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CAS: the Operation of the Transfer System

The transfer system is plainly designed to deter players from breaking their contracts and it thereby intends to promote contractual stability in the interest of clubs. It does so by envisaging the possible imposition of an obligation to compensate in the event of termination of contract without just cause plus, in defined cases arising within the contractual ‘protected period’, supplementary sporting sanctions. It bears repetition that these restraints would not be tolerated in ‘normal’ industries, where the position of the employee wishing to change employer is dictated by contract law and employment law. The transfer system adds an extra level of constraint. The question to be addressed is always not whether the transfer system is justified but rather whether the transfer system is justified in sport but not elsewhere. Is sport’s special character justification enough? Those defending the system tend to emphasize the virtues of contractual stability in team-building; those attacking it prefer the importance of the autonomy of the individual employee and the prevalence of contractual negotiation as a means to retain valued workers.[1] The practical operation of the system depends heavily on how compensation is calculated and how severe and frequent is the imposition of sporting sanctions. The higher the compensation, the more severe and frequent the sanctions, the more the interest of the clubs prevails over the interest of players. The lower the compensation, the milder and the more uncommon the sporting sanctions, the more that the freedom of the player to choose an employer is enhanced. Moreover, as will be examined more fully later, the place at which this balance is set is also highly significant in determining the extent to which the FIFA Regulations are likely to withstand scrutiny when reviewed under EU law.

Inspection of FIFA’s Annual Reports[2] [3] [4] [5] shows that a very large number of disputes between players and clubs are settled before the Dispute Resolution Chamber (DRC), which is established under the governing Regulations.82 Transfers of players who are in contract happen, compensation is paid, they do not go to national courts. The system works!

The CAS, the Court of Arbitration for Sport, was met in Chapter 2. It has become especially influential in shaping the transfer system.83 Its treatment of cases involving termination of contract without just cause, as defined in the Regulations, is especially revealing. Such cases reach the CAS as appeals against decisions taken by the DRC and they typically involve sanctions imposed on players of a type that certainly would not be known outside sport. This is where the FIFA Regulations have teeth. The CAS has begun to piece together a—so far rather inconsistent—set of guiding principles.

The first ruling of the CAS which grabbed attention was Webster.84 Andy Webster was a Scottish international defender who played in Scotland for Hearts. He refused offers of a new extended contract and, relying on Article 17 of the Transfer Regulations, he elected to leave before the existing contract had expired and he signed a contract with Wigan Athletic in England. Hearts brought a claim for compensation before the DRC, the decision of which was duly appealed to the CAS.

The CAS decided that compensation should not be calculated according to the player’s value on the transfer market, for that would have the effect of reinstating the situation existing before the Regulations were introduced. Nor is compensation to be calculated with reference to the wages payable under the new contract, that is, the one offered by the new club, Wigan. Instead, the CAS ruled, the club which the player has quit should receive only what would have been due to the player under the residual length of the contract which he had broken. Hearts had sought in excess of ?4 million. The DRC had decided they should receive ?625,000. But by the CAS, Hearts were awarded just ?150,000.

Webster generated instant and acute anxiety. The ruling was criticized as vastly unbalanced in favour of the short-term interests of players and against the need to promote stability in the game. The DRC decision was reported as clearing a ‘path for hordes to follow’.85 The subsequent CAS ruling, which reduced the size of the payment due, was greeted with still greater dismay by clubs and federations since it seemed to encourage contract-breakers by confining monetary compensation to (usually) a relatively low amount and, moreover, one readily calculated in advance by the player who is able to make a shrewd calculation of what suits his or her interests best.86

The CAS quickly changed its tune. Webster had been decided by the CAS in January 2008. A differently constituted panel decided Matuzalem in May 2009. And a quite different approach was taken.87 Much heavier emphasis was placed on the promotion of contractual stability and, contrary to Webster, it was accepted that value is related to the transfer fee foregone by the ‘losing’ club.

Matuzalem was a Brazilian player. He played for Shakhtar Donetsk in Ukraine. He terminated his contract pursuant to Article 17 of the Regulations—that is, without just cause—and he joined Real Zaragoza in Spain. Later he was loaned to Lazio in Italy. Shakhtar claimed compensation.

Having found there was no agreed contractual provision, the CAS then took the view, contrary to that which reigned in Webster, that calculation should be assessed with reference to the transfer fee foregone. The player, having left Shakhtar, had subsequently been the subject of a valuation agreed between Zaragoza and Lazio, so there was helpfully concrete evidence of the value placed by the market on his services. This was duly relied on as the principal means of calculation. However, the CAS also chose ‘to take into due consideration the specific nature and needs of sport’, which directed that not only the interests of player and club but also ‘those of the whole football community’ should be taken into account.88 It was in this vein considered relevant that the breach had occurred with fully two years remaining on a five-year contract, rather than just a few months; and that the player left the club just a few weeks before the start of the qualifying rounds of the lucrative UEFA Champions League. The CAS therefore set an additional indemnity amount equal to six months of salary payable under the contract by Shakhtar Donetsk, which amounted to €600,000. [6] [7] [8]

In total an award in favour of Shakhtar of almost €12 million was made to cover the two years of the contract ‘lost’ to Shakhtar, whereas, had the ‘Webster methodology’ been followed, only €2.4 million would have been payable.

The inquiry will be harder where there is no subsequent evidence of market value of the type that was helpfully available in Matuzalem. The process of arbitration tends typically to generate smudgier lines in its accumulated practice than the case law of ‘ordinary’ courts, but even so there is something troublingly ad hoc about this process of calculation. Matuzalem has attracted astute criticism for its thin reasoning and the uncertainty it creates.[9] [10] [11] [12] [13] However, the approach adopted in Matuzalem plainly enhances the deterrent effect of Article 17 of the Transfer Regulations, and is much more conducive to contractual stability. As far as clubs and governing bodies are concerned, it was a welcome re-orientation in favour of deterring contract-breaking.

A key message for those alarmed by the unpredictability of the likely calculation of compensation, especially given the insistence in Article 17 and the CAS’s rulings that the specificity of sport shall inform the assessment, is that it remains possible to address the matter in the contract itself. This allows all involved, including poacher clubs, to know where they stand. The CAS has made it clear that it will normally treat a contractual clause setting out an agreed sum payable in the event of unilateral breach of contract as enforceable. This allows players seeking to terminate their relationship with their current club to ‘buy out’ the contract. The CAS has also emphasized that it is important for the parties to make clear that that is what they have in fact done.9° It seems right to be cautious about deferring to the contractual autonomy of players, especially where younger players or at least players without access to good legal advice are concerned.91 If the CAS did not take that point, a national court asked to deal with the matter probably would.92

In 2010 in its De Sanctis decision, the CAS stressed the wide range of potentially relevant factors in the assessment of due compensation, none of which on its own would be decisive, save only that it would give effect to a liquidated damages clause.93 In the absence of such a clause, it would consider costs incurred, lost transfer fee(s), the player’s level of remuneration, the time remaining under the old contract, whether or not the breach has occurred within the protected period, the law of the country concerned, and the ‘specificity of sport’. This, the ruling stresses, is not an additional head of compensation but rather a ‘correcting factor’, allowing consideration of other objective elements not explicitly covered by Article 17 of the Regulations.94 In the case itself De Sanctis had broken his contract with Udinese in Italy and moved to Sevilla in Spain. The DRC made an award of some

€4 million, but the CAS, criticizing the lack of detailed reasoning in the DRC decision, awarded a lower sum, €2,250,055. It did, however, take the view that the loss suffered when a ‘hero’ leaves a club may not be readily provable in euros and it is here that an increased award inspired by the specificity of sport may be appropriate. Explicitly following the reasoning on this point advanced in Matuzalem, it was decided that the award should include a sum of €690,789, being six months’ pay under the new contract.

Admittedly the CAS rulings are internally not fully consistent. Juventus v Chelsea involved an attempt by Chelsea to make Juventus jointly liable for the sum of some €17 million due under a CAS award in favour of Chelsea and payable by Adrian Mutu, a Romanian player who had been dismissed by Chelsea after being suspended for doping.95 He had not paid, but had joined Juventus on the expiry of his ban. The CAS treated the question of how far to protect ‘contractual stability [as] ... at the centre of the debate’ about Article 14(3) of the Regulations.96 The CAS was particularly concerned that were Chelsea’s claim to succeed, then players in Mutu’s position would find it hard to find a new employer. This, the ruling noted, would reach back to ‘pre-Bosman times’, offer ‘disproportionate’ protection to Chelsea, and upset the balance between ‘players’ rights and an efficient transfer system’.97 So Chelsea could have decided not to sack the player or they could, having sacked him, pursued him for compensation—but they could not also pin liability on the club that had offered the player a chance to resume his career. This approach shows how the reasoning in Matuzalem is open to criticism as excessively detrimental to the contract-breaking player, even seen from within the CAS’s own case law. But Matuzalem shows that the CAS is capable of interpreting the power to make a compensation award in a way that leads to a very high amount.

There is much less relevant practice dealing with sporting sanctions as distinct from compensation. However, Matuzalem has played his part in developing the lex sportiva and its limits here too. In 2012 the Swiss Federal Supreme Court decided Matuzalem9s This was a follow-up to the original finding that he should pay compensation to Shakhtar. He had not paid it. He was then banned from playing for a specified period by FIFA: this was a sporting sanction of the type envisaged by the FIFA Regulations. A subsequent CAS ruling affirmed the imposition on Matuzalem of this sanction.99 Article 190(2)(e) of the Swiss Private International Law Act (PILA) provides that an arbitral award may be set aside if it is incompatible with public policy. Matuzalem argued before the Swiss Court that the CAS award violated his personal freedom to such an extent that it offended against this notion. The Swiss Court agreed. It found that an excessive limitation of freedom is contrary to public policy if the rights of the individual concerned are clearly and severely infringed. The Swiss Supreme Court found that an open-ended playing ban, such as the one Matuzalem was facing, which could be triggered at the sole discretion of a former employer, constituted a severe infringement of the player’s individual rights. [14]

Moreover, the Court noted, the ban was intended to secure enforcement of the monetary claim against the player to the advantage of a member of FIFA and indirectly to FIFA itself: in short, the sanction was applied in circumstances of a conflict of interest.100 Moreover, the sporting sanction was not necessary for the purpose of enforcing the monetary award of compensation, since the claim by the previous club against Matuzalem, which has been upheld by the CAS, could anyway be enforced in a national court against him by reliance on the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards without the need for an additional private sanction. All this was examined in Chapter 2—this is the contractual protection afforded by the lexsportivas embrace of arbitration which in the Swiss Court’s estimation had plainly been pursued with exorbitant aggression. But none of this changed the original finding that Matuzalem was liable to pay compensation to Shakhtar under the FIFA Regulations for having terminated his contract without just cause.

  • [1] See eg S Gardiner and R Welch, ‘The Contractual Dynamics of Team Stability versus Player Mobility:Who Rules the Beautiful Game?’ (2007) 5(1): 3 ESLJ, available via accessed 29 November 2016.
  • [2] accessed 29 November 2016.
  • [3] 82 FIFA Regulations (n 68) Art 24. See F De Weger, The Jurisprudence of the FIFA Dispute ResolutionChamber (2nd edn, TMC Asser 2016).
  • [4] The website of the Court of Arbitration for Sport is at . The case lawis at . For discussion of the case law,see McArdle (n 72) ch 8; A Wild (ed), CAS and Football: Landmark Cases (TMC Asser 2012) ch 4;‘The Economic and Legal Aspects of Transfers of Players’ (n 78) ch 2 (this Study is examined furtherat sect 9.11).
  • [5] CAS 2007/A/1298-1300.
  • [6] ‘Pioneer Webster’s Contract Buy-Out Clears Path for Hordes to Follow’ The Guardian (London,9 May 2007) 4.
  • [7] eg D Castles, ‘Wenger Sees the End of Transfer Fees: Arsenal Manager Says the Power has Shiftedfrom Clubs to Players’ The Observer (London, 29 June 2008) Sports section; D Hytner, ‘FIFA TransferRule Undermines My Youth-Team Policy, Says Wenger’ The Guardian (London, 22 April 2008) Sportssection, 5.
  • [8] CAS 2008/A/15 1 9-152 0 . 88 Matuzalem (n 87) para 153.
  • [9] eg B Dabscheck, ‘Being Punitive: The Court of Arbitration for Sport Overturns Webster (2009)9(3—4) Intl Sports LJ 20.
  • [10] 9° eg Matuzalem (n 87) para 74.
  • [11] See M Giancaspro, ‘Buy-Out Clauses in Professional Football Player Contracts: Questions ofLegality and Integrity’ (2016) 16 Intl Sports LJ 22.
  • [12] 92 On EU law’s insistence on the protection of the weaker party, see Ch 2.2.
  • [13] CAS 2010/A/2145-2147. 94 ibid para 96.
  • [14] CAS 2013/3365. 96 ibid para 158 . 97 ibid paras 174—75. 98 4A_558/2011, 27 March 2012. See also Ch 2.2. 99 29 June 2011, unreported.
 
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