First Czechoslovak sports law conference Contractual stability between

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 : n n n Protection of minors Training of young players Solidarity in the football world Contractual stability Dispute resolution system monteneri sports law & management 2

CAS Awards n n 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 El. Hadary v/ FIFA & Al Ahli Sporting Club CAS 2010/A/2145, 2146 & 2147 Morgan de Sanctis & Sevilla FC SAD v/ Udinese Calcio Sp. A monteneri sports law & management 3

Application and aim of the FIFA Regulations n The application: • Cases with an international dimension; • Cases with ITC request; • Dispute Resolution Chamber – CAS; • Federations responsible for national disputes (NDRC & arbitration tribunals). n The aim: maintainance of contractual stability between clubs and players. monteneri sports law & management 4

The law applicable to the merits n n n Art. 187 PILA: law chosen by the parties; Not only national law, but also the regulations of an international sports federation; Art. R 58 CAS Code of Sport-related Arbitration. monteneri sports law & management 5

The law applicable to the merits n n n Art. R 58 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: n n 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 n n 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 n n n 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 n n 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 n 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. n n Player excluded from training (personality right Art. 28 CC) Parties autonomy: buy-out clause monteneri sports law & management 11

Just cause for a Club n Club shall put the Player in default; Player does not offer his services; n Unjustified absence of the Player; n Player plays on purpose under his possibility; n • Difficult to prove; • But not if Player does not have a certain level. n n 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. (…)” n n n 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, (…)” n 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 n n Law governing the employment relationship; closest connection to dispute. Law of the country of the club, where the contract was stipulated and performed • • n 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. R 58 CAS Code, result: Swiss law applying by default. monteneri sports law & management 18

Specificity of Sport n n 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 n n n 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, - n 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 • • n n 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 n n n 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 n n 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 n n 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 n n 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 n n n 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 n Art. 337 lit. c § 1 & 2 CO monteneri sports law & management 29

Damage suffered by the Club n n 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 n What would a club spend on the transfer market to contract the services of an analogous player? • As salary; • As transfer fee. n 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) n n n 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 n 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 n Other additional damage • Who claims damage must prove it n 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 n Value of the services of the player n Less the savings made n Add the specificity of sport • Hadary n Value of the services of the player n Less the savings made n No specificity of sport • De Sanctis n Replacement cost n Less the savings made n Add the specificity of sport monteneri sports law & management 35

Conclusions n n 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: n n 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 ! n Questions & Answers Gianpaolo Monteneri tel. +41 44 491 55 33 fax +41 44 491 55 34 info@monteneri. com monteneri sports law & management 37