The unilateral extension option through the eyes of FIFA DRC and CAS.

• Author: de Weger, Frans

Introduction

The extension option is the right of the player and/or the club to extend the employment contract for a certain period of time which is stipulated by the parties in an employment contract. There are many kinds of extension options. We have the reciprocal extension option in favour of the player and the club in which both parties are entitled to prolong the employment contract for a certain predetermined period and there is the unilateral extension option only in favour of one of the parties. In the daily practice of international professional football, we usually find unilateral extension options solely in favour of the club.

After the Bosman-case of 1995 (1), in which the European Court of Justice decided that transfer compensation to be paid by a club for a player who had ended his contractual relationship with his former club was not permitted and was in violation with the free movement of people within the European Union. From that moment on, the clubs had to prevent the situation whereby their professional football player came to the end of their contracts and were able to leave for free. Therefore, the use of the unilateral extension option in favour of the clubs increased substantially.

At international level there is uncertainty regarding the validity of the unilateral extension option. For example, in South-America, where the unilateral extension option was very popular (and in some countries still is), as result of the general disputable validity of this clause, developments can be noticed that the unilateral extension option is disappearing in some countries. One can also notice from a recently published report that in Chili the unilateral extension option is totally banned, in Uruguay the option only still exists because the players' union disagrees with an absolute disappearance of the unilateral extension option and in Argentina the option can only be inserted in the contracts of players beneath 21 years old and only for the duration of a maximum period of three years. (2)

The Dispute Resolution Chamber of FIFA (hereinafter DRC) as well as the Court of Arbitration for Sport (hereinafter CAS), as being the authoritative committees at international level in the world of professional football, provided the football world with several decisions related to this subject. With this article we trust to provide the international professional football world with a valuable survey of all relevant international jurisprudence from the DRC and CAS.

Structure article

This article will contain an extensive survey of all relevant decisions of the DRC and CAS related to the unilateral extension option. First the relevant decisions of the DRC will be discussed and analyzed. (3) The most important decisions will be discussed in a chronological course of time as from the first published decision in 2004 until now. Since parties have the possibility to appeal against decisions of the DRC before CAS, the decisions of CAS will also be analyzed and discussed. (4)

In the conclusion we summarize the general line the DRC and CAS stand for with respect to the unilateral extension option and will answer two important questions: What conclusions can be drawn from analyzing DRC and CAS jurisprudence and what can be expected from future DRC and CAS decisions?

Please note that this article is meant for anyone interested in this subject. Although this article has a scientific character, it must be emphasized that it is intended to have great value for the daily practice of international professional football. The reason we discuss the unilateral extension option throughout the eyes of DRC and CAS is a result of the increasing internationalization and importance of the decisions of these committees within the international field of professional football, which will also have its impact at national level (certainly at the long run), such as for national arbitrational courts. In this article the national laws will be excluded and will not be taken into consideration.

In this article we only discuss the jurisprudence related to this subject since the regulations of FIFA do not contain any provisions in respect thereof. However, it needs to be noted that the FIFA Regulations do provide for a provision related to the contracts of minors. In the Regulations of FIFA, the Regulations on the Status and Transfer of Players, is stated that players under the age of 18 cannot conclude contracts for a period longer than three years and that parties are forbidden to insert clauses that refer to longer periods than three years. (5) This provision leaves no space for any other interpretation in order to assume that unilateral extension options (since they without any doubt refer to longer periods) are not permitted to be inserted in the youth contracts that have a duration of three years. Furthermore, apart from the jurisprudence, Ciculaire 1171 of FIFA of 24 November 2008 is relevant to keep in mind while discussing the decisions of the DRC. This Circulaire provides the minimum requirements for players' contracts. One of the minimum requirements is remarkably enough the fact that unilateral extensions are not permitted and that extension- and termination rights are only permitted in case the clause is reciprocal and so in favour of both parties. Apart from these matters, the Regulations of FIFA as well as other Circulaires do not provide for any provisions related to this subject as result of which the decisions of DRC and CAS become even more relevant. (6)

Relevant decisions of the DRC

DRC 22 July 2004 (7)

The first published decision of the DRC to be discussed is the case of 22 July 2004. In this case a player signed on 30 July 2004 an employment contract for the period as from 30 July 2003 until 30 June 2004. The contract was provided with a unilateral extension option in favour of the club with the possibility for the club to extend each year with a consecutive total of four years. It was agreed in the contract that the club had to inform the player five days before the beginning of the transfer period in case it wanted to extend the contract. Furthermore the club had the obligation to inform the player about the new conditions of the extended contract. On 24 July 2004 the club informed the player that they wanted to extend the contract as from 1 July 2004 until 30 June 2005 based on the same conditions as stated in the current contract. The player did not agree with the club and disputed on 3 June 2004 before the DRC the validity of the unilateral extension clause.

In this case the DRC is for the first time clear with respect to the validity of the unilateral extension option. (8) The DRC decided in this case that unilateral extension options are in general problematic, since they limit the freedom of a party who cannot make use of this clause (the player) in an excessive manner. The DRC decided that the option concerned was not reciprocal since the right to extend was exclusively left to the discretion of one party (the club). In this specific case the extension option was solely in favour of the club. The club as the employer was the stronger party in the relationship. By referring to the clause by the club in order to extend the contract the player had no substantial advantage since the conditions remain unaltered. The DRC clearly pointed out in this decision that unilateral options in principle do not match with the general principles of labour law. The DRC did not found the latter consideration, but the DRC did clearly emphasize that unilateral extension option are not permitted. Despite the clear considerations of the DRC in this decision the DRC does create some openings in order to create a valid option. Following this decision one can sincerely wonder what the DRC would have decided in case the conditions in the new contract did alter in such a manner that a substantial increasing of the salary did exist. The club did appeal against the decision before CAS and this case will be discussed in that part of this article.

DRC 13 May 2005 (9)

In a decision of the DRC of 13 May 2005 it seems the DRC gives us more handholds in order to decide whether a unilateral extension option is valid or not. In the contract of the player a unilateral extension option was inserted in favour of the club for a period of three years. On 1 February 2005 the player decided to dispute the validity of the clause before the DRC. The player pointed out that he indeed could not agree with the extension as provided for in the contract. However, he was willing to continue negotiations for a new contract. The negotiations finally did not end in a successful way and the club's point of view remained unaltered and stated the option was valid. The club also pointed out that the player had accepted a payment of EUR 1,950 after the extension as result of the new contract and that he had also played in official matches after the extension. The club emphasized that the player with this stance indirectly accepted the unilateral extension option.

The DRC decided that a clause that gives one party the right to unilaterally extend or terminate the contract, without providing the counterparty with that same rights, is a clause with disputable validity. According to the DRC the unilateral extension option concerned had a potestative nature, since the contract was not provided with the new financial conditions and were not accepted after the negotiations between the parties. (10) The DRC did not find it relevant that the player played several matches after the extension, since the player was in the reasonable presumption the negotiations would be ended successfully with regards to the financial conditions. At the moment he realized that the negotiations would not end successfully, according to the DRC, the player left the club. The DRC finally concluded that the contract had ended on 31 December 2004 and that no valid extension of the contract...