Transcript Art. 17 Consequences of terminating a contract without just cause

First Czechoslovak
sports law conference
Contractual stability between
players and clubs in the light of
Art. 17(1) RSTP
Resort Svatá Kateřina – Počátky
23-24 April 2013
Historical Background
Principles of the FIFA Regulations
since 2001 :





Protection of minors
Training of young players
Solidarity in the football world
Contractual stability
Dispute resolution system
monteneri sports law & management
2
CAS Awards




CAS 2007/A/1359 FC Pyunik Yerevan v/Edel
Edima Bete, AFC Rapid Bucaresti & FIFA
CAS 2007/A/1519 & 1520 FC Shakhtar Donetsk
v/ Mr. Matuzalem Francelino da Silva & Real
Zaragoza SAD
CAS 2009/A/1880 & 1881 FC Sion & Essam ElHadary v/ FIFA & Al Ahli Sporting Club
CAS 2010/A/2145, 2146 & 2147 Morgan de
Sanctis & Sevilla FC SAD v/ Udinese Calcio SpA
monteneri sports law & management
3
Application and aim of
the FIFA Regulations

The application:
•
•
•
•

Cases with an international dimension;
Cases with ITC request;
Dispute Resolution Chamber – CAS;
Federations responsible for national
disputes (NDRC & arbitration tribunals).
The aim: maintainance of contractual
stability between clubs and players.
monteneri sports law & management
4
The law applicable to the merits



Art. 187 PILA: law chosen by the
parties;
Not only national law, but also the
regulations of an international sports
federation;
Art. R58 CAS Code of Sport-related
Arbitration.
monteneri sports law & management
5
The law applicable to the merits



Art. R58 CAS Code:
applicable regulations and law chosen by the
parties;
if no choice: laws of the country where
federation that issued challenged decision is
domiciled.
Parties usually choose subsidiary application of
Swiss law:


expressly or
in concludent way: through application of FIFA
regulations in relation with Art. 66(2) FIFA Statutes
(„CAS shall primarily apply the various regulations of FIFA
and, additionally, Swiss law.“ - Only to fill lacunae in the
RSTP or FIFA Statutes)
monteneri sports law & management
6
The law applicable to the merits
Competence clause in the
employment contract
•
•
•
•
National law applicable;
Tailor-made solution for football?
Sporting sanctions;
Subsequent choice of law prevails on the
applicable law in the contract.
monteneri sports law & management
7
Chapter IV – Maintenance of Contractual
Stability between Professionals and Clubs


Art. 13 - Respect of Contract
A contract between a Professional and a club may
only be terminated on expiry of the term of the
contract or by mutual agreement.
Art. 14 - Terminating a Contract for Just
Cause
A contract may be terminated by either party
without consequences of any kind (either
payment of compensation or imposition of
sporting sanctions) in the case of just cause.
monteneri sports law & management
8
Just Cause






No definition in RSTP, therefore Swiss law.
Not every violation of the employment contract
justifies the termination of the contract for just
cause.
Severe violation of the employment contract;
serious breach of confidence.
Innocent party cannot be expected in good
faith to continue the employment
relationship (Art. 337.2 CO)
To be established on a case by case basis.
Only what occurred before the termination is
relevant.
monteneri sports law & management
9
Just Cause
Consequences


The party terminating the contract with valid
reason (innocent party) is not liable to pay
compensation or to suffer sporting sanctions.
The party responsible for the breach of contract
(guilty party) is liable to pay compensation to
the innocent party and may suffer sporting
sanctions.
monteneri sports law & management
10
Just cause for a Player

No payment or late payment of
salary
• Player shall put the Club in default;
• No need of a financial hardship of the
player;
• Just cause denied if amount
insubstantial or completely secondary.


Player excluded from training
(personality right Art. 28 CC)
Parties autonomy: buy-out clause
monteneri sports law & management
11
Just cause for a Club

Club shall put the Player in default;

Player does not offer his services;

Unjustified absence of the Player;

Player plays on purpose under his
possibility;
• Difficult to prove;
• But not if Player does not have a certain level.

Serious misconduct of the Player (e.g.
consume of cocaine).

Permanent incapacity of the Player?
monteneri sports law & management
12
Art. 17 Consequences of terminating
a contract without just cause
The following provisions apply if a contract is terminated without
just cause:
1. In all cases, the party in breach shall pay compensation.
Subject to the provisions of Art. 20 and annex 4 in relation
to Training Compensation, and unless otherwise provided
for in the contract, compensation for breach shall be
calculated with due consideration for the law of the country
concerned, the specificity of sport, and any other objective
criteria. These criteria shall include, 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, the fees and expenses paid or incurred by the
Former Club (amortised over the term of the contract) and
whether the contractual breach falls within a Protected
Period.
monteneri sports law & management
13
Art. 17 Consequences of terminating
a contract without just cause
“The following provisions apply if a contract is
terminated without just cause:
1. In all cases, the party in breach shall pay
compensation. (…)”



Compensation is due inside or outside the
protected period.
Every termination of contract, even
outside the protected period, remains a
serious violation of the contract.
Breach without termination of contract?
Compensation based on Swiss law.
monteneri sports law & management
14
Art. 17 Consequences of terminating
a contract without just cause
“Subject to the provisions of Art. 20 and annex
4 in relation to Training Compensation, (…)”
Training compensation is:
- not payable, if the club has terminated the
contract without just cause;
- payable, if the player has terminated the
contract without just cause (in addition to
compensation for the breach).
monteneri sports law & management
15
Art. 17 Consequences of terminating
a contract without just cause
“(…) and unless otherwise provided for
in the contract, (…)”

Buy out clause: Liquidated damages
provision. Party autonomy.
• However: Art. 163.3 CO the judge shall
reduce excessively high penalty clause or
liquidated damage (ordre public – excessive
legal commitments)
• Sport legislation of certain countries (e.g.
Spain, Real Decreto 1006): compulsory buyout-clause.
• Forbidden in other countries because not
compatible with mandatory labour law.
monteneri sports law & management
16
Art. 17 Consequences of terminating
a contract without just cause
“(…) compensation for breach shall be
calculated with due consideration
- for the law of the country concerned,
- the specificity of sport,
- and any other objective criteria.
(…)”
- Discretionary power of the
deciding authority
monteneri sports law & management
17
Law of the country concerned


Law governing the employment
relationship; closest connection to dispute.
Law of the country of the club, where the
contract was stipulated and performed
•
•
•
•

Often no tailor-made solution for sport;
Corrective effect for compensation?
To be considered – not to be applied;
Parties‘ submissions mainly based on RSTP
Art. R58 CAS Code, result: Swiss law
applying by default.
monteneri sports law & management
18
Specificity of Sport


Over the years, the EU has produced
some colourful jargon to describe various
concepts.
The term “specificity of sport” has
entered into common jargon to refer to
the special nature and characteristics
of sport recognised in the Nice
Declaration on Sport of December 2000.
monteneri sports law & management
19
Specificity of Sport



Is the solution reached just and fair
under civil law as well as considering the
sporting intests of the entire football
community?
Consider the specific nature of the
damages caused by the breach of contract
(player as asset from a sportive and
commercial point of view);
Corrective effect – subordinated in
relation to other damages awarded. No
punitive or enriching character.
monteneri sports law & management
20
The Objective Criteria
“These criteria shall include, in particular,
-

the remuneration and other benefits due
to the player under the existing contract
and/or the new contract, (…)”
Indication on:
the value of the services of the player
• for the former club
• the new club


the market value of the services of player
motives behind the unjustified termination
monteneri sports law & management
21
The Objective Criteria
-
-
“These criteria shall include, in particular,
(…)
the time remaining on the existing
contract up to a maximum of five years,
(…)”
Linked to the specificity of sport.
Every breach of contract is reproachable,
even more if the contract had still a
substantial duration (aggravating factor).
monteneri sports law & management
22
The Objective Criteria
-
-
“These criteria shall include, in particular,
(…)
the fees and expenses paid or incurred by
the Former Club (amortised over the term
of the contract) (…) “
Refers only to the Club’s damage.
Will be dealt with later in the part:
“Damage suffered by the Club”
monteneri sports law & management
23
The Objective Criteria
“These criteria shall include, in particular, (…)
-
-
-
whether the contractual breach falls within a
Protected Period.”
Protected period: 3 years or 3 seasons
from entry into force of the contract
(players over 28: 2 years or 2 seasons)
Breaches within protected period are
considered a particular serious form of
unlawful behaviour (cf. sporting sanctions
in Art. 17.3-5 RSTP): aggravating factor
- increasing effect.
monteneri sports law & management
24
The Objective Criteria






Non exhaustive enumeration in Art. 17.1.
Criteria cover a number of categories of
cases.
Not all criteria applicable for every case.
Combination of criteria not always
possible.
Some apply to clubs others to players.
Art. 17 applies to clubs and players: no
category shall be favorized.
monteneri sports law & management
25
Assesment of various criteria


The judge shall assess the various
criteria in his discretion, having
regard to the ordinary course of
events, the behavior of the parties
and the measures taken by the
damaged party.
No „ranking“ among the criteria.
monteneri sports law & management
26
Scope of Compensation


Positive interest (expectation
interest): the innocent party shall be
put in the same position as if the
contract was performed properly and
the breach did not occur.
Full compensation of the injured
party.
monteneri sports law & management
27
Calculation of Compensation


The judging authority has a wide margin
of appreciation when determining the
amount of compensation.
Compensation shall have:
• no punitive effect. Sporting Sanctions in Art.
17.3 RSTP;
• no enriching effect / no overcompensation.
monteneri sports law & management
28
Damage suffered by the Player



Renumeration until termination, then:
Compensation of positive interest: the
remainder of the contract.
No undue enrichment or
overcompensation
• Obligation to mitigation of damage
• Deduction of remuneration earned with new
club

Art. 337 lit. c §1 & 2 CO
monteneri sports law & management
29
Damage suffered by the Club




Player cannot be forced to remain with the
Club against his will.
Calculation of damage is a difficult task.
Fees and expenses paid by the Club
(amortised over the term of the contract)
• Transfer fee
• Agent’s commission,
• Signing on fee, etc.
Training compensation: lex specialis
monteneri sports law & management
30
Damage suffered by the Club
Value of the services of the Player

What would a club spend on the transfer
market to contract the services of an
analogous player?
• As salary;
• As transfer fee.

Offer from third club is indication on the
value of the services of the player.
monteneri sports law & management
31
Damage suffered by the Club
Loss of earnings (lucrum cessans)



Opportunity to receive a transfer fee.
Only if concrete offer and the Player
agreed to the transfer.
If compensation for lost transfer fee is
recognized, no compensation for the loss
of the value of the services of the player,
otherwise over-compensation.
monteneri sports law & management
32
Damage suffered by the Club
Additional damage: Art. 42–44 CO

Replacement expenses: prove that the
new player was hired in substitution of the
other player (same position, need of
substitution, etc.);
• injured Club has to mitigate the damage while
replacing the player.
• Replacement shall be reasonable from a
sportive and economical point of view,
otherwise the compensation can be reduced.
monteneri sports law & management
33
Damage suffered by the Club
Additional damage: Art. 42–44 CO

Other additional damage
• Who claims damage must prove it

Sporting and commercial losses
following departure of Player difficult to
quantify (termination of sponsoring
contract?)
• If exact amount of damage cannot be
established, the judge must asses it in
his discretion having regard to the
ordinary course of events.
monteneri sports law & management
34
Damage suffered by the Club
Calculation in the CAS case law
• Matuzalem
 Value of the services of the player
 Less the savings made
 Add the specificity of sport
• Hadary
 Value of the services of the player
 Less the savings made
 No specificity of sport
• De Sanctis
 Replacement cost
 Less the savings made
 Add the specificity
of sport
monteneri sports law & management
35
Conclusions


Every case shall be assessed as to its own
merits.
CAS procedure is an adversarial system
and not an inquisitorial one, i.e. the
parties shall:




substantiate their allegations;
discharge their burden of proof.
Buy-out-clause (reasonable)
Otherwise, risk of going to a dispute.
monteneri sports law & management
36
Contractual stability between players and
clubs in the light of Art. 17(1) RSTP
Thank you for your attention !

Questions & Answers
Gianpaolo Monteneri
tel. +41 44 491 55 33
fax +41 44 491 55 34
[email protected]
monteneri sports law & management
37