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'Phoenix' club: concern at tribunal's decision

DRC & NDRC News
16 March 2021

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FIFPRO notes with concern the recent decision of arbitrators at the Court of Arbitration for Sport that raises the possiblity of unscrupulous behaviour by “phoenix” football club owners.

The decision was in the case Mihaita Plesan Paunel v FC Nizhny Novgorod & FIFA

A "phoenix" club is the incorporation of a new club from the remains of one that has ceased operating.

The CAS ruling opens the possibility of an owner delaying the incorporation of a new club to avoid paying the previous club's unpaid wages and other debts.

In his appeal, Mr Plesan sought to overturn a decision of the FIFA Dispute Resolution Chamber (DRC) that his claim against Russia’s FC Nizhny was inadmissible.

“A phoenix club is the incorporation of a new club from the remains of one that has ceased operating”

Between 2010 and 2013, Mr Plesan played for FC Volga Nizhny Novgorod (FC Volga). When his contract ended, he was owed more than USD $400,000. He promptly brought a claim against FC Volga at the DRC. For two and a half years, FIFA failed to resolve the dispute, and just before the matter was finally heard in September 2016, FC Volga dissolved. As a result, the DRC rendered the claim inadmissible.

In November 2017, Mr Plesan learnt that FC Nizhny had been established – a “phoenix” club resurrected from the remains of FC Volga – and under the principle of sporting succession he brought a fresh claim at the DRC against FC Nizhny in June 2018. The principle allows players owed money by a dissolved club to be paid by the club set up in its place.

The DRC, however, again held that Mr Plesan’s new claim was inadmissible. Mr Plesan appealed to CAS, arguing that the earliest time he could have brought his claim against FC Nizhny was when he became aware that it existed.

FIFA HQ
FIFA headquarters in Zurich

To FIFPRO’s concern, the CAS dismissed his appeal and confirmed the DRC decision, finding that the time limit to bring a claim runs from the date that the player is entitled to be paid by the original club.

FIFPRO notes that the CAS decision is inconsistent with actions taken by FIFA in other similar cases.

The principle of sporting succession has been included in the FIFA Disciplinary Code since 2019 to ensure “financial justice”. However, since then the concept has been supplemented by additional requirements of both the FIFA Disciplinary Committee and CAS which are neither in the interest of financial justice nor legal certainty.

The CAS arbitrator in Mr. Plesan’s case held that although Swiss law on limitation would have permitted him to bring his claim against FC Nizhny within one month of his claim against FC Volga being dismissed, that time limit had since passed.

FIFPRO strongly believes this one-month limitation is inconsistent with the timeframes provided for in the rules of FIFA. Given that DRC disputes are international, it also imposes an extremely onerous obligation on players to investigate complex cases of sporting succession.

Perhaps the most striking injustice for Mr Plesan is that had the DRC resolved his original claim against FC Volga in a timely manner, he would have been in a position to seek the enforcement of a decision against Nizhny before the FIFA Disciplinary Committee.

As a result of the lengthy delay in dealing with this matter, Mr Plesan has been denied the justice to which he is entitled.