Contractual stability between players and clubs in the light of Art. 17(1) RSTP

1. First Czechoslovak sports law conference Contractual stability between players and clubs in the light of Art. 17(1) RSTP ResortSvatáKateřina – Počátky 23-24 April 2013

2. 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

3. CAS Awards • CAS 2007/A/1359 FC Pyunik Yerevan v/EdelEdimaBete, 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 AhliSporting Club • CAS 2010/A/2145, 2146 & 2147 Morgan de Sanctis & Sevilla FC SAD v/ Udinese Calcio SpA monteneri sports law & management

4. Applicationandaimofthe 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. montenerisportslaw & management

5. The lawapplicabletothemerits Art. 187 PILA: lawchosenbytheparties; Not only national law, but also theregulationsof an international sportsfederation; Art. R58 CAS Code of Sport-related Arbitration. 5 monteneri sports law & management monteneri sports law & management

6. The lawapplicabletothemerits Art. R58 CAS Code: applicableregulationsandlawchosenbytheparties; ifnochoice: lawsofthecountrywherefederationthatissuedchallengeddecisionisdomiciled. Partiesusuallychoosesubsidiaryapplicationof Swiss law: expresslyor in concludentway: throughapplicationof FIFA regulations in relationwith Art. 66(2) FIFA Statutes („CAS shall primarily apply the various regulations of FIFA and, additionally, Swiss law.“ - Onlytofilllacunaein the RSTP or FIFA Statutes) 6 monteneri sports law & management monteneri sports law & management

7. The lawapplicabletothemerits Competence clause in theemploymentcontract National lawapplicable; Tailor-madesolutionforfootball? Sportingsanctions; Subsequent choiceoflawprevails on theapplicablelaw in thecontract. 7 monteneri sports law & management monteneri sports law & management

8. 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

9. Just Cause • Nodefinitionin RSTP, therefore Swiss law. • Not every violation of the employment contract justifies the termination of the contract for just cause. • Severe violationof the employment contract; serious breach of confidence. • Innocent party cannot be expected in good faith to continue the employment relationship(Art. 337.2 CO) • Tobeestablished on a casebycasebasis. • Only what occurred before the termination is relevant. monteneri sports law & management

10. Just Cause Consequences • The party terminating the contract with valid reason (innocent party) is notliable 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

11. 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 11 monteneri sports law & management monteneri sports law & management

12. 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? 12 monteneri sports law & management 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. 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

14. 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

15. 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 compensationis: • not payable, iftheclubhasterminatedthecontractwithout just cause; • payable, iftheplayerhasterminatedthecontractwithout just cause (in additiontocompensationforthebreach). monteneri sports law & management

16. Art. 17 Consequences of terminating a contract without just cause “(…) and unless otherwise provided for in the contract, (…)” • Buy out clause:Liquidateddamagesprovision. Party autonomy. • However: Art. 163.3 COthejudgeshallreduceexcessivelyhighpenaltyclauseorliquidateddamage (ordre public– excessive legal commitments) • Sport legislation of certain countries (e.g. Spain, Real Decreto 1006): compulsory buy-out-clause. • Forbidden in other countries because not compatible with mandatory labour law. monteneri sports law & management

17. Art. 17 Consequences of terminating a contract without just cause “(…) compensation for breach shall be calculatedwith due consideration • for thelawof the country concerned, • thespecificity of sport, • and any otherobjective criteria. (…)” • Discretionary power of the deciding authority monteneri sports law & management

18. Law of the country concerned • Law governingtheemploymentrelationship; closestconnectiontodispute. • Law ofthecountryoftheclub, wherethecontract was stipulatedandperformed • Oftennotailor-madesolutionforsport; • Correctiveeffectforcompensation? • Tobeconsidered – not tobeapplied; • Parties‘ submissionsmainlybased on RSTP • Art. R58 CAS Code, result: Swiss lawapplyingbydefault. monteneri sports law & management

19. 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

20. Specificity of Sport • Is thesolutionreachedjust and fair undercivillawas well asconsideringthesportingintestsoftheentirefootballcommunity? • Considerthespecificnatureofthedamagescausedbythebreachofcontract (playerasassetfrom a sportive andcommercialpointofview); • Correctiveeffect – subordinated in relationtootherdamagesawarded. No punitive orenrichingcharacter. monteneri sports law & management

21. 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

22. 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

23. 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

24. 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

25. The ObjectiveCriteria • Non exhaustive enumeration in Art. 17.1. • Criteria cover a numberofcategoriesofcases. • Not all criteriaapplicableforeverycase. • Combinationofcriteria not alwayspossible. • Someapplytoclubsotherstoplayers. • Art. 17 appliestoclubsandplayers: nocategoryshallbefavorized. monteneri sports law & management

26. 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“ amongthecriteria. monteneri sports law & management

27. ScopeofCompensation • 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. • Fullcompensationoftheinjuredparty. monteneri sports law & management

28. Calculation of Compensation • The judgingauthorityhas a widemarginofappreciationwhendeterminingtheamountofcompensation. • Compensationshallhave: • no punitive effect. SportingSanctions in Art. 17.3 RSTP; • noenrichingeffect/ noovercompensation. monteneri sports law & management

29. Damage suffered by the Player • Renumeration untiltermination, then: • Compensationofpositive interest: theremainderofthecontract. • Noundueenrichmentorovercompensation • Obligation tomitigationofdamage • Deductionofremunerationearnedwithnewclub • Art. 337 lit. c §1 & 2 CO monteneri sports law & management

30. Damage suffered by the Club • Player cannotbeforcedtoremainwiththe Club againsthis will. • Calculationofdamageis a difficulttask. • 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: lexspecialis monteneri sports law & management

31. Damage suffered by the Club Value oftheservicesofthe Player • Whatwould a clubspend on thetransfermarkettocontracttheservicesof an analogousplayer? • As salary; • As transferfee. • Offerfromthirdclubisindication on thevalueoftheservicesoftheplayer. montenerisportslaw & management

32. Damage suffered by the Club Loss ofearnings(lucrumcessans) • Opportunitytoreceive a transferfee. • Onlyifconcreteofferandthe Player agreedtothetransfer. • Ifcompensationfor lost transferfeeisrecognized, nocompensationforthelossofthevalueoftheservicesoftheplayer, otherwiseover-compensation. monteneri sports law & management

33. Damage suffered by the Club Additional damage: Art. 42–44 CO • Replacementexpenses: provethatthenewplayer was hired in substitutionoftheotherplayer (same position, needofsubstitution, etc.); • injured Club hastomitigatethedamagewhilereplacingtheplayer. • Replacementshallbereasonablefrom a sportive andeconomicalpointofview, otherwisethecompensationcanbereduced. monteneri sports law & management

34. Damage suffered by the Club Additional damage: Art. 42–44 CO • Other additional damage • Who claimsdamage must proveit • Sportingandcommerciallossesfollowingdepartureof Player difficulttoquantify (terminationofsponsoringcontract?) • Ifexactamountofdamagecannotbeestablished, thejudge must assesit in hisdiscretionhaving regard to the ordinary course of events. monteneri sports law & management

35. Damagesufferedbythe ClubCalculation in the CAS caselaw • Matuzalem • Value oftheservicesoftheplayer • Less the savings made • Add the specificity of sport • Hadary • Value oftheservicesoftheplayer • 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

36. Conclusions • Every caseshallbeassessedastoitsownmerits. • CAS procedureis an adversarialsystemand not an inquisitorialone, i.e. thepartiesshall: • substantiatetheirallegations; • dischargetheirburdenofproof. • Buy-out-clause (reasonable) • Otherwise, riskofgoingto a dispute. monteneri sports law & management

37. Contractual stability between players and clubs in the light of Art. 17(1) RSTP Thankyouforyourattention ! • Questions & Answers Gianpaolo Monteneri tel. +41 44 491 55 33 fax +41 44 491 55 34 info@monteneri.com monteneri sports law & management