a year of fast track proceedings on overdue payables
Article 12bis to the Regulations on the Status and Transfer of Players (‘FIFA Regulations’) came into force on 1 March 2015. The aim was to establish an efficient and effective mechanism with respect to overdue payables. Sébastien Ledure, Managing Partner of Cresta, and Wouter Janssens, Founding Partner of Cresta and Assistant Professor of the University of Leuven, provide an analysis of the case law on overdue payables under article 12bis published until 1 March 2016.
- Which kind of agreements can be enforced?
Article 12bis paragraph 1 constitutes an affirmation of the basic legal principle of pacta sunt servanda: clubs are required to comply with their financial obligations as per the terms stipulated in their contracts with players and in their transfer agreements with other clubs.
The contracts with players are not limited to employment agreements but also cover related settlement or termination agreements as well as private agreements. The transfer agreements include both transfers and loans.
- Which kind of overdue payables can be claimed?
The financial obligations resulting from the abovementioned agreements mainly are salaries, signing fees, bonuses, termination indemnities, transfer fees and loan fees.
Moreover, article 12bis can be invoked with respect to any financial obligation that is contractually valuated: costs of transportation (flights, trains, taxis), costs of medical investigation (ultrasounds), rent, etc. Where a contract merely stipulated the player’s entitlement to a round-trip flight ticket, the club’s financial obligation was valued using the information provided by FIFA Travel.
A transfer agreement provided for penalties at a rate of 10% for each installment of the transfer fee that would be overdue. These penalties were granted as separate principal amounts, themselves inducing interests. Hence, it appears to be possible to successfully lodge a claim solely with respect to penalties when the corresponding principal amounts have been paid after their due date.
At present, no cases on fast track proceedings handling overdue training compensations and/or solidarity contributions have been published.
In any event, the club’s financial obligations must be fully substantiated and unconditional. Bonuses allegedly stipulated in the club’s internal rules but not in the employment agreement were not granted in absence of a copy of said internal rules. A signing fee subject to the agreement of both the club and the player was not retained.
- What is a prima facie contractual basis?
Pursuant to article 12bis paragraph 2, clubs can justify overdue payables by invoking a prima facie contractual basis. At present, no prima facie contractual basis was accepted in any of the published cases. External events like the entry of new shareholders, financial difficulties, payment difficulties relating to bank authorizations or issues following the hosting of events by third parties in the club’s stadium do not exempt clubs from fulfilling their financial obligations.
- What determines the applicability of article 12bis in time?
The signing date of the underlying agreement nor the due date of the financial obligations determine the applicability of article 12bis. The sole decisive element is the date of the lodging of the claim: article 12bis applies to all claims lodged after 28 February 2015, even if the underlying agreement was signed and/or the financial obligations were due before this date.
- Who can lodge a claim?
It is generally accepted that the protection of article 12bis is limited to players and clubs. Nevertheless, it has been asserted that coaches would also fall within the scope of article 12bis. At present, no cases on fast track proceedings involving other individuals than players have been published.
- When to lodge a claim?
Pursuant to article 12bis paragraphs 2 and 3, a club is considered as having overdue payables in case it has delayed a due payment for more than 30 days and the creditor (player or other club) has put the club in default in writing, granting a deadline of at least 10 days (not business days).
It is generally accepted that the default letter can only be sent as from the 31st day after the relevant due date. Hence, clubs are granted a grace period of 41 days. However, a salary payment that was (i) included in a default letter, (ii) not delayed for more than 30 days at the moment of the sending of the default letter and (ii) delayed for more than 30 days at the moment of the decision, was added to the overdue payables. Consequently, it appears to be possible to successfully put a club in default as from the 1st day after the relevant due date and lodge a claim as from the 31st day after the relevant due date, reducing the grace period to 31 days.
In any event, the 2 years statute of limitation following article 25 paragraph 5 to the FIFA Regulations must be respected. Hence, any claim under article 12bis must be lodged before 2 years have elapsed since the due date of the relevant financial obligation.
- Where to lodge a claim?
Claims under article 12bis can be lodged with the Dispute Resolution Chamber (‘DRC’), the DRC Judge, the Players’ Status Committee (‘PSC’) respectively the PSC Single Judge as far as they feature a dispute with an international dimension. At present, no cases on fast track proceedings with the PSC have been published.
With respect to purely national disputes on overdue payables, each member association was obliged to integrally implement article 12bis in its domestic regulations. At present, various member associations have not yet implemented article 12bis or appointed the competent body to handle fast track proceedings. The position of clubs and players of such member associations facing overdue payables is being jeopardized as a complaint against such member associations with FIFA would not directly result in the recovery of the overdue payables.
- Are interests being granted?
Interests can be applied on the principal amounts of the overdue payables as from the moment and at the rate stipulated in the contract. However, excessive or disproportionate rates can be mitigated or even rejected. Interests contractually stipulated at a rate of 12% per annum were accepted.
In default of contractual stipulations, interests are being applied ex officio at a rate of 5% per annum as from the moment requested (at earliest as from the day after the relevant due date but also as from the day of the lodging of the claim) or, in default of such request, as from any moment between the lodging of the claim and 30 days after the date of the notification of the decision.
- Are procedural compensations being granted?
The DRC nor the DRC Judge grant a procedural compensation to the prevailing party. The PSC Single Judge ex officio grants a procedural compensation to the prevailing club.
The amount of the procedural compensation is based upon the following schedule, irrespective of any request from the prevailing club:
|overdue payables||procedural compensation|
|up to CHF 50.000||up to CHF 5.000|
|up to CHF 100.000||up to CHF 10.000|
|up to CHF 150.000||up to CHF 15.000|
|up to CHF 200.000||up to CHF 20.000|
|as from CHF 200.001||up to CHF 25.000|
The PSC Single Judge consistently grants the maximum amount in default of reply by the debtor club and a mitigated amount in case of reply by the debtor club. The procedural compensation appears to be allocated approximately 20-35% to the prevailing club and by 65-80% to FIFA. It might be deemed paradoxical that FIFA’s compensation and workload relate inversely.
|date of decision||reply||overdue payables||procedural compensation||prevailing club||FIFA|
|7 May 2015||Yes||€ 1.000.000||CHF 20.000||CHF 5.000||CHF 15.000|
|11 June 2015||No||€ 95.000||CHF 10.000||CHF 2.000||CHF 8.000|
|29 July 2015||No||€ 1.070.000||CHF 25.000||CHF 5.000||CHF 20.000|
|11 August 2015||Yes||$ 690.000||CHF 15.000||CHF 5.000||CHF 10.000|
Which kind of sanctions are being imposed?
Despite their discretion resulting from the term ‘may’ in article 12bis paragraph 4, the competent bodies systematically impose sanctions to the condemned party, irrespective of any request from the prevailing party. The following cascade of sanctions can be distinguished:
- a warning if the club replied and is not a recidivist;
- a reprimand if the club replied and is a recidivist;
- a fine if the club did not reply and is not a recidivist;
- a fine if the club replied and is a recidivist;
- an elevated fine if the club did not reply and is a recidivist;
- a transfer ban if the club did not timely execute the decision and is a recidivist.
- Which amounts of fines are being imposed?
The fines, which are allocated 100% to FIFA, appear to approximate the following percentages of the principal amounts of the overdue payables:
- imposed by the PSC Single Judge: 5 – 15%;
- imposed by the DRC: 15%;
- imposed by the DRC Judge: 10 – 25% and up to 40% for moderate overdue payables.
|competent body||date of decision||overdue payables||Fine|
|PSC Single Judge||11 June 2015||€ 95.000||CHF 10.000|
|fPSC Single Judge||29 July 2015||€ 1.070.000||CHF 60.000|
|DRC||15 October 2015||$ 118.750||CHF 15.000|
|DRC||6 November 2015||$ 111.400||CHF 15.000|
|DRC Judge||12 June 2015||€ 39.000||CHF 5.000|
|DRC Judge||3 July 2015||$ 40.000||CHF 10.000|
|DRC Judge||8 July 2015||€ 4.500||CHF 2.000|
|DRC Judge||2 September 2015||€ 13.600||CHF 4.000|
|DRC Judge||16 September 2015||€ 3.080||CHF 1.000|
|DRC Judge||16 September 2015||€ 2.451||CHF 1.000|
|DRC Judge||1 October 2015||$ 34.200||CHF 5.000|
|DRC Judge||1 October 2015||$ 45.000||CHF 5.000|
|DRC Judge||5 October 2015||$ 50.000||CHF 5.000|
|DRC Judge||13 October 2015||? 291.000.000||CHF 2.000|
|DRC Judge||2 November 2015||€ 5.000||CHF 1.000|
|DRC Judge||3 November 2015||? 110.000||CHF 2.000|
|DRC Judge||12 November 2015||€ 5.000||CHF 1.000|
|DRC Judge||30 November 2015||€ 8.000||CHF 1.000|
|DRC Judge||7 December 2015||€ 15.000||CHF 2.000|
- How long do proceedings take?
Proceedings last on average 1-2 months and exceptionally up to 6 months.
Pursuant to article 12bis paragraph 9, the lodging of a claim under article 12bis is without prejudice to the application of further measures under article 17 to the FIFA Regulations. Considering (i) the grace period of at least 31 days under article 12bis, (ii) the duration of proceedings under article 12bis and (iii) the grace period of at least 2 and preferably 3 months under article 17, under certain circumstances it might be an option for a player to counter the lack of timely execution of a decision under article 12bis via the unilateral termination of the underlying agreement in accordance with article 17.