Terminating a contract between a football club and a football player
1. Background
Where a football club is to sign a professional contract with a player, it is often obliged by its national football association to use a standard contract issued by the football association. Such a standard contract would normally be based on the framework provided in FIFA’s Regulations on the Status and Transfer of Players (RSTP) although it can to some degree be amended in order to comply with domestic labour law.
2. Termination of contracts with professional football players
2.1 Deviation between domestic labour law and FIFA’s RSTP
When a standard contract has termination provisions that deviates from FIFA's regulations, or when domestic labour law differs from FIFA regulations, the extent of the club’s possibility to terminate the football player’s contract would depend on which of the regulations that prevail. FIFA has the right to assess disputes related to, among other things, contract disputes of an international dimension, which in practice includes, inter alia, all contractual disputes between clubs and foreign players. This follows from FIFA's transfer regulations art. 22:
”Without prejudice to the right of any player or club to seek redress before a civil court for employment-related disputes, FIFA is competent to hear:
b) employment-related disputes between a club and a player of an international dimension, unless an independent arbitration tribunal guaranteeing fair proceedings and respecting the principle of equal representation of players and clubs has been established at national level within the framework of the association and/or a collective bargaining agreement”
Jurisprudence from FIFA’s Dispute Resolution Chamber (DRC), shows that DRC primarily considers disputes according to the FIFA's transfer regulations, and to a small extent, the based on national circumstances. This is illustrated in a case for DRC of May 10, 2012. The club and the player had then signed a contract that, inter alia, had a clause with the following wording:
“The Club and the Player hereby agree that in case the Club plays for any reason during the validity of the Player´s employment with club A, in the SECOND or Lower Division of the country C League, the Club has the right to terminate the Player´s contract and the Player shall be free to be registered to in any Club of his own choice. The Club and/or the Player, in that event, accepts that such termination is for just cause and shall not be entitled to any compensation”.
In assessing the validity of this clause, DRC stated the following:
“In this respect, the DRC judge came to the conclusion that both art. 6, in combination with the alleged internal regulations of the club, and art. 14 would be unilaterally applicable in the event of an unsuccessful sporting performance of the club. The DRC judge established that these clauses being to the benefit of the club only, and, thus, having a unilateral character, in addition to the failure of the Respondent to present documentation corroborating its allegations relating to the implications of art. 6 of the employment contract, if at all valid, such clauses cannot be taken into consideration and that the Respondent’s arguments in this connection must be rejected.“
DRC's jurisprudence where the cases are mainly assessed against FIFA's transfer regulations, and to a small extent against national regulations, indicates that disputes between clubs and foreign players, which constitute a relatively large proportion of all professional players, would be assessed by a different set of rules than players with the same nationality as the league they play in, as the foreign players could choose to run a dispute for DRC according to FIFA's transfer regulations, as opposed to disputes between clubs and domestic players who would have to deal with the provisions in the standard contract and domestic labour law. This could create an inconsistent situation for both clubs and players, for example when domestic labour law or standard contract provisions allow the club to terminate the football player’s contract, but where such a termination is in violation of FIFA’s RSTP. In such a situation the foreign players would be better protected from termination than the domestic players.
2.2. FIFA’s transfer regulations
2.2.1. Historical
FIFA's transfer regulations, RSTP, came into force in 2001, following an agreement between FIFA and the EU. The background for this agreement model was the Bosman ruling issued by the European Court of Justice in 1995. The case concerned a player in a Belgian second division club who, after his contract expired, wanted a transfer to a French club. His Belgian club did not accept the transfer fee offered by the French club and refused the player to leave the club. The Bosman ruling confirmed that a player is entitled to a free transfer to another club in the EU/EEA area when the contract has expired.
The Bosman case challenged the special scheme of transfers practiced in the football industry where the player/employee's ability to change club/employer was dependent on the consent of the existing club/employer. The Bosman ruling made it necessary to make provisions that regulated to which extent clubs could demand a transfer fee for players who wanted to sign for a new club. For FIFA, it was important to maintain the transfer scheme, to ensure that the clubs can educate and train players, knowing that they could get a transfer fee if the player agreed to transfer to another club.
From 1995 to 2001, the EU and FIFA worked together on a new transfer system. FIFA's new transfer regulations, RSTP, came into force in 2001, and have undergone some changes since then, but the main principles are the same.
2.2.2. FIFAs RSTP, duties for national associations
The extent to which each national football association is obliged to comply with FIFA's provisions in its own legislation is regulated in FIFA’s RSTP art. 1-3 b):
b) Each association shall include in its regulations appropriate means to protect contractual stability, paying due respect to mandatory national law and collective bargaining agreements. In particular, the following principles must be considered:
– article 13: the principle that contracts must be respected;
– article 14: the principle that contracts may be terminated by either party without consequences where there is just cause;
– article 15: the principle that contracts may be terminated by professionals with sporting just cause;
This means that the national football associations are obliged to implement rules that ensure stability in the contractual relationship between football clubs and football players. This obligation must be seen in light of how FIFA defines stability in the contractual relationship. Furthermore, the national football associations are obliged to consider having in their regulations provisions ensuring that a contract can only be unilaterally terminated where there is just cause. In other words there is no direct obligation for the national associations to include FIFA's wording or model in their own regulations, but there is as a strong recommendation that this is implemented. As long as the national football associations have included in their regulations rules that ensure stability of the contractual relationship, there is thus a certain degree of freedom of choice with regard to how this is implemented.
2.3. More about termination provisions in FIFA’s RSTP
2.3.1: General overview of termination provisions
In short, the possibility of unilaterally terminating the contract for club and player will have to be considered in concrete terms, based on whether there is just cause or not. In addition to the player’s and club’s possibility to terminate the contract if there is just cause, an established player can terminate the contract if there is a sporting just cause. Whether or not the player is to be considered established must be considered in concrete terms, but this is a provision that is intended for players who have previously been a part of the starting eleven for several seasons, and who no longer is given opportunities to play for the first team.
The consequences of terminating a contract will depend on whether there is just cause, or possibly sporting just cause, and whether one is within the protected period of three / two years. Both the player and the club may be subject to financial sanctions (liability for the contracting party) and sporting sanctions (e.g., the player may be suspended for a period and the club may be excluded from one or more transfer windows). The consequences of the various scenarios related to dismissal are as follows:
1) The player terminates the contract with sporting just cause:
• No sporting sanctions against player or club
• The player will be liable for damages
2) The player terminates the contract with just cause:
• No sporting sanctions against player
• Possible sporting sanctions against club, if within protected period
• The club will be liable for damages
3) The player terminates the contract without just cause in the protected period:
• Possible sporting sanctions against the player
• The player will be liable for damages
4) The player terminates the contract without just cause after the protected period:
• No sporting sanctions against the player
• The player will be liable for damages
5) The club terminates the contract with just cause:
• No sporting sanctions against the club
• Possible sporting sanctions against the player
• The player will be liable for damages
6) The club terminates the contract without just cause in the protected period:
• Possible sporting sanctions against the club
• The club will be liable for damages
7) The club terminates the contract after the protected period:
• No sporting sanctions
• The club will be liable for damages
2.3.2: More about sporting just cause:
Termination due to sporting just cause is a relatively narrow possibility for an established player to terminate the contract for sporting reasons. The provision is intended for circumstances in which a former key player is removed from the first team. There is little jurisprudence on this issue, but the commentary edition on FIFA RSTP says the following about the provision:
“Terminating a contract for sporting just cause
The Regulations reflect the fact that an established player may have valid sporting reasons – so-called ‘sporting just cause’ – to prematurely terminate a long-term contract unilaterally if he has appeared in less than 10% of the official matches of his club during a season. Consequently, the two mandatory conditions for a player to be entitled to claim sporting just cause are, first of all, that the player is recognised as an established player and secondly, he has not played in 10% of the official matches of his club. But what is an established player? The Regulations do not define this term. Consequently, in order to understand what an established player is, it is essential to focus on the scope of this provision. The key element here is the fact that a player with a certain level of footballing skill does not have sufficient opportunities in a club and therefore wishes to leave in order to join a club where he has the opportunity to play on a regular basis. “Established” is therefore first of all a player who has terminated and completed his training period. Furthermore, his level of footballing skill is at least equal to or even superior to those of his team-mates who appear regularly. One possible reason for the player in question not playing (regularly) is because his position has already been taken by another player with similar characteristics. A further condition imposed by the Regulations in order for a player to be able to claim sporting just cause is that he has appeared in less than 10% of the official matches of his club during a season. “Appearance” is to be understood as being fielded and thus actively taking part in a game. The championship, as well as national and international cup matches, are to be taken into account in order to establish the percentage of games played. As noted above, it is not possible to compile an exhaustive list of characteristics to define an “established player”. The deciding body must therefore evaluate the player’s specific circumstances in the appraisal of such cases and the existence of sporting just cause on a case-by-case basis. In particular, the following situations may play a fundamental role in the evaluation: the player’s position on the pitch, any injuries or suspensions sustained by a player that have prevented him from playing over a certain period of time as well as any situation that may justify, from a sporting point of view, the fact that the player has not been fielded on a regular basis Whenever it is established by the competent body that sporting just cause exists, no sporting sanctions are imposed on the player terminating the contract. However, compensation is payable to the club. The club may lose its entitlement to compensation if the player can prove that the club has completely neglected the player from a sporting point of view, as it was not interested in his services.6 A player who claims sporting just cause may only terminate his contract on this basis in the 15 days following the last official match of the season of the club for which he is registered. Failure to respect this provision will lead to the imposition of disciplinary sanctions. It must, however, also be considered that such a late termination will have financial consequences for the player, who must compensate the club for damages incurred as a result of the contract being terminated incorrectly.”
2.3.3: More about just cause
The clear starting point in FIFA’s RSTP is that the contract must be respected. The contract can only be terminated if there is just cause, or if an established player has sporting just cause. The principle that the contract must be respected is supported by the commentary edition of the FIFA's transfer regulations, which states:
“Respect of contract:
The Regulations aim to ensure that in the event of a club and a player choosing to enter into a contractual relationship, this contract will be honoured by both parties. A contract between a player and a club may therefore only be terminated on expiry of the contract or by mutual agreement. Unilateral termination of a contract without just cause, especially during the so-called protected period, is to be vehemently discouraged.
The definition of just cause and whether just cause exists shall be established in accordance with the merits of each particular case. In fact, behaviour that is in violation of the terms of an employment contract still cannot justify the termination of a contract for just cause. However, should the violation persist for a long time or should many violations be cumulated over a certain period of time, then it is most probable that the breach of contract has reached such a level that the party suffering the breach is entitled to terminate the contract unilaterally. The following examples explain the application of this norm.
In the event of just cause being established by the competent body, the party terminating the contract with a valid reason is not liable to pay compensation or to suffer the imposition of sporting sanctions.
On the other hand, the other party to the contract, who is responsible for and at the origin of the termination of the contract, is liable to pay compensation for damages suffered as a consequence of the early termination of the contract and sporting sanctions may be imposed.”
Termination due to just cause may exist if the counterparty has breached its part of the agreement. The commentary on FIFA's transfer regulations and extensive practice from DRC and CAS shows what is needed for one of the contracting parties to be able to terminate the contract with just cause.
The commentary on FIFA's transfer regulations refers to the following examples of what should be considered just cause:
“Example 1: A player has not been paid his salary for over 3 months. Despite having informed the club of its default, the club does not settle the amount due. The player notifies the club that he will terminate the employment relationship with immediate effect. The fact that the player has not received his salary for such a long period of time entitles him to terminate the contract, particularly because persistent noncompliance with the financial terms of the contract could severely endanger the position and existence of the player concerned.
Example 2: player A, employed by club X, has displayed an uncooperative attitude ever since his arrival at the club. He does not follow the directives given by the coach, he regularly argues with his team-mates and often fights with them. One day, after the coach informs him that he has not been called up for the next championship fixture, the player leaves the club and does not appear for training on the following days. After two weeks of unjustified absence from training, the club decides to terminate the player’s contract. The player’s uncooperative attitude towards the club and his team-mates would certainly justify sanctions being imposed on the player in accordance with the club’s internal regulations. The sanctions should, however, (at least in the beginning) be a reprimand or a fine. The club would only be justified in terminating the contract with the player with just cause if the player’s attitude continued, together with the player disappearing without a valid reason and without the express permission of the club”
Furthermore, relatively extensive jurisprudence exists from DRC and CAS, regarding the question of whether there is just cause. Below is a review of some central cases.
CAS: Ariel Ortega - Fenerbache:
The dispute between the Argentine midfielder Ariel Ortega and the Turkish club Fenerbache was one of the first to address the issue of whether there was just cause for breach of an agreement. In May 2002, Ortega signed for Fenerbache, after a transfer from the River Plate for a $ 7,500,000 transfer sum. February 12, 2003, Ortega played an international match in the Netherlands, and instead of returning to Turkey, he went home to Argentina. In the months that followed, the club sent written requests to Ortega's representatives, requesting him to return. On April 11, the club sent the case to FIFA, where it was processed in the DRC. The DRC concluded that Ortega had broken the contract without just cause, and that he was obliged to pay the club $ 11 million. Ortega was also suspended for four months. CAS confirmed the judgment: “Mr Ortega’s explanation for not returning to Turkey being inadequate, our conclusion is that he has failed to identify any breach of contract by the Club a fortiori any such breaches would justify Mr Ortega’s refusal to return from Argentina or, in the vocabulary of the FIFA rule, “just cause”. It is therefore inevitable that we should find that Mr Ortega was himself in breach.”
CAS: Phillippe Mexès – Auxerre[1]:
The case concerned the French player Phillippe Mexès, who was under contract with Auxerre. Mexès wanted a move to AS Roma, but Auxerre did not accept Roma's bid. Mexes terminated the contract with Auxerre, referring to the fact that at the last contract extension, the player was verbally assured that he could leave the club for a larger club if possible, and signed for Roma in June 2004. Auxerre complained to the DRC where it, inter alia, was assessed whether the extension of the contract resets the protected period, which was not regulated in the then transfer regulations. After several rounds in DRC and CAS, Mexes was imposed a six-week suspension. AS Roma was ordered to pay Auxerre € 7,000,000, and imposed a sporting sanction, by being barred from signing new players in one transfer window.
CAS: Tareq Eltaib v. Club Gaziantepspor[2]:
This dispute concerned the player Eltaib from Libya, who signed for Gaziantepspor on July 1, 2004, until June 30, 2007. On March 14, 2006, the player terminated the contract and demanded the DRC to endorse that the contract was terminated as a result of just cause, as the club had not fulfilled its obligations to pay the salary for two months, in December 2005 and January 2006. The club claimed that the player was required to return to the club, after illegal absence.
DRC instructed the player to return without the player accepting it. The player appealed DRC's decision, claiming to be considered a "free agent" and a claim for compensation as a result of the contract being terminated with just cause. Before the case came up for CAS, club representatives issued harsh criticism of the player in the media, and it was stated by the vice president of the club: “We are the son of an old bull fighter and campaigner. In our understanding who escaped from war got into execution of the death penalty. Our way with E. is separated. We will take necessary procedures against him.” The club president stated: “I will terminate him. He should never know Gaziantep and he will never play football any more.” The statements were also assessed by CAS, together with the question of the absence of two monthly salaries. When it came to the statements to the media, CAS came to the conclusion that this was not relevant to the assessments, as the statements fell after the player had completed the contract.
In the case of late wage payments, CAS emphasized that the club was practically used to paying wages late, and that the player had not expressed dissatisfaction about this prior to the termination. CAS believed it had to be required before the player could terminate any termination that he did not accept late payments and that future delays related to payments could lead to termination.
CAS: Adrian Mutu –Chelsea FC[3]
Adrian Mutu announced a move to Chelsea in 2003. One year later, the club terminated the contract with the player, as the player tested positive for cocaine. CAS concluded that the player was considered to have breached the contract and that the club's termination was thus legitimate. Mutu was ordered to pay EUR 17,000,000, a compensation which was calculated as a proportionate share of the transfer sum, in the context of the remaining part of the contract period. Mutu argued in vain that Chelsea were obliged to limit their financial losses by trying to sell the player to another club, rather than terminating the contract.
A particularity of this case was that the player had not found a new club when the club terminated the contract. Mutu was ordered to pay the compensation himself. It can be questioned whether it is appropriate to put a player that has violated the doping regulations in a position where he becomes responsible for such high compensation.
2.3.4. Calculation of compensation
If a contract has been terminated by one of the parties without there being just cause, and if a party terminates the contract where there is just cause, the party who has breached its obligations will be liable for damages pursuant to RSTP article 17. Below is a summary of some of the most central judgments from CAS about compensation calculation.
Webster – Heart of Midlothian[4]:
The dispute between Andrew Webster and the Scottish club Hearts concerned the player's termination of the employment contract, and has become central to how compensation should be calculated where a player has terminated the contract without just cause.
Andrew Webster joined the club at the age of 18 in 2001, when the club paid £ 75,000 in transfer fee. In 2003 he signed a new four-year contract expiring on June 30, 2007. He eventually became a key player for Hearts and national team player for Scotland. He refused to sign a new contract, and was consequently being left out of first-team games. In May 2006, with one year left of the contract, Webster terminated the contract and signed for the Premier League club Wigan Athletic FC. As the contract was terminated four days late in relation to the protected period, the DRC concluded that the contract was terminated without just cause, and that Webster and Wigan, in solidarity, had to pay £ 650,000 in compensation. All parties appealed the decision to CAS.
CAS concluded that the contract was not terminated with just cause, and then proceeded to the compensation calculation. In this calculation, the CAS assumed that the compensation should be calculated based on the remaining salary during the contract period:
”86. Instead the Panel finds it more appropriate to take account of the fact that under a fixed-term employment contract of this nature both parties (club and player) have a similar interest and expectation that the term of the contract will be respected, subject to termination by mutual consent. Thus, just as the Player would be entitled in principle to the outstanding remuneration due until expiry of the term of the contract in case of unilateral termination by the club [subject it may be, to mitigation of loss], the club should be entitled to receive an equivalent amount in case of termination by the Player. This criterion also has the advantage of indirectly accounting for the value of the Player, since the level of his remuneration will normally bear some correlation to his value as a Player. Thus a Player receiving very high remuneration (and thereby being able to expect high remuneration in case of a change of club) will have a correspondingly high amount of compensation to pay even if he terminates his contract outside the Protected Period, and the earlier such termination occurs the higher will be the total amount of compensation owed.”
After that, Webster and his new club Wigan were responsible for paying £ 150,000 in compensation.
CAS: Shatkar Donetsk – Matuzalem/ Real Zaragoza[5]:
In the case between Shatkar Donetsk and Matuzalem, CAS assumed a compensation calculation that deviated from the one used in the Webster case. In the summer of 2004, Matuzalem signed a contract with Shatkar Donetsk until June 30, 2009. On July 2, 2007, two weeks before the qualification for the UEFA Champions League started, the player informed the club that he had terminated the contract. Two weeks later, he signed a contract with the Spanish club Real Zaragoza before signing a three-year contract with the Italian football club Lazio a year later. The problem for CAS was how the compensation should be calculated. CAS concluded that the compensation should be calculated based on the principle of positive contract interest. CAS stated that the compensation must be assessed concretely, and that the remaining salary during the contract period is only one of several factors. Emphasis was placed on buy-out clause (€ 25,000,000, -) without being decisive, as this was intended for traditional transfers. Matuzalem was ordered to pay € 12,000,000, Real Zaragoza in solidarity.
2.3.5 Sporting sanctions
According to FIFA RSTP art. 17 (3) and (4), in addition to liability to the counterparty, sporting sanctions shall be imposed on the party responsible for the breach of contract, if the breach of contract occurs within the protected period. However, jurisprudence from DRC and CAS shows that sporting sanctions are rarely imposed in addition to liability for damages. The principle was first used in CAS 2007 / A / 1359 FC Pyunik Yerevan v. E., AFC Rapid Bucaresti & FIFA. CAS concluded that FIFA was not obliged to impose a sporting sanction, even if it follows from the wording:
“It follows from a literal interpretation of the said provision that it is a duty of the competent body to impose sporting sanctions on a player who has breached his contract during the protected period: “shall” is obviously different from “may”; consequently, if the intention of the FIFA Regulations was to give the competent body the power to impose a sporting sanction, it would have employed the word “may” and not “shall”. Accordingly, based on the wording of art. 17 para. 3 of the FIFA Regulations, a sporting sanction should have been imposed. However this Panel considers that rules and regulations have to be interpreted in accordance with their real meaning. This is true also in relation with the statutes and the regulations of an association. Of course, if the wording of a provision is clear, one needs clear and strong arguments to deviate from it. During the hearing, FIFA observed that it is stable, consistent practice of FIFA and of the DRC in particular, to decide on a case by case basis whether to sanction a player or not. Even though it is fair to say that the circumstances behind the decisions filed by FIFA to demonstrate such practice differ from case to case, the Panel is satisfied that there is a well accepted and consistent practice of the DRC not to apply automatically a sanction as per art. 17 para. 3 of the FIFA Regulations. The Panel is therefore inclined to follow such an interpretation of the rationale of art. 17 para. 3 of the FIFA Regulations which may be considered contrary to the literal interpretation, but appears to be consolidated practice and represents the real meaning of the provision as it is interpreted, executed and followed within FIFA. It is indeed noteworthy that a sporting sanction, by which the Player was suspended from playing for two years, was imposed of the Player within the ambit of FFA disciplinary proceedings. This being so, the Appellant’s application that a sporting sanction be imposed on the Player is dismissed.”
This decision by CAS has formed the basis for a practice where the main rule that a sporting sanction should be imposed has almost become an exception.
3. Dispute resolution and FIFA’s competence
3.1. The relationship between domestic dispute resolution bodies and FIFA's DRC
Which dispute resolution bodies that will be competent to settle a dispute between a club and a player will depend primarily on whether or not the player in question is foreign. As a starting point, all players with the same nationality as the club they are employed by will normally be able to try a dispute for domestic courts or tribunals. However, the player and the club can agree, either in the contract or after the dispute has arisen, that the dispute shall be settled by an international tribunal.
If the dispute is to be settled by arbitration, the parties are basically free to choose court of arbitration, but most disputes are handled by domestic tribunals and the FIFA DRC. FIFA DRC has the competence to try disputes between a player and a club of an international dimension, which in practice implies, inter alia, all contractual disputes between clubs and foreign players.
Any decision by DRC can be appealed to CAS, according to Art 63 of FIFA's statutes. The DRC consists of 24 permanent judges appointed by the FIFA Board, 12 of whom are appointed by representatives of the players, and 12 who are appointed by representatives of the clubs.
3.2. The Court of Arbitration for Sports
The Court of Arbitration for Sport, (CAS) has the expertise to arbitrate sports-related disputes. The framework for CAS's competence, as well as provisions on procedures, deadlines etc. is regulated in the CAS-code. CAS will be able to operate as a court of appeal in disputes that have been dealt with by a judicial body of the former body of sport. There are two prerequisites for CAS to handle these cases. First, the statutes or provisions of the sports organization in question, e.g. FIFA or UEFA, recognize CAS as the appeal body for the case type in question. Secondly, all other internal legal remedies must be exhausted. In FIFA's statutes, CAS is recognized as an appeal body for decisions made by FIFA's judicial bodies, which means that decisions from DRC can be appealed to CAS.
For further information on processing cases for CAS, please read this article.
4. Summary
A working relationship between club and player differs from ordinary employment in many ways. Contrary to ordinary working conditions, the parties bind themselves to each other for a period of time, where the financial consequences of breaking the contract could be significant. The condition that there must be just cause is based on Swiss labour law. What should be considered just cause must be considered on a case-to-case basis, but jurisprudence from FIFA DRC and CAS gives some predictability.
[1] CAS 2004/A/708
[2] CAS 2006/A/1100
[3] CAS 2008/A/1644
[4] CAS 2007/A/1298-1300
[5] CAS 2008/A/1519-1520
