De Sanctis and the Article 17: the last of the saga?

• Author: Withagen, Matthijs

Introduction

On 28 February 2011, the Court of Arbitration for Sport (CAS) issued a leading decision regarding Article 17 of the RSTP on the Status and Transfer of Players, hereinafter "RSTP (1)" in the three joint cases between Udinese and Sevilla (2), Udinese and Mr. Morgan De Sanctis (3), and Udinese against Mr. De Sanctis and Sevilla (4).

In these cases, which are commonly referred to jointly as the De Sanctis case, the CAS Panel ruled that De Sanctis and Sevilla were jointly and severally liable to pay the amount of EUR 2,250,055 as indemnification to Udinese after it was held that De Sanctis had unilaterally terminated his employment contract with Udinese without just cause.

In this article, we shall give a brief introduction to Article 17 of the RSTP and the most important CAS jurisprudence regarding this article. Afterwards we shall review the facts of the De Sanctis case, the decision of the FIFA Dispute Resolution Chamber, and the CAS award. Finally we shall endeavour to explore the future development of Article 17 of the RSTP and the approach the CAS might take to such cases.

Article 17 of the Regulations on the Status and Transfer of Players

Article 17 is part of chapter IV of the RSTP regarding the "Maintenance of Contractual Stability between Professionals and Clubs". It is common knowledge that the parties to a contract should respect the terms and duration of that contract, such is also typically referred to as pacta sunt servanda. This principle is expressly provided for in Article 13 of the RSTP, which stipulates that "a contract between a professional and a club may only be terminated upon expiry of the term of the contract or by mutual agreement". (5)

In 2001, FIFA included Article 17 in the RSTP which stipulated what would happen in the event that one of the parties of an employment contract (the player or the club) would terminate said employment contract prematurely and without just cause. (6)

One of the most important aspects of Article 17 is that it states that "in all cases, the party in breach shall pay compensation" to the party that has suffered damage as a result of said breach..

Article 17 of the RSTP now states, with regard to the calculation of the compensation to be paid to the party that has suffered damage, that:

"Compensation for the breach shall be calculated with due consideration for the law of the country concerned, the specificity of sport, and any other objective criteria. These criteria shall include, in particular, the remuneration and other benefits due to the player under the existing contract and/or the new contract, the time remaining on the existing contract up to a maximum of five years, the fees and expenses paid or incurred by the former club (amortised over the term of the contract) and whether the contractual breach falls within a Protected Period. (7)" Furthermore, Article 17 of the RSTP states that if the unilateral termination of the contract occurred during the Protected Period, sporting sanctions shall be imposed on the party in breach. For players, this sanction can be a 4 to 6 months restriction on playing official matches, (8) whereas Clubs shall (9) be sanctioned with a ban on registering any new players for two Registration Periods as defined in the RSTP. (10) Furthermore, in the event that the unilateral termination of the contract occurs outside the Protected Period no sporting sanctions shall be imposed.

Hereafter we shall discuss the application of Article 17 of the RSTP on cases in which the player was the party who unilaterally breached the contract without just cause.

CAS jurisprudence on Article 17

In the recent past there have been various cases regarding the the consequences of terminating a contract without just cause before the Court of Arbitration for Sport, hereinafter "CAS", which were decided in accordance with Article 17 of the RSTP.

For the sake of clarity we will first briefly discuss the most important cases in which the party in breach was the player.

One of the very first "Article 17 cases" is the case of Ariel Ortega against Fenerbahce (11). Fenerbahce did not pay Ortega his salary for two months. After playing an international match with the Argentinean team in the Netherlands, Ortega flew to Argentina instead of returning to the club in Turkey.

The CAS Panel ruled that the non-payment of salary by itself would not entitle Ortega to treat the contract as terminated, thus releasing him from his contractual obligations to the Club. It was established that if Ortega wished to be freed from his contractual obligations to his club then he would have had to have formally requested the club to pay his salary, or give notice to the club that the payment of his salary/ies was/were overdue, which he didn t (12).

Finally, the CAS Panel decided that Ortega had to pay a compensation fee of USD 11,000,000. This amount was calculated on the basis of the transfer fee Fenerbahce paid for Ortega, image rights of Ortega and other expenses of Fenerbahce (13).

Another important case regarding the liability of a player (14) for the breach of his contract is the case of Philippe Mexes against AJ Auxerre (15). This was the first case in which a player made specific reference to Article 17 of the RSTP when unilaterally terminating his contract.

Mexes terminated his contract with the French club after four seasons of his initial contract, assuming that the Protected Period had finished. However, as the player and the club had previously signed an extension of the initial contract for one additional year, the CAS Panel considered that the extension was a new contract, thus a new Protected Period had commenced.

Therefore, the CAS Panel suspended Mexes in accordance with the terms of Article 17 and ordered the payment of EUR 7,000,000 as compensation for the breach of contract without just cause. Such indemnity was fixed at EUR 7,000,000, which corresponded to a sum of the costs incurred by Auxerre of EUR 2,289,644 and an offer submitted by AS Roma of EUR 4,500,000.

The latter amount was based on the negotiations between Auxerre and AS Roma regarding the possible transfer of the player. Roma offered EUR 4,500,000 for the player s registration, and no other offers were made to Auxerre. Thus, the CAS Panel considered this amount to be the "market value" of the player which Auxerre could have received in the event of a transfer of the player, but which it did not receive because of a "failed transfer".

It should be noted that the CAS also took other criteria into account when calculating the amount of damages to be paid, however they did not specifically indicate why they rounded the amount of indemnity to be paid to exactly EUR 7,000,000 (16).

The next case is the oft-referenced dispute between Mr. Andrew Webster and Heart of Midlothian, hereinafter "Hearts" (17). The Scottish club offered Webster a new contract in February 2006, however Mr. Andrew Webster declined the offer. It was understood that Mr. Webster, having enjoyed many successful seasons with Hearts and having become a fixture in the national team wanted to explore different career possibilities. The club reacted by not selecting Webster for some matches in the Scottish league. Webster decided to use Article 17 of the RSTP to unilaterally terminate his contract at the end of the season.

Hearts claimed an amount of GBP 5,000,000, which was based on the lost possibility of a transfer of the player, the replacement costs of a new player, the transfer fee it had paid to the player s former club, the residual value of the player s contract with the club, the difference of the value of one year of the player s contract with Hearts and the player s contract with his new club, Wigan Athletic FC, and commercial and sporting losses.

The CAS Panel in the Webster case decided to calculate the compensation payable on the basis of the residual value of the last year of the player s contract, which was GBP 150,000. It is important to note that in this dispute, the behaviour of Hearts of was likely a significant factor in the Panel calculating a relatively low amount of indemnification for the breach of contract of a Player of Mr. Webster s quality.

Later the CAS Panel heard the dispute between FC Shakhtar Donetsk of Ukraine, hereinafter "Shakhtar", Matuzalem Francelino da...