars Four Hundred Thousand) net after tax annual income for the year 2020 at the exchange rate of USD 1 to Baht 31.

b) The Club shall pay one lump sum amount that is USD 25,000 (US Dollars Seventy Thousand) as a settlement fee to be paid in Thai Baht on 31st January 2020.

c) The remaining value of USD 300,000 (US Dollars Three Hundred Thirty Thousand) will be paid in monthly instalments by way of salary, adding up to 12 (Twelve) monthly salaries of USD 25,000 (US Dollars Twenty Seven Thousand Five Hundred) to be paid in Thai Baht due each month on the last business day.

d) Bonus Scheme will be mutually agreed by the Club and the Player based on the achievement of the Club and the Club’s policies. The Player is permitted to receive bonus payments from the Club in accordance with its policies.

e) The Club will provide one lump sum amount that is Baht 600,000 (Baht Six Hundred Thousand) to be use for car, accommodation expenses and air ticket to be paid on 31st July 2020.”

4. Furthermore, the employment contract contained the following clause regarding relegation (article 15 of the contract):

“This Contract will terminate without any liability for either party if the Club’s senior men’s first team is relegated from the Thai League 1 for ordinary sporting reasons. On such relegation, this Contract shall terminate with effect from the end of the month in which the Club’s senior men’s [sic] played its last match”.

5. The employment contract also contains a clause in the event of a unilateral termination of the employment contract (article 14 of the contract):

“14.1. ln the event that the club wants to unilaterally terminate the contract extension clause starting from 1st December 2019 and ending on 30th November 2020 with the Employee without just cause before the expiration, the Club shall pay 3 (Three) months’ worth of salary to the Player.

14.2. The Employee shall not be entitled to resign from the Club and/or terminate this Agreement”.

6. On 27 October 2019, a day after the last match of the season which left the Club in fourteenth position in the Thai League 1, the Respondent issued a letter to the attention of the Claimant confirming the automatic termination of the employment contract pursuant to article 16 (meaning art. 15)by virtue of the Club’s relegation for sporting reasons.

7. On 16 December 2019, the player’s legal representative sent a letter to the Respondent, requesting the Club “to issue a statement to the Player […] that the Contract is still in force until 30th November 2020 and the letter of The Club dated 27th October 2019 was delivered by a bona fide mistake”. The Claimant’s legal representative further underlined that “according to the Thai FA decision the Defendant is to remain competing in the Thai 'League 1' for 2020 season” and that the contract “is valid and the Termination Letter shall be null and void”.

8. On 6 January 2020, the Respondent, via its own legal representative, sustained that the employment relationship had been terminated pursuant to clause 15 of the contract and that there is “no reason to question the validity of this clear wording”. The Club further pointed out that “any decision by the national football association concerning the relegation of [the club] is of administrative nature and does not impact the working of article 15 of the contract (which has a sporting nature)”. In this context, the Club held that “the official decision by the national football association only confirms the sportive relegation from the club as it once again stated that Suphanburi finished 14th in the 2019 Thai League”.

9. On 3 March 2020, the Claimant lodged a claim in front of FIFA regarding compensation for breach of contract against the Respondent in the amount of USD 325,000 plus interest as of the date of the claim. The Claimant also requested the imposition of legal expenses, lawyer’s fees and any VAT required by law on the Respondent.

10. In support of his claim, the player explained that on 26 October 2019, the last match of the 2019 season took place and the Club finished the League in the 14th place, leading to a team relegation.

11. The player further held that he received the Club’s termination letter only a couple of weeks after it was issued, and that he contested its content via his legal representative.

12. According to the player, since the Club remained competing in the Thai League 1 for the season 2020, accordingly the employment agreement should be considered as valid and the termination letter as null and void.

13. In continuation, the Claimant maintained that the Respondent had ignored the contents of article 14.1 of the contract by not paying him the agreed compensation corresponding to three monthly salaries in case of a unilateral termination of the contractually agreed extension.

14. The Respondent, for its part, rejected the Claimant’s claim entirely and held that the contract holds an explicit termination clause (article 15), which has been explicitly negotiated and freely agreed upon by both parties. The validity of the clause, therefore, cannot be contested and both parties have the legal right to terminate the employment without further financial liability.

15. In this context, and since the Club was relegated at the end of the 2019 season, the Club decided to trigger the application of article 15 of the employment contract by letter of 27 October 2019.

16. The Respondent pointed out that the use of relegation clauses does not only benefit clubs but that also players, who can use such a clause to their advantage, this in order to protect their sports career, in that they would not be obliged to play in lower level competitions.

17. Furthermore, the Respondent highlighted that the termination letter was sent to the player’s email address of the player, as proven by a screenshot of the email between the Club and the player, in which the letter of termination is attached. Therefore, it is clear that the player decided not to contest the termination.

18. The Respondent added that the player, thereafter, left Thailand and never returned. This is the sole reason why it took the Claimant almost two months before issuing a short letter requesting a confirmation that “the contract was still into force until November 2020”.

19. The Respondent clarified that the withdrawal of the Thai club PTT Rayong from the Thai League 1 in the 2020 season does not impact the wording of article 15 of the contract. In fact, on 25 November 2019, the Thai league issued a first official statement confirming that PTT Rayong withdrew from the Thai League 2020 season. The Thai football authorities also confirmed the league table for the 2019 season and the Respondent’s 14th position. The statement further specified that the Thai league had decided, based on the rules concerning the number of teams competing in Thai League 1, to allow Suphanburi FC to participate in the Thai League 1 2020 competition.

20. Finally, the Respondent stated that in case “the Chamber is of the opinion that the contract was not terminated dd. 27 October 2019 and that the parties agreed upon an automatic extension, quod certe non, the Chamber will apply article 14.1 of the contract.”

21. In view of the foregoing, the Respondent requested the Dispute Resolution Chamber:

 To dismiss the Claimant’s claim and requests for sporting sanctions,

 Alternatively, to condemn the Respondent to pay a maximum of tree monthly salaries as compensation with a deduction of any payments upon termination,

 To order the Claimant to bear the legal fees and costs in this matter.

22. The player informed the FIFA administration that on 7 January 2020 he signed an employment contract with the Israeli club Hapoel Haifa valid as from the date of signature until 31st May 2020. The club undertook to pay to the player a total amount of NIS 243,315.

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 3 March 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 DRC referred to art. 3 par. 1 of the Procedural Rules and confirmed that, in accordance with art. 24 par. 1 in conjunction with art. 22 lit. b) of the Regulations (edition January 2020), it is competent to decide on the present litigation, which concerns an employment-related dispute with an international dimension between a Brazilian player and a Thai club.

3. Furthermore, the DRC analysed which edition of the Regulations should be applicable as to the substance of the matter. In this respect, the Chamber confirmed that, in accordance with art. 26 par. 1 and 2 of the Regulations (edition March 2020) and considering that the present matter was submitted to FIFA on 3 March 2020, the March 2020 edition of said Regulations is applicable to the present matter as to the substance.

4. The competence of the DRC and the applicable regulations having been established, the Chamber entered into the substance of the matter. In doing so, it started by acknowledging the facts of the case as well as the documents contained in the 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 regard, Chamber recalled that the parties had concluded an employment contract valid as of 1 July 2019 until 30 November 2019. The said contract included an extension clause and a relegation clause as described in par. I.3. and I.4. above.

6. The Chamber further acknowledged that on 27 October 2019, the Respondent issued a letter to the attention of the Claimant, thereby confirming the termination of the employment contract with reference to the relegation clause.

7. The Claimant contested the triggering of the relegation clause in view of the fact that the team, although initially subject to relegation by reason of its sporting results, in fact was not relegated from the Thai League 1 as another team dropped out, whereupon the League decided to allow the Club to compete in the 2020 competition. The Claimant refers in this context to the extension clause, according to which the contract was automatically extended by one season if the team would remain in the Thai League 1. The Claimant therefore concludes that the Respondent did not have a just cause to terminate the employment contract, and claims compensation for breach of contract.

8. The Respondent, for its part, relies on the full application of the relegation clause, the wording of which is clear and unequivocal. The Respondent highlights that such clauses are considered valid in the sense that they benefit both parties. Finally, the Respondent relies on the fact that the club was indeed relegated for sporting reasons and that the fact that it was, later on, reinstated in the Thai League 1 (a decision which it refers to as a purely administrative one) does not affect the applicability of the relegation clause. In the Respondent’s view, therefore, the termination of the employment contract on 27 October 2019 was justified and the Claimant is not entitled to any compensation for breach of contract.

9. Alternatively, should the Chamber find that the Respondent terminated the employment contract without just cause, the Respondent held that the Claimant could only be entitled to compensation equalling 3 months’ salary in accordance with article 14.1 of the employment contract.

10. In view of the parties’ divergent positions in this matter, the Chamber highlighted that the underlying issue in this dispute was to determine as to whether the club had unilaterally terminated the employment contract with or without just cause. The Chamber also underlined that, subsequently, if it were found that the employment contract was terminated without just cause, it would be necessary to determine the consequences for the party that was responsible for the early termination of the contractual relation.

11. The Chamber, in this context, proceeded to assess the validity and applicability of article 15 of the employment contract, this is, the relegation clause, which was the basis on which the Respondent understood that the employment contract had automatically terminated as stated in its letter dated 27 October 2019.

12. Art. 15 of the employment contract indeed provides as follows:

“This Contract will terminate without any liability for either party if the Club’s senior men’s first team is relegated from the Thai League 1 for ordinary sports reasons. On such relegation, this Contract shall terminate with effect from the end of the month in which the Club’s senior men’s [sic] played its last match”.

13. The Chamber, referring to its own jurisprudence, held that such clauses may, as a matter of principle, be seen as valid as long as they are not potestative in nature and that they are reciprocal, i.e. they provide for equal rights of the parties to terminate the employment relationship due to the team’s relegation.

14. The Chamber underlined that a relegation clause is, in essence not potestative as it depends on an occurrence of an event which is not in one of the parties’ control, but it solely depends on other circumstances, i.e. the relegation of the team. Therefore, the parties are, as a general rule, entitled to stipulate a clause according to which the contract will terminate if the team is relegated.

15. The Chamber further took note of the fact that such clauses can be of benefit to both parties to the employment relation.

16. As to the reciprocity, the Chamber, looking at the exact wording of the clause, held that it must be seen as reciprocal as it clearly mentions that the contract will terminate “without any liability for either party”.

17. This being said, the DRC found that it must analyse the applicability of such clause in light of the extension clause provided for in article 4 of the employment contract. Indeed, article 4 reads as follows:

“The club agreed that contract extension clause starting from 1st December 2019 and ending on 30th November 2020 will automatically extend should the Club remain competing in the Thai League 1 for the Season 2020. Terms and conditions shall be as follows (…)”.

18. The Chamber noted in this regard that article 4 of the contract clearly provides for the automatic extension of the contract, should the club remain in the Thai League 1 in the season 2020. Since the Respondent effectively remained in the Thai League 1, the Chamber had to question whether the Respondent could in fact treat the contract as terminated by reason of the relegation clause.

19. After a thorough analysis of the wording of the employment contract but also of the underlying intention of the parties when concluding such contract, the majority of the Chamber was convinced that the extension clause must prevail over the relegation clause.

20. In other words, the parties had clearly intended to continue their employment relationship for one more season, should the club remain in the Thai League 1 and without any further conditions. In this sense, the majority of the Chamber was comforted in its conclusion by the fact that the parties had explicitly provided for the consequences of the termination of the extended contract by the club (article 14.1 of the employment contract). In other words, there was a mutually agreed will of the parties, assuming the club would remain in the Thai League 1, which it effectively did, to continue the employment relationship beyond one season.

21. In the majority’s view, the extension clause and the relegation clause are in fact difficult – if not impossible – to reconcile; the broader and simpler language of the extension clause trumps the narrower and more ambiguous language of the relegation clause. Looking at the sequence of events and the wording of both clauses in relation to the said sequence of events, there may be doubt as to whether the Club was really “relegated” since a month after the season ended, the withdrawal of a higher-ranked club allowed the Club to remain in the League, but there is no doubt that the Club “competed” in 2020.

22. With this in mind, the majority of the Chamber came to the conclusion that since the Respondent did, in fact, remain in the Thai League 1, the contract was, de facto, extended by one additional season.

23. As a consequence, the majority of the Chamber determined that the Respondent could not proceed to treat the employment contract as having been terminated on or around 27 October 2019. Indeed, the majority of the Chamber held the view that the Respondent had taken advantage of the relegation clause by treating the employment contract as terminated just one day after the final match of the League, thus prematurely triggering the termination of the contract.

24. In view of the above considerations and looking at the overall circumstances surrounding the present matter, in particular the automatic applicability of the extension clause, according to which the contract would have run until 30 November 2020 in light of the Respondent remaining in the Thai League 1 in the 2020 season, the majority of the Chamber decided that the Respondent prematurely terminated the contract without just cause.

25. Having established that the club is to be held liable for the early termination of the employment contract, the Chamber focused its attention on the consequence of such termination. Taking into consideration art. 17 par. 1 of the Regulations, the player is entitled to receive from the club an amount of money as compensation for breach of contract.

26. The Chamber thus focused its attention on the calculation of the amount of compensation for breach of contract in the case at stake. In doing so, it firstly recalled 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 player 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.

27. In application of the relevant provision, the Chamber held that it first of all had to clarify as to whether the pertinent 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. In this regard, the Chamber paid particular attention to the contents of article 14.1 of the employment contract, which provides the following: “ln the event that the club wants to unilaterally terminate the contract extension clause starting from 1st December 2019 and ending on 30th November 2020 with the Employee without just cause before the expiration, the Club shall pay 3 (Three) months’ worth of salary to the Player”.

28. After an analysis of the above-mentioned, the Chamber, referring to its well-established jurisprudence, concluded that such clause cannot be taken into account as it is not reciprocal; in other words, it does not provide equal rights for both parties to the contract to receive compensation in case of a unilateral breach of the contract without just cause.

29. As a consequence, the Chamber determined that the amount of compensation payable by the club to the player had to be assessed in application of the other parameters set out in art. 17 par. 1 of the Regulations. The Chamber recalled that said provision provides for a non-exhaustive enumeration of criteria to be taken into consideration when calculating the amount of compensation payable.

30. Bearing in mind the foregoing, the Chamber reverted to the player’s claim for compensation for breach of contract in the amount of USD 325,000. The Chamber duly noted that this amount corresponds to the monies payable to the player under the terms of the contract until 30 November 2020, date of expiry of the extended contract. The Chamber thus concluded that the residual value of the contract at the time of the club’s termination indeed amounted to the entire 2020 season, i.e. USD 325,000.

31. In continuation, the Chamber verified as to whether the player 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 breach of contract in connection with the player’s general obligation to mitigate his damages.

32. Indeed, the player entered into a new contract with the Israeli club, Hapoel Haifa, on 7 January 2020 and valid until 31 May 2020. According to this contract, the Israeli club undertook to pay him the total amount of Israeli Shekels (NIS) 243,315, which corresponds to USD 68,092 (conversion rate: 7 January 2020).

33. On account of all the above-mentioned considerations and the specificities of the case at hand, the Chamber decided that the Respondent must pay the amount of USD 256,908 to the Claimant as compensation for breach of contract.

34. 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.

35. In this regard, the Chamber established that, in virtue of the aforementioned provision, it has competence to impose a sanction on the club. In particular, the sanction against clubs 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.

36. Therefore, bearing in mind the above, the Chamber decided that in the event that the Club does not pay the amount due to the player 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 club in accordance with art. 24bis par. 2 and 4 of the Regulations.

37. 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.

38. Finally, the Chamber rejected player’s claim for legal expenses and legal fees in accordance with art. 18 par. 4 of the Procedural Rules and the Chamber’s respective longstanding jurisprudence in this regard.

39. The Chamber concluded its deliberations in the present matter by establishing that the claim of the player is partially accepted. Any further claims of the Claimant are rejected.

III. Decision of the Dispute Resolution Chamber

1. The claim of the Claimant, Michael Seroshtan, is partially accepted.

2. The Respondent, Suphanburi FC, has to pay to the Claimant compensation for breach of contract in the amount of USD 256,908.

3. Any further claims of the Claimant are rejected.

4. 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 amount mentioned under point 2. above.

5. The Respondent shall provide evidence of payment of the due amount in accordance with point 2. above to FIFA to the e-mail address psdfifa@fifa.org, duly translated into one of the official FIFA languages (English, French, German, Spanish).

6. In the event that the amount in accordance with point 2. 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 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).

7. The ban mentioned in point 5. above will be lifted immediately and prior to its complete serving, once the due amount is paid.

8. In the event that the amount due in accordance with point 2. above 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 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