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Introduction

In this case Egyptian goalkeeper, Essam El Hadary signed a contract for three years with Al-Ahly, a club in his home country starting 1 January 2007 until the end of the sporting season  2009/2010. In February 2008 negotiations between Al-Ahly and Swiss club FC Sion took place. The clubs were not able to reach an understanding regarding the transfer of the player. However, the Swiss club and the player did come to an agreement. According to the player, Al-Ahly allowed him to start negotiations in order to come to an agreement. The club states that it did not give the player such permission.

 

Because the parties were unable to reach an amicable solution the case was brought before the FIFA DRC. FIFA decided that the player and his new club had to pay a compensation of  EUR 900'000 for the breach of contract. This decision was appealed by the player.

 

CAS
In appeal CAS considered  that the player breached the contract without just cause. It is not seen as probable that the club did allow the player to freely negotiate his transfer  with another club. The player did not prove the consent of the club.

 

By establishing that the player terminated the contract without just cause, the consequences of the breach had to be considered. Compensation has to be paid and sporting sanctions apply because the player terminated the contract in the protected period.

 

The residual value of the old contact  was USD 292,000. The contract of the player for the two seasons at the new club was worth USD 488,500. According to the Panel this reflects the value that FC Sion gave to the services of the player and thus the amount that Al-Ahly would have to spend on the football employment market in order to hire a  player of analogous value.

 

Article 17 of the FIFA Regulations on the Status and Transfer of Players mentions that compensation shall be calculated with due consideration for –amongst other criteria- the remuneration under the existing contract and /or the new contract. This does not implicate that the salary of the new contract can be seen as the standard for calculating the compensation.

 

The point here is that the relationship between a player and a club is an employment contract in which the player is obliged to perform at best endeavours and the club is obliged to pay the amount agreed upon for this performance. No more and no less. Suppose here that the same player would have ended his career in stead of moving to another club. Would this change the basis for compensation?

 

Loss of transfer fee
The loss of a possible transfer fee is not a criterion mentioned in article 17. This is quite logic because this does not fit within the EU-law system. After the Bosman-ruling it became clear that the employment contract of a football player was in fact not different from other employment contracts within the European Union. In the termination of such contracts no transfer sums are involved.

 

For CAS the criterion of lost opportunities is the main indicator for the calculation of the compensation in this case. This seems very strange as FIFA and the European Commission in their 2001 agreement specifically mention a number of criteria for the calculation of compensation. It is not very likely that they would leave out a criterion with the impact CAS now dedicates to this subject. Looking at the considerations of the Bosman-ruling it is obvious that it was certainly not intended to imply possibly lost transfer sums.

 

If this principle is accepted this would mean that a player who is denied a transfer to a new club will be able to file a lawsuit against his current club in order to claim the salary and all other benefits that he was offered by this new club.

 

The reference made to the Matuzalem case and the principle of lucrum cessans is certainly inappropriate here. The lost opportunity to receive a transfer sum simply cannot be a valid criterion.

 

Moreover , if we look at the Webster-award the Panel considers: 'Subject to it being validly agreed by an enforceable contract, there is no economic, moral or legal justification for a club to be able to claim the market value of a player as lost profit.' This consideration is fully in line with the Bosman-ruling, the FIFA-European Commission agreement of 2001 and European labour law.

 

When the FIFA and CAS decisions regarding to cases in which the club is the party that terminates without just cause are reviewed we can see that it is well established case law that the only basis for the calculation for compensation is the residual value of the contract.

 

It is puzzling why the Panel in this case chose to follow the Matuzalem-ruling that is clearly deviating from the EU-principles and not the Webster-doctrine which is EU-conform.

 


Insight in the offer for transfer
The fact that there is evidence of what the new club was willing to pay as a transfer fee is also not relevant here. A player has no role in the negotiations between clubs and cannot not possibly influence the amount offered although he is the one to pay compensation. What if the new club would have offered only USD 100,000 or the residual value of the contract ? Should this have an effect on the outcome for the sum the player has to pay?

 

The considerations of the Panel show that Al-Ahly asked for an amount of USD 800,000 for the transfer of El Hadary. This means that for this amount the parties would settle for the complete transfer of the player. The reasoning to take into account the amount that Sion was willing to pay USD 600,000 and next to that add the salary of the new contract to this amount and then deduct the salary of the old contract is some incomprehensible hocus pocus of the CAS Panel. 

 

If Sion would have offered a salary of i.e. USD 800,000 to the player , the way of calculation of the Panel would have largely exceeded the amount requested by Al-Ahly for the complete transfer. This illustrates that inappropriate criteria are applied here by the Panel.

 

The protected period
One of the built-in specificities of sport in the FIFA-European Commission agreement is the introduction of a protected period for football contracts. Contracts between clubs and players under 28 years at the moment of signing of the contract have a special three year protection that deviates from regular labour law. For players over 28 years  a period of two years is protected. If one of the parties terminates the contract without just cause then sporting sanctions apply.

 

A player who terminates his contract within the protected period without just cause is looking at a 4 to 6 months suspension. A club can be excluded from making transfers for one or two transfer periods. In practice the system seems to work as hardly any players terminate their contracts before the end of the protected period.

 

The background for the consent of the European Commission is the fact that in many cases the clubs made substantial investments in players in order to have them play for their team. This investment can be the training and education of a player or the payment of a transfer sum. In both situations it seems reasonable that such investment deserves some more protection than regular labour law can provide. Recently this is confirmed in the Olivier Bernard case of the European Court.

 

However, the consent of the Commission was given for a period of three respectively two years. For the renewal of the protected period in the FIFA Regulations for each time the contract is extended there is no legal nor economic support. In case of a renewal of a contract there is no investment in training or transfer. So this can easily be challenged at a forum that will apply EU-law.

 

In order to secure the stability of contract during the protected period even more FIFA and FIFPro developed a matrix for the compensation to be paid in case of breach of contract. This matrix was accepted by CAS in the Bouabe-case of 2007 but explicitly denied in the Matuzalem case.

 

The matrix is mainly based on the residual value of the contract and contains a factor in order to multiply this value in case there is no just cause for the termination without just cause. In principle the application of the matrix could have lead to the same outcome in this case although it would have been unlikely.

 

 

Specificity of sport
Important is that the Panel  in this case considers that the specificity of sport is not meant to award additional amounts where the facts and circumstances of the case have already been taken sufficiently into account. In our opinion this is a right valuation of the specificity of sport.

 

It is also important to note that apparently the Panel does not consider the lost transfer value as a specificity of sport but still applies this criterion although there is no reference to it in article 17.

 

As mentioned before it has to be taken into account that the FIFA Regulations on the Status and Transfer of Players already contain specific provisions regarding to the calculation of compensation in case of the breach of contract. These specificities were necessarily agreed upon between FIFA the European Commission and FIFPro. This is the forum where such specific provision must be dealt with.  In a situation like this there is absolutely no competence for an arbitration court to create it’s own specificities.  In fact the result is here that a specific criterion –the lost opportunity to ask a transfer sum-  is applied by CAS in a situation in which already has been dealt with this specificities in the relevant regulations.

 

Any court  is very limited in applying new criteria that have no legal basis in the regulations or law. By applying the lost opportunity-criterion CAS has exceeded it’s legal powers.

 

Conclusions

After the Matuzalem-case  the CAS Panel again applied a  main criterion for the calculation of compensation  that is not mentioned in article 17 of the FIFA Regulations and which is not consistent with EU-law. The missed opportunity to ask a transfer sum cannot be considered as a relevant factor in this dispute.

 

Also the way the Panel took into consideration the salary with the new club is not in line with article 17 and FIFA case law. The fact that the player earned less with his former club is mere an indication that he was underpaid than it indicates the damage for the club.

 

The considerations about the limited value of the specificity of sport are certainly worth reading and to the point but apparently the Panel does not consider the missed opportunity to ask for a transfer sum as such,  but off course it is.

 

As the player is relatively old for a professional and he was at the club for twelve seasons these would have been pre-eminent reasons to apply the specificity of sport in his advantage.

 

Looking at all facts of the case it is not surprising that CAS decided that the player terminated the contract without just cause and within the stability period. The criteria used to calculate the compensation do not meet the relevant provisions. It would have been possible to solve the matter and stay within the limits of the regulations and the law.