Deep pockets required?

Jean-Marc Bosman changed the face of football by disputing the behaviour of his club and of the football authorities, who did not allow his registration to be transferred to a new club, even though he was out of contract, thus precluding his career from continuing at another club.

Bosman’s successful challenge to this practice not only destabilised the registration and transfer system that had underpinned football, but heralded a new litigious era, with clubs and players alike more readily asserting their rights to protect their assets. In the modern era of football, the sanctity of contract in the player/club relationship was markedly threatened further when Andrew Webster successfully left Heart of Midlothian by terminating his contract early and making his way to Wigan Athletic, with the football authorities awarding Hearts a relatively small compensatory award for the breach of contract. The recent decision of the Court of Arbitration for Sport (“CAS”) in the case of Matuzalem and his former club, Shakhtar Donetsk, has developed matters further (see FC Shakhtar Donetsk v Matuzalem Francelino da Silva etc, CAS 2008/A/1519).

Back towards the club

Prior to the Matuzalem ruling, handed down on 19 May 2009, contract buyout cases were perceived to have been frequently decided in favour of the player, much to the displeasure of their former clubs. This was the case in the dispute following Andy Webster’s move to Wigan Athletic from Hearts. The seven-figure compensation sought by Hearts was rejected in favour of a more nominal sum, equivalent to around the value of salary which Webster had remaining on his contract, had he stayed. The Matuzalem decision, however, develops this position and suggests that the football authorities may take a harder line on players and award more than the residual value of the player’s contract as compensation, where players simply leave one club to join another, in breach of contract.

The case arose after Matuzalem, captain and top scorer at Ukrainian side Shakhtar Donetsk, unilaterally terminated his contract with Shakhtar and proceeded to move to the Spanish club Real Zaragoza (who have since agreed his transfer to Italian giants Lazio). Matuzalem had signed a five year fixed term contract with Shakhtar in June 2004, but left in July 2007, two years early. Shakhtar took a case to FIFA, pursuing an award of damages, for which they received 6.8 million euro. Unsatisfied, Shakhtar continued with their case to the CAS, who pronounced in their favour in the sum of 11,858,934 euro.

Unprecedented step

It was undisputed that Matuzalem had terminated his contract with Shakhtar unilaterally, prematurely, without just cause and that the compensation due had to be calculated in accordance with article 17 of the FIFA Players’ Status Regulations. The CAS ordered him to pay the stated compensation to his former club plus interest of 5% per year commencing on 5 July 2007. Real Zaragoza, the club Matuzalem joined, was declared jointly and severally liable, as happened in Webster.

The case is of more interest

due to the factors taken into account by CAS in calculating compensation. In essence, CAS accounted for the value of the player to his former club, his salary, and the difficulty in which he placed them with the timing of his departure, and thereafter deducted the salary that Shakhtar would not have to pay him.

In what may be termed an unprecedented decision, CAS underlined that the termination of a contract without just cause, even if it occurs outside the so-called protected period, remains

a violation of contractual obligations and should be compensated accordingly. FIFA has stated that it considers this decision to be very important as it gives clear and strong support to the FIFA regulations and defends contractual stability in football.

Consider the domestic law

For solicitors in Scotland advising football clubs, players and their agents, the 45-page decision (available from www.tas-cas.org) should be closely considered. Thought should also be given to any distinction that may be made between the basis and circumstances of this dispute and disputes that may arise in the SPL/SFL in Scotland. If a player is acquired through circumstances such as in Matuzalem, close consideration should be given to the law of the land of the club that the player has left. If a player leaves a Scottish club in breach of contract, the analysis of likely damages under Scots law also needs to be assessed. These local influences may be relevant to any decision, given that individual jurisdiction and choice of law clauses can influence the disputes decided before the football authorities and the CAS.

Separately, the decision is also of interest to practitioners in stimulating thought on the applicability and force of a liquidated damages/penalty clause in footballers’ contracts in terms of the FIFA regulations, notwithstanding their treatment under Scots law.

Bruce Caldow, Partner, Harper Macleod LLPL