Away win for Webster

The Court of Arbitration for Sport (“CAS”) delivered its award on 30 January 2008 in the dispute between Andrew Webster, a professional footballer, Wigan Athletic FC and Heart of Midlothian plc. The case concerned Webster’s unilateral termination of his contract of employment with Hearts after the end of the “protected period”, as he was entitled to under reg 17 of the FIFA Regulations Relating to the Status and Transfer of Players, subject to payment of compensation.

Three appeals were before CAS, namely Wigan v Hearts, Hearts v Webster and Wigan, and Webster v Hearts (CAS 2007/A/1298, 1299 and 1300), following the parties’ unanimous dissatisfaction with the decision of the FIFA Dispute Resolution Chamber (“DRC”). On 4 April 2007 the DRC determined that £625,000 was payable by Webster and Wigan to Hearts. Webster was also banned for two weeks. The CAS set aside the DRC decision and ordered Webster and Wigan to pay £150,000 compensation. With no appeal lying from this award, the decision and its reasoning are being closely considered. Its ramifications are likely to affect the landscape and administration of football.

The parties’ unanimous view was that the DRC had erred by failing to express reasons for its award of £625,000. CAS agreed, noting that Swiss law dictates that reasons be given by the DRC for its decisions. In assessing whether and to what extent compensation was payable by Webster, CAS made specific findings relating to the regulations that will likely shape the way in which players and clubs transact in future.

Limited purpose

Hearts contended that £4.6 million compensation was payable because (amongst other things) it had lost the opportunity to acquire a sizeable transfer fee; and a sizeable award would support contractual stability and also reward the club’s effort in developing the player into a leading international standard footballer.

CAS dismissed these arguments. The club had not lost the opportunity to transfer the player, because any such transaction could not have been carried out unilaterally. The purpose of compensation under reg 17 was not to preserve and support contractual stability, as that was the function of the “protected period”: if a player terminates his contract without cause during a protected period he cannot insist on the transfer of his registration and is unable to join a new club. The compensation fee due (if any) was not intended to provide a financial return to the club for training and development, as FIFA and in turn national associations have separate rules for that purpose.

A contractual solution?

CAS considered it important that the FIFA regulations provided a uniform and consistent approach to the assessment of compensation. The award of £150,000 reflected the figure agreed as representing the remaining term of the player’s contract. In so doing, CAS has issued the clear direction that if a player terminates his contract outwith the protected period without cause, he will be liable to pay compensation to the club he leaves, in the region of the value of the remaining term not served by him.

This is subject to one important qualification. CAS stressed that its award was based on the regulations and the specific regulation outlining the calculation of compensation, as Webster’s playing contract was silent on the question of compensation in the event of early termination. The regulations specifically recognise that compensation may be predetermined and agreed in a player’s contract. This suggests that clubs will now seek to provide for the Webster scenario within their playing contracts. Clauses that are unilaterally in favour of the club may prove difficult, as players may seek parity. One issue that would require to be considered carefully in negotiating and drafting would be to what extent the same could be achieved within the framework of the regulations, as interpreted by CAS.

CAS’s view on the application of Swiss law to the regulations will need to be considered. CAS also hinted that it would not wish to see excessive figures being provided for in contracts. The court does suggest that allowing for recovery of a transfer fee, apportioned over the period of the initial contract and beyond the protected period, is something that could be provided for, and ultimately recovered by the club if so. It also noted that it would not be attracted to the difference between a player’s old and new contracts being in some way payable to the club he leaves, on the view that such an assessment would be punitive.

As disputes relating to cross-border player transfer can be brought before the DRC and thereafter CAS, the guidance that the Webster decision offers should be closely followed.

Bruce Caldow, Partner, Harper Macleod LLP