On 21 January 2015, the Court of
arbitration for sport (CAS) rendered its award in the latest avatar of the Mutu case, aka THE sports law case that
keeps on giving (this decision might still be appealed to the Swiss Federal
tribunal and a complaint by Mutu is still pending in front of the European
Court of Human Right). The decision was finally published on the CAS website on
Tuesday. Basically, the core question focuses on the interpretation of Article
14. 3 of the FIFA Regulations on the Status and
Transfer of Players in its 2001 version. More precisely, whether, in case of a dismissal of a player
(Mutu) due to a breach of the contract without just cause by the
player, the new club (Juventus and/or Livorno) bears the duty to pay the
compensation due by the player to his former club (Chelsea). Despite winning maybe
the most high profile case in the history of the CAS, Chelsea has been desperately
hunting for its money since the rendering of the award (as far as the US), but
it is a daunting task. Thus, the English football club had the idea to turn
against Mutu’s first employers after his dismissal in 2005, Juventus and
Livorno, with success in front of the FIFA Dispute Resolution Chamber (DRC),
but as we will see the CAS decided otherwise[1].
I.
Facts and Procedure of the Mutu Case
The Mutu saga is probably one of the most well known sagas in the sports
law world (with the unavoidable Bosman case
and the up and coming Pechstein
one). It cumulates the glamour drama of a star’s downfall due to a positive
cocaine test and many important legal developments.
The saga started in July 2004 with a
private drug test conducted by Chelsea on Mutu that turned out to be positive
to cocaine. The club issued a fine and a warning. But, in October 2004, Mutu
was again tested positive to cocaine, this time by the English FA. Upon this
finding, and Mutu’s admission of having ingested cocaine, Chelsea decided to
terminate his contract on 28 October 2004. On 29 January 2005 the player was
registered at Livorno, before being transferred two days later to Juventus.
Juventus had reached its quota of non-EU players it could recruit from outside Italy
and used this strategy to circumvent the Italian rules applicable at that time.
Meanwhile, Mutu had challenged in
front of the FA’s Appeals Committee (FAPLAC) the decision of Chelsea to
terminate his employment contract. In April 2005, the FAPLAC decided that Mutu
had committed a breach of his employment contract without just cause. Mutu
appealed this decision to the CAS without success (CAS 2005/A/876). In May 2006, Chelsea launched a
complaint before the DRC to obtain compensation against the player on the basis
of the contractual breach without just cause. The DRC in its decision from 26
October 2006 (available here) held that it could not pronounce itself on
the matter and that Chelsea had to turn to FAPLAC. Chelsea appealed the
decision to the CAS, which enjoined the DRC to decide on the matter (CAS 2006/A/1192). Consequently, the DRC decided on 7 May 2008 to award €17, 173 990 in damages
to Chelsea. Unsurprisingly, Mutu decided to appeal the decision to the CAS, he was
especially contesting the amount of compensation awarded, which on 31 July 2009
endorsed the decision of the DRC (CAS 2008/A/1644). It even held that the damage
claims of Chelsea were higher, but decided it could not go ultra petita and award a higher sum to the club. Mutu, which had
unsuccessfully challenged the independence and impartiality of one of the
arbitrators due to his previous participation in the first Mutu case (CAS 2005/A/876), went on to contest the validity of the
award in front of the Swiss Federal Tribunal (SFT) mainly on this basis. In its
decision (4A_458/2009), the SFT rejected Mutu’s claims regarding the
lack of independence of the arbitrator, a decision that has attracted
widespread criticisms in the literature.[2]
Moreover, it also held that the amount of compensation awarded was not a
restriction to free movement in the sense of the Bosman ruling and could not amount to an infringement of Mutu’s
personality rights. Thereafter, Mutu decided to continue his fight in yet
another forum: the European Court of Human Rights (40575/10).
Chelsea had the final award giving
it the right to damages, but still needed to get hold on the money. To do so,
it even asked (and obtained) for the recognition and the enforcement of the
award in the US (see here), where Mutu was expected to have some
property. Nevertheless, Mutu went on to play for smaller and smaller teams,
thus earning less and less, and Chelsea’s hope of getting paid in full faded
away. However, on 15 July 2010, five years after Mutu’s move to Italy’s Serie A
in the first place, Chelsea decided to submit a petition to the FIFA DRC
against Juventus and Livorno, asking the DRC to find them jointly liable for
the awarded compensation. The claim was based on Article 14.3. of the RSTP
2001, stating that: "If
a player is registered for a new club and has not paid a sum of compensation
within the one month time limit referred to above, the new club shall be deemed
jointly responsible for payment of the amount of compensation." The DRC,
in an unpublished decision dated 25 April 2013 (see here and here), followed the interpretation of Article 14.3. RSTP suggested by Chelsea
and found that “under the clear wording of Article 14.3, the Player's New Club
was automatically jointly responsible for the payment of the Awarded
Compensation due by the Player, should the latter fail to fulfil his
obligations within a month of notification of the relevant decision”.[3]
This provision would make “no distinction between the termination of the
contract by a player without just cause and the termination of a contract by a
club with just cause”.[4]
It also held that "the registrations of the player with both [Appellants]
were so closely connected that, given the exceptional circumstances of this
specific matter, both Juventus and Livorno should be considered the player's
new club in the sense of art. 14 of the Application Regulations”.[5]
Both Juventus and Livorno decided to
appeal this decision to the CAS, which in its award decided to reject the DRC’s
reasoning.
II.
The Meaning of Article 14.3 FIFA
RSTP
The whole case focuses on the interpretation
of the wording of Article 14.3 of the RSTP 2001. Does it mean that every club,
whatever the circumstances, must pay compensation when it hires a player that
bears the responsibility of the breach of his contract? Or, does it restrict
this duty to the cases where the breach can be reasonably imputed to the will
of the player to leave his former club?
A. Contractual or statutory interpretation?
In order to determine the
interpretative tools to be used to identify the meaning of article 14.3 RSTP,
the Panel must first clarify the nature of Article 14.3 under Swiss law.[6]
Basically, is the provision of a contractual or quasi-statutory nature? The Panel
“does not consider that
there is a contractual relationship between the Appellants and Chelsea”.[7] Indeed, “[i]f there is no contractual relationship
between an indirect member (i.e. any of the Parties) and a sport federation
(i.e. FIFA), the conclusion should be the same as regards the relationship
between two indirect members of the same federation”.[8] Furthermore, the “[a]cceptance of
general rules (such as FIFA Regulations) does not necessarily entail subjection
to specific obligations when their scope must be determinable on the basis of
minimum criteria”.[9] Thus, the question raised implies
only the interpretation of the bylaw of a Swiss legal entity, FIFA.
The Panel highlights four methods of
interpretation under Swiss law:
- the literal interpretation ("interprétation
littérale");
- the systematic interpretation ("interprétation
systématique");
- the principle of purposive interpretation
("interprétation téléologique");
- the
principle of so-called "compliant interpretation"
("interprétation conforme").[10]
The “starting point” [11]
is always the wording of the text. The Swiss Federal Tribunal recognizes that
“[t]here is no reason to depart from the plain text, unless there are objective
reasons to think that it does not reflect the core meaning of the provision
under review”.[12] Moreover,
when asked to interpret a law, the SFT “adopts a pragmatic approach and follows
a plurality of methods, without assigning any priority to the various means of
interpretation”.[13]
However, the question is whether those interpretative methods should also apply
to the (private) bylaws of a private association. The Panel notes that “[a]s regards
the statutes of larger entities, it may be more appropriate to have recourse to
the method of interpretation applicable to the law, whereas in the presence of
smaller enterprises, the statutes may more legitimately be interpreted by reference
to good faith”.[14]
It finds that “FIFA's regulations have effects which are felt worldwide, and
should therefore be subject to the more objective interpretation principles”
applicable to Swiss laws.[15]
In short, the Panel is of the
opinion that FIFA regulations, bylaws of an association under Swiss law, are to
be interpreted analogously to national laws.
B. EU law as THE decisive contextual element to interpret the RSTP
The Panel first tries to interpret Article
14.3 on the basis of its wording. However, it is of the opinion that the
wording is ambiguous and therefore “it is necessary to look beyond the wording
of this provision”[16]
and adopts what it calls a “contextual approach”.
In short, “the context surrounding
the implementation of the RSTP 2001 is of crucial importance in interpreting Article
14.3”.[17]
In the view of the Panel (and the appellants), this context is constituted by
the application of EU law to sport and especially the Bosman case of the Court of Justice of the EU. Indeed, it is “[a]s
part of the reform of the FIFA and UEFA rules following the Bosman decision, [that]
FIFA adopted the RSTP 2001”.[18]
Thus, the requirements set by the CJEU’s jurisprudence in sports matters are
decisive to define the reach of the provisions included in the RSTP. Moreover,
the rejection decision of the Commission regarding the complaint submitted
against FIFA’s transfer regulations is also important.[19]
Specifically, the Panel deduces from the Commission’s decision that it
recognizes the need to sanction unilateral termination of contracts.[20]
In the present case, it is precisely
the “contractual
stability [that] is at the centre of the debate”.[21]
In a nutshell, does the paramount objective of contractual stability justify
that Juventus and Livorno be considered jointly liable for the breach of
contract of Mutu leading to the termination by Chelsea of his contract?
In this regard, Chelsea considers
that Article 14.3 “is designed to protect contractual stability by means of a
deterrent, namely by ensuring that the parties who benefit from the player's
breach – the player himself and his New Club – are not allowed to enjoy that
benefit without paying compensation to the player's former club”.[22]
While, Juventus and Livorno consider that “Article 14.3 – and FIFA regulations
in general – are not meant to protect a club's bad investment”.[23]
Which one of this two interpretations is EU law supporting? That is the
question.
For the Panel
“the Player was the author of his misfortune, but the Club was not required to
terminate his employment if they still valued his services and preferred to
hold him to his contract”. Indeed, “[t]he Club was entitled, not obliged, to
dismiss him” and it “makes all the difference in terms of assessing the
position of his subsequent employer(s) under the FIFA regulations, read in light
of their object and purpose”.[24]
As “Chelsea put an end to the Player's Employment Contract, no issue of
contract stability, whose purpose was to safeguard the functioning and
regularity of sporting competition, was at stake”.[25]
Thus, “it strains logic for the club now to contend that the Appellants somehow
enriched themselves by acquiring an asset (the player) which it chose to
discard”.[26]
Moreover, “the Panel finds it hard to understand how, in the name of contract
stability, Chelsea's claim of € 17,173,990 against the Player is to be borne
jointly and severally by the New Club, which has never expressed a specific
agreement in this regard, had nothing to do with the Player's contractual
breach, and was not even called to participate in the proceedings, which
established the Awarded Compensation”.[27]
Additionally, it seems “incongruous for Chelsea to try to seek an advantage
from the fact that the New Club benefits from the Player’s services, whereas
Chelsea was no longer interested in his service”.[28]
Hence, “Chelsea's conduct appears to have had no other purpose than to increase
its chances for greater financial compensation” and the Panel “does not see the
connection between the damage being claimed and the interest of protecting
legitimate contractual expectations”.[29]
In other words, the interpretation of Article 14.3 RSTP supported by Chelsea
does not fit the fundamental objective of this provision, as highlighted by its
legislative context (mainly the Lethonen
case of the CJEU and the Commission’s rejection decision
in the competition law complaint against the FIFA transfer system) and cannot
be followed.
Interestingly,
the Panel also recognized that “[t]here must be a balance between the players’
fundamental right to free movement and the principle of stability of contracts,
as supported by the legitimate objective of safeguarding the integrity of the
sport and the stability of championships”.[30]
In the present case, “[i]f the New Club had to pay compensation even if it is
established that it bears no responsibility whatsoever in the breach of the
Employment Contract, the player would be hindered from finding a new employer”.[31]
Indeed, “it is not difficult to perceive that no New Club would be prepared to
pay a multi-million compensation (or transfer fee), in particular for a player
who was fired for gross misconduct, was banned for several months, and suffered
drug problems”.[32]
In short, “Chelsea's interpretation of Article 14.3 would bring the matter back
into pre-Bosman times, when transfer fees obstructed the players' freedom of
movement”.[33]
This is unacceptable for the Panel. Had Chelsea’s interpretation been tolerated
“the balance sought by the 2001 RSTP between the players' rights and an
efficient transfer system, which responds to the specific needs of football and
preserves the regularity and proper functioning of sporting competition would
be upset”.[34]
Consequently, this interpretation is deemed “incompatible with the fundamental
principle of freedom to exercise a professional activity and is disproportionate
to the protection of the old club's legitimate interests”.[35]
Thus, the Panel concludes “that Article 14.3 does not apply in cases where it
was the employer's decision to dismiss with immediate effect a player who, in
turn, had no intention to leave the club in order to sign with another club and
where the New Club has not committed any fault and/or was not involved in the
termination of the employment relationship between the old club and the Player”.[36]
Conclusion
This award
is of great interest, not so much for its solution - it is difficult to
understand how the FIFA DRC could construct Article 14.3 RSTP as imposing a
joint liability on Juventus and Livorno - as for the method used to reach it. The
CAS had already in the past based its interpretation of the RSTP on its
legislative history and especially on it being the result of a negotiation with
the EU Commission in the aftermath of the Bosman
ruling.[37]
It is the first time, however, that it does so in such length and depth. This
contextual reading of Article 14.3 tipped decisively the balance in favor of the
appellants. Furthermore, it is a timely reminder for other CAS Panels that
FIFA’s RSTP must be interpreted in conformity with EU law and especially the
case law of the CJEU on the free movement of workers. If not, CAS awards will
face problems at the enforcement stage, as highlighted by the recent SV Wilhelmshaven ruling of the OLG Bremen (see our comment here
on the EU law dimension)[38].
This implies that the restrictions it imposes on the free movement of players
must be justified by a legitimate objective recognized by the CJEU and be
proportionate to attain this objective. In the present case, the interpretation
of 14.3 promoted by the DRC runs counter to this requirement as it is not truly
aimed at an acceptable legitimate objective and certainly not a proportionate
mean to attain contractual stability. Nonetheless, this reasoning could also
put into question previous interpretations of the FIFA RSTP. This is especially
true for the case-law on the implementation of Article 17 RSTP. The Panel,
conscious of the potential implication of the analysis used, is adamant that
this case-law is compatible with an EU law conform interpretation. Yet, EU law
scholars strongly oppose this view and it can be reasonably argued that the way
damages are calculated in case of a breach of a contract under Article 17 is
not compatible with the letter and spirit of EU law as applied to the transfer
system in Bosman and after[39].
This case
will set a resounding precedent for future CAS awards. Lawyers dealing with
disputes involving the FIFA RSTP in front of the FIFA DRC and the CAS should
take note of this development and introduce wider references to EU law in their
briefs.