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Edit article The Trouble with Unilateral Termination

  • Subjects: Regulations, Status and Transfer of Players,

    Territory: FIFA - Fédération Internationale de Football Association

    Intro

    Let’s starts with a short story about a Ghanaian player. In January 2015 he signed with an North African team till the end of the 2017-2018 season. The club paid irregular and always too late and by October 2016 the player was owned approximately 200K which equaled to 2/3rd of his yearly salary at that moment. The club intimidated the player via punishment trainings which they also proudly announced on their website. Beside that they were also so kind to inform him in writing that they had no intention to pay him anymore unless he stopped a pending FIFA Dispute Resolution Chamber (‘DRC’) procedure. So there comes that moment at that the player thinks enough is enough. The club was far more than three month’s behind with payments and the player terminated his contract.

    Now probably most of us will think that’s fair enough. Sign with a new club and get on with life.

    Well now that’s not how it works. Club after club spoke with the player and discussed offers ranging between 200K and 400K per year but all of them were in the end too scared to sign him. All of them were put off by the FIFA regulations that oversee the signing of players who’s contract have been terminated.

    How the FIFA regulations limit the players freedom to work and from which corner help can be expected is explained hereunder.

    International registration after contract expiration or multilateral termination

    When a player’s contract with a club ends after expiration of his contract or mutual termination he will not normally not encounter problems when he signs for a new club in a different country. His new contract will be registered with the new football association (‘FA’) which FA will request an International Transfer Certificate (‘ITC’) from the former FA. If the new FA does not receive a response to the ITC request within 15 days of the ITC request being made, it shall immediately register the professional player with the new club on a provisional basis . 1

    In everyday practice a new registration after contract expiration or mutual termination happens flawless.

    Restricted freedom of work after unilateral termination

    When a player or an agent hears the words ‘unilateral termination’ he will most likely think of the situation where a player after month’s of none payment decides that it has been enough and terminates. There are however more scenario’s. Let’s list the 4 main ones:

    ScenarioTerminating partyBreaching partyWho pays damagesAClubClubClub liableBClubPlayerPlayer liableCPlayerClubClub liableDPlayerPlayerPlayer liable

    In 3 out of 4 scenario’s (A,B and C) clubs have an active role. They are the terminating party and or the party that breaches the contract in such a way that the player has just cause to terminate.

    Only in one scenario the player is the terminating party as well as the breaching and liable party (scenario D).

    The position of a player who’s contract has been unilateral terminated differs drastically from other out of contract players. He will face far greater obstacles when he wants to find a new job because:

    • a new FA needs prior authorization from FIFA to register the player provisional with a new club 2, and
    • a new club is jointly liable for damages that a player will have to pay to his former club (type B & D). 3

    The case of our Ghanaian player is either a scenario C or D scenario depending on the outcome of his claims with the DRC or the Court of Sport (‘CAS’) if there will be an appeal.

    Prior authorization

    This authorization creates 2 problems:

    • it is not clear how long such registration takes;
    • it is not guaranteed that such authorization is given 4

    It may be obvious that the new club really has no clue when the player will be eligible to play. Maybe in 2 weeks, maybe in 2 month’s who knows, but this uncertainty is nothing compared to the far worse risk of the joint liability.

    Joint liability

    A unilateral termination is usually followed by dispute resolution. Usually at least one party will file a claim for compensation but until such claim is settled there is no guarantee that the player will not be found in breach of contract and not be liable to pay damages. Any club who does not wait for the outcome of such decision is taking a huge risk, because the club is jointly liable for damages that that the players possibly will have to pay.

    It is however not uncommon that it takes 6 month’s or more before the DRC renders a decision.

    The purpose

    The joint liability clearly aims to support contractual stability and prevent players from terminating contracts without just cause but solely because a better offer awaits them.

    What the thoughts behind the prior authorization are is a bit vague. The regulation do not mention under what conditions an authorization is given or withing what period. What goal it serves except frustrating players is not clear.

    Punishment without trial

    It will be obvious that the result of the ‘prior authorization’ and joint liability are devastating for the player who’s contract has been unilaterally terminated. Compared to a player who’s contract has expired or mutually terminated he:

    • will be longer unemployed;
    • will find fewer clubs interested in him, and
    • find himself in a far worse negotiation position.

    There can be no doubt that these regulations hurt the player financially even if it is the club who initiated the termination is in breach of contract.

    Despite the fact that only in 1 out of 4 scenario’s the Player is the active and liable party the FIFA has implemented a registration system that punishes the player in every type of termination thus even when the club is liable or has initiated the unilateral termination the player is punished

    To come back to our Ghanaian player. After many clubs had walked away from the negotiation table a smaller club with far less salary to offer was brave enough to accept the risks of joint liability and uncertain registration. For 1/3rd of what other clubs wanted to offer provided the players previous employment had ended for other reasons than unilateral termination the player and new club committed to a contract till the end of the 2017-2018 season. This contract however will only start after a successful registration which is still pending for the time being.

    When we assume that the Ghanaian player’s termination was just the best he can expect is that the DRC orders the former club to compensate the loss of income for the period that would have remained on his terminated contract. The loss of income for the period thereafter will normally not be compensated. At least the DRC nor CAS have until now never gone that far.

    The prior authorization and joint liability versus EU law

    The European Court of Justice has already ruled in the Bosman case5 that the freedom of movement in the EU applies to football players. FIFA regulations may however contain ‘restrictions of competition which are indispensable for attaining the legitimate objectives pursued by them‘. 6

    After the Bosman ruling the FIFA and the European Commission agreed upon a set of key principles that had to be respected in new regulations. Where in the letter from these principles can one read that it was agreed that the freedom of players could be limited after unilateral termination. The EC did agree to ‘proportionate sporting sanctions to be applied to players, clubs or agents in the case of unilateral breaches of contract without just cause, in the protected period’. 7 That’s it, nothing more nothing less.

    Judiciary interventions

    When you find these limitation of freedom all a bit ridiculous or grossly unfair you are not the only one. Although the system has not been sent completely to the garbage bin, the CAS and the Belgium Tribunal de Commerce du Hainaut (‘Tribunal’) have made a start with it’s destruction. The CAS in the so called ‘Mutu’ case and Tribunal in the ‘Diarra’ cases. What were these cases about? In a nutshell:

    • Romanian player Adrian Mutu was fired by Chelsea after a positive cocaine test. The outcome of the compensation claims was that the player had to pay over 17 million EUR compensation to Chelsea. 8
    • French player Lassana Diarra was fired by Lokomotiv Moscow. In the procedures that followed Diarra was found in breach of contract and Lokomotiv was awarded 10.5 million EUR compensation.

    That was not the end of these cases:

    • when Chelsea tried to invoke joint liability for the new club(s) the CAS decided that the new club was not jointly liable because it had no vault and Chelsea itself had terminated the contract 9 and
    • Diarra filed a complaint against the Belgian FA with the Tribunal, The Tribunal decided that:
      • the joint liability after a previous club has terminated is in violation of EU law 10
      • the Belgian FA was at fault for not registering the player,11and
      • the Belgian FA has to pay Diarra 60,000 EUR damages.

    In both cases the clubs terminated the contract after the player had breached the contract and the wording of the CAS and Tribunal decisions is limited to situations where the clubs has dismissed a player. (scenarios A & B)

    A considerable percentage of all terminations are unilateral actions of players whom have not been paid for month’s and who are left with no other choice than to terminate.

    Conclusion

    With the joint liability and prior authorization the FIFA has limited the players freedom to movement (and work) a lot further than one can assume is allowed under EU law and is agreed upon between the European Commission and FIFA.

    The waiting is for for the CAS or another judiciary body to bring down the last pieces of these unjust and abominable regulations.

    In the meantime any player who has plans to terminate should think very careful and seek a specialized lawyers advise.

    Footnotes:

    1. art. 8.2.6 annexe 3 RSTP’
    2. art. 8.2.4 b and 8.2.7 annexe 3 RSTP
    3. if the player is found guilty of breaching the contract and liable to pay compensation ‘his new club shall be jointly and severally liable for its payment’ -art. 17.2 RSTP
    4. the use of the word ‘if’ in the sentence ’ If the competent body authorises the provisional registration’ in art. 8.2.7 annexe 3 RSTP allows the competent body not to issue the authorization
    5. CJEU C415/93
    6. CJEU C:1995/293, par. 269
    7. http://europa.eu/rapid/press-release_IP-01-314_en.htm
    8. CAS 2008/A/1644, 31 July 2009
    9. “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” - CAS 2013/A/3365 & 3366, para 177.
    10. “there is no doubt that the European Commission would have never given its green light to such a system, which boils down in fine to preventing a worker dismissed by his employer – even if it is due to his behaviour - to find a new job” - Jugement du Tribunal de Commerce du Hainaut, division Charleroi, A/16/00141, 19 January 2017, para 28
    11. “Allowing, like the RSTP seems to do, a federation or association to which the former club belongs […] not to deliver an ITC if there is a contractual disputes between the former club and a player that has been dismissed (and who has not taken the initiative of breaching his contract) and who has concluded (or wishes to conclude) a new contract in another country, is equivalent to requiring the new club to pay to the former club the compensation requested from the player, which is akin to imposing to the new club to pay a transfer fee to the former club to recruit a player who in fact is out of contract. This is exactly the practice deemed contrary to EU law in the Bosman case.” - Jugement du Tribunal de Commerce du Hainaut, division Charleroi, A/16/00141, 19 January 2017, para 28

    Last update by: Matthijs Lambregts on February 21, 2017 16:19

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