Unilateral termination of a football player’s contract
1. Preamble
The employment relationship between football club and football player is rather unique as the football club normally will have to pay a transfer fee in order to complete a transfer of a football player who is under contract with another club. By signing the contract, the football club and the football player will commit themselves to each other for a set period of time, unlike ordinary working relationships where at least the employee can terminate the contract without being held liable for the financial consequences.
Although national legislation to a certain extent can be relevant for the possibility to terminate the football player’s contract, FIFA’s transfer regulations, the Regulations on the Status and Transfer of Players (RSTP), has provisions that requires the national football associations to comply with FIFA’s regulatory model with regards to the contractual relationship between a football club and a football player. As a consequence, the legal framework that regulates the possibility for a football club to terminate a contract with one of their football players is rather comparable from country to country.
2. FIFA’s regulations
Unilaleral termination of a football player’s contract is mainly regulated in FIFA's transfer regulations, the RSTP. Although the first version of RSTP dates back to the 1980s, the regulations were drastically amended in 2001, following an agreement between FIFA, UEFA and the EU. The agreement was established in the aftermath of the Bosman ruling issued by the European Court of Justice in 1995. The Bosman ruling concerned a football player in a Belgian second division club who was denied a transfer to a French club after the expiry of his contract. The Bosman ruling confirmed that a football player is entitled to a free transfer to another club within the EU/EEA area once the contract has expired. The Bosman ruling challenged the transfer system that had been practiced within football for many years, where the football player/employee's ability to change club/employer was dependent on the consent of the existing club. The ruling made it necessary to make provisions that regulated to what extent football clubs could demand a transfer fee for their football players who wanted to sign for other clubs. For FIFA, it was important to maintain the transfer system, to ensure that the football clubs could educate and train football players, knowing that they could get a transfer fee if the football player at some point would transfer to another football club. From 1995 to 2001, the EU, UEFA and FIFA worked together on a new transfer system. FIFA's issued a new RSTP in 2001, and although the RSTP has undergone some changes since, the main principles are the same.
The extent to which each national football association is obliged to comply with FIFA's provisions in its own legislation is regulated in FIFA’s RSTP art. 1-3 b). The provision regulates how national football associations must implement the transfer system in its national regulations. The national football associations are obliged to implement rules that ensure stability in the contractual relationship between football clubs and football players. This obligation must be seen in light of how FIFA defines stability in the contractual relationship. Further, the national football associations are obliged to consider implementing the principle that the football player’s contract only can be unilaterally terminated by one of the parties where there is just cause. Although there is no direct obligation to include FIFA's wording or model in the national regulations, the RSTP must be understood to strongly recommend that a model of just cause is implemented.
3. More about just cause
3.1. Generally about just cause and football players’ contracts
An essential principle in RSTP is that contracts between football players and football clubs should be respected. The principle that the contract must be respected is emphasised in the commentary edition of the FIFA's transfer regulations, which states that “unilateral termination of a contract without just cause is to be vehemently discouraged”.
A contract between a football player and a football club can only come to an end in the following situations:
a) The contract expires.
b) The contract is terminated by mutual agreement.
c) The player can terminate the contract with sporting just cause.
d) The club or the player can unilaterally terminate the contract with just cause.
In practice, the two first options seldom lead to complications, and termination of a contract with sporting just cause is a relatively limited possibility for an established football player to terminate the contract for sporting reasons. The provision is intended for circumstances in which a former central football player no longer plays matches for the first team.
The consequences of terminating a football player’s contract will depend on whether there is just cause, or possibly sporting just cause, or not, and whether one is within the protected period. Both the football player and the football club may be liable to pay compensation and could even risk sporting sanctions (e.g., the football player may be suspended for a period and the football club may be excluded from one or more transfer windows). The consequences of the various scenarios related to unilateral termination of a football player’s contract are:
1) The player terminates the contract with sporting just cause:
• No sporting sanctions against player or club
• The player will be liable for damages
2) The player terminates the contract with just cause in the protected period:
• Possible sporting sanctions against club
• The club will be liable for damages
3) The player terminates the contract without just cause in the protected period:
• Possible sporting sanctions against the player
• The player will be liable for damages
4) The player terminates the contract without just cause after the protected period:
• No sporting sanctions
• The player will be liable for damages
5) The club terminates the contract with just cause in the protected period:
• Possible sporting sanctions against the player
• The player will be liable for damages
6) The club terminates the contract without just cause in the protected period:
• Possible sporting sanctions against the club
• The club will be liable for damages
7) The club terminates the contract after the protected period:
• No sporting sanctions
• The club will be liable for damages
The vast majority of football related disputes handled by FIFA’s decision-making bodies concern the question of whether a football club or a football player has terminated the contract with just cause. As a clear starting point, termination of a football player’s contract due to just cause may only occur when one of the parties fail to fulfil its contractual obligations, e.g. the football club fails to pay wages, or the football player does not show up for training. In other words, the club will normally not have the possibility to unilaterally terminate the football player’s contract due to the club’s financial challanges. In accordance with the principle of pacta sunt servanda (agreements must be kept), a football club that fails to fulfil its financial obligations towards the player, due to the club’s financial challanges, commits a breach of contract.
Any contractual breach does not constitute just cause, so even if the football club or the football player fails to fulfil its contractual obligations, it does not necessarily give the other party the right to terminate the contract. In fact, the commentary edition of FIFA's transfer regulations and extensive jurisprudence from FIFA’s Dispute Resolution Chamber (DRC) and the Court of Arbitration for Sport (CAS) show that a contractual breach must be material to justify termination with just cause[1].
3.2. When the football player terminates the contract
If a football player unilaterally has terminated the contract, the essential question is whether the player can establish just cause for the termination. As just cause in such a case only can be established if the club has breached its contractual obligations, one must first consider whether the club has breached its contractual obligations, and, if that is the case, consider whether the club’s breach is significant enough to establish just cause.
The club’s most important contractual obligation towards the player is the payment of wages, and jurisprudence from DRC and CAS unsurprisingly show that missing or reduced payments of wages fully or partly are claimed by football players as a justification for the termination of the player’s contract. Although reduced or non-payment of wages normally will constitute a breach of the club’s contractual obligations, it must be considered on a case-to-case basis whether the missing payments are enough for a player to to terminate the contract with just cause. Minor delays and non-payments that are not significant seen in connection with the contractual value will normally not constitute just cause for termination. However, should the violation be considered material, persist for a long time or seen in relation with other violations, then the breach of the player’s contract might well reach such a level that the player is entitled to terminate the contract unilaterally.
To what extent late or reduced salary payments constitute a just cause for a player to terminate his contract has been assessed by DRC and CAS on a number of occasions. However, in 2018 FIFA adopted a new provision, art 14bis, in RSTP. The first paragraph of the provision states in brief that if a club is more than two months late with salary payments, then the player will be able to terminate the contract with just cause, provided he gives the club 15 days to pay outstanding wages. When FIFA introduced this new article, it published circular no. 1625, where the background for the new article was explained. The circular stated that the article “has been introduced in order to address the specific circumstance of terminating a contract due to overdue salaries”.
3.3 When the football club terminates the contract
Although it normally is the player that unilaterally terminates the player’s contract, the club can, just as the player, terminate the contract if it can establish just cause. A player’s lack of success will not constitute just cause. Jurisprudence from DRC and CAS show however that clubs can establish just cause if players fail to report for training over a longer period, or if they breach football or sports regulations, such as Adrian Mutu who was sacked from Chelsea FC after he tested positive for cocaine.
It is worth noting that FIFA amended RSTP art. 14 (2) in June 2018, at the same time as they introduced art. 14bis. In the circular where FIFA informed about the change, the pointed out that art. 14 (2) “has been amended to include a new paragraph concerning abusive situations where the stance of a party (either a player or a club) is intended to force the counterparty to terminate or change the terms of the contract”.
4. The consequences of unilateral termination of the player’s contract
If a player terminates his contract with just cause, due to the club’s unilateral decision to reduce or not pay salaries, the player will be free to sign for another club and his former club will be liable to pay him compensation. In such a situation, the club will, in addition to being liable to pay compensation, risk sporting sanctions. However, if the player terminates his contract without just cause, or the club terminates the contract with just cause, the player is liable to pay compensation to the club, and also risk sporting sanctions. For sporting sanctions to be imposed one must be within the protected period of two or three years, depending on the age of the player. In practice, the player risks being suspended from football matches for a period, whilst the club may be excluded from one or more transfer windows.
4.1. Calculation of compensation
If a contract has been terminated by one of the parties without there being just cause, and if a party terminates the contract where there is just cause, the party who has breached its obligations will be liable for damages pursuant to RSTP article 17. DRC and CAS has awarded compensation in a large number of cases based on the principles from the cases of Matuzalem[2] and De Sanctis[3], which, in short, acknowledged the harmed party’s right to be put in the position it would have been if the contract had been properly fulfilled, the principle of positive interest. In the process of calculating the compensation, a wide range of factors will have to be taken into consideration, leaving the DRC and CAS panels with a wide margin of discretion.
When FIFA presented the mentioned amendment to RSTP art. 14 (2) and the new art. 14bis, they also introduced amendments to art. 17, which regulate how compensation should be calculated when the player is entitled to compensation. The new article states a clear method of calculation. If the player has not signed for a new club, the player shall be entitled to an amount equalling the wages for the remainder of the contract. If the player has signed a contract with a new club, these wages shall be deducted from the compensation. The positive difference between the value of the old contract and the new contract in the corresponding time frame, is defined as “mitigated compensation”. In addition to mitigated compensation, the player will automatically be entitled to three months wages, defined as “additional compensation”. If the player can establish egregious circumstances, the additional compensation may be increased from three up to maximum six-monthly salaries, although he overall compensation may cannot exceed the rest value of the prematurely terminated contract.
The new wording of article 17 obviously gives less room for discretion with regards to the calculation of payable compensation, compared to the old wording. The reasoning for FIFA’s decision to change the provision was that the old wording gave the DRC and CAS panels considerable discretion on how to calculate compensation, which led to a large degree of uncertainty for the football clubs and football players involved in such disputes. Although the new wording could contribute to a larger degree of certainty for the involved parties when a player is entitled to compensation, the old wording still applies in cases where the club is entitled to compensation.
4.2 Sporting sanctions
According to FIFA RSTP art. 17 (3) og (4) the party in breach should, in addition to be liable for compensation, also risk sporting sanctions if the breach of contract occurs within the protected period. However, jurisprudence from DRC and CAS show that sporting sanctions are rarely imposed in addition to liability for damages. The principle was first used in FC Pyunik Yerevan v. E., AFC Rapid Bucaresti & FIFA[4]. CAS concluded that FIFA was not obliged to impose a sporting sanction, even if it follows from the wording. This decision by CAS has formed the basis for a practice where the main rule that a sporting sanction should imposed has almost become an exception.
5. Dispute resolution. FIFA’s and CAS’ competence
5.1. The relationship between domestic courts, domestic arbitration courts and FIFA's DRC
Which dispute resolution bodies that will be competent to settle a dispute between a club and a player will depend primarily on the nationality of the player. As a starting point, all players may take a dispute to the ordinary domestic courts or domestic arbitration courts. Players with a nationality that differs from the country the club is registered in, will normally also have the possibility to take their case to FIFA’s DRC which has the competence to consider disputes between a player and a club of an international dimension.
For foreign players, the choice between using a domestic court or DRC can be of great significance as jurisprudence from DRC show that the cases are mainly assessed based on FIFA's regulations, and to a small extent on national regulations. In countries with strong rights for employees, it could be an advantage for players to choose the national court or arbitration court.
Any decision by DRC can be appealed to CAS, according to Art 63 of FIFA's statutes.
5.2. The Court of Arbitration for Sports (CAS)
The Court of Arbitration for Sport, (CAS) has the capability to make decisions in sports-related disputes. The framework for CAS' competence, as well as terms on processes, deadlines etc. is regulated in the CAS-code. CAS operates as a court of appeal in disputes that have been dealt with by a judicial body. There are two requirements for CAS to handle these cases. First, the statutes of the sports organization in question, e.g. FIFA or UEFA, must recognize CAS as the appeal body for the case type in question. Secondly, all other internal legal remedies must be exhausted. In FIFA's statutes, CAS is recognized as an appeal body for decisions made by FIFA's judicial bodies, which means that decisions from DRC regarding termination of a football player’s contract can be appealed to CAS.
For further information on the role of the CAS arbitrator, please read this article.
[1] CAS 2013/A/3091
[2] CAS 2008/A/1519-1520
[3] CAS 2010/A/2145-2147
[4] CAS 2007 / A / 1359
