Following the near global suspension of football activity, many clubs were put in the unfortunate position of being unable to satisfy their existing contractual obligations as significant revenue streams from gate receipts, sponsorship and broadcast were all severely impacted.

FIFA has recently published a decision which concerns the extent to which the global pandemic has caused a ‘force majeure’ event and whether that gave rise to a viable argument excusing a club’s non-payment of contractually agreed salaries.

This case comes seven months after FIFA issued the COVID-19 Football Regulatory Issues guidelines (the “Guidelines”) and COVID-19 Football Regulatory Issues FAQs (the “FAQs”), aimed at assisting stakeholders to navigate the financial upheaval caused by the health crisis by suggesting, inter alia, the factors that the FIFA judicial bodies would take into account where clubs could not afford to meet their financial obligations.

Background

The case in question concerns the Bulgarian player, Nikolay Bodurov (the “Player”) and the Iranian Club, Esteghlal (the “Club”).

The Player and the Club entered into a short term employment contract on 30 January 2020, set to last until 31 May 2020 pursuant to which the Player was to receive EUR 25,000 per month, with an additional EUR 10,000 to be paid to his agent.

Iran had entered ‘lockdown’ on 27 February and the Player left the country on 6 March. On 14 March the Club announced that training had been suspended until further notice. On the same day, the Player made a demand for outstanding salaries in accordance with Article 14bis of the FIFA Regulations on the Status and Transfer of Players (“RSTP”). At that date, two monthly salaries were overdue, in addition to the EUR 10,000 owed to the agent.

The Club did not dispute the payment, but instead asked for an extension to pay the money. Article 14bis provides that a player must give a debtor club 15 days to fully comply with its financial obligations before it can terminate a contract with just cause on the basis of two outstanding monthly salaries.   The Player declined to give the club an extension and demanded that he be paid in full by 29 March 2020, failing which he would terminate his contract.

No payment was made and so the Player terminated his contract on 30 March 2020. Later that day, the Club sent a letter to the Player explaining that it was commencing a disciplinary action against him for leaving the country on 6 March 2020 without the permission of the Club.  On 21 May 2020 the Player lodged a claim before the FIFA DRC.

Player’s Submissions

The Player’s case was simple. Since two monthly salaries were overdue, in addition to the EUR 10,000 due to be paid to the agent, he was entitled to make a formal demand for payment in accordance with Article 14bis RSTP and give the Club 15 days to make payment. When the Club failed to make payment, he was entitled to terminate his contract with just cause.

Club’s Submissions

The Club made the following arguments:

  1. at the date the Player left Iran, 6 March 2020, only one monthly salary was overdue, in addition to the agent’s commission;
  2. the Player had terminated the contract during a period where the contract had been suspended on the grounds of force majeure; and
  3. the Player should have been aware that the nature of the banking system in Iran and the fact that the country is subject to international sanctions meant that timely payments were impossible.

DRC’s Decision

The DRC accepted the Player’s submissions, save that it did not accept that the claim for the agent’s commission was admissible as it was not an “employment related dispute”,[1] and rejected all of the Club’s submissions.

Crucial to the DRC’s findings was that by the time football activity was suspended in Iran, two monthly salaries were already overdue. The DRC also found that the Club had not raised any issue with the Player’s departure from the country prior to his contractual termination and that the banking restrictions in Iran could not justify the non-fulfilment of the Club’s contractual obligations.

Of more interest, was the DRC’s finding on the issue of force majeure. The DRC held that it was necessary for any party relying on the legal concept of force majeure to prove its existence in accordance with the applicable laws and/or rules in question:

    1. Analysing the concept of a situation of force majeure, the members of the Chamber noted that, based on the contents of the FIFA COVID-19 Guidelines and the FIFA COVID-19 FAQ, FIFA did not declare that the COVID-19 outbreak was a force majeure situation in any specific country or territory, or that any specific employment or transfer agreement was impacted by the concept of force majeure.
    1. In other words, in any given dispute, it is for a party invoking force majeure to establish the existence of said event under the applicable law/rules as well as the consequences that derive in connection thereto. The analysis of whether a situation of force majeure existed has to be considered on a case by-case basis, taking into account all the relevant circumstances.
    1. Furthermore, the deciding body recalled that the aforementioned COVID-19 documents issued by FIFA – as per the explicit wording of FAQ no. 16, as well as pages 6 and 7 of the FIFA COVID-19 Guidelines – are only applicable to “unilateral variations to existing employment agreements”. Therefore, except where a termination of a contract occurred following a unilateral variation made as a result of COVID-19 (in which case the validity of the variation must first be assessed under the guidelines), said guidelines do not apply to assess unilateral terminations of existing employment agreements.
    2. In this regard, the DRC stated that, is [SIC] this particular matter, the Respondent did not submit any form of documentary evidence or allegations that the situation it faced, was to be considered a situation of force majeure. Moreover, the Chamber referred to the fact that the Respondent only mentioned that the competition in Iran would supposedly continue after 24 June 2020, but did not further specify this allegation or indicated what consequences said continuation of the completion would have for the contractual relationship with the Claimant. As a result, no situation of force majeure could be established. (emphasis added)

Aside from failing to provide adequate evidence of the existence of a force majeure scenario in this instance, the Panel also found that parties could only invoke the Guidelines and the FAQs where they had attempted to vary contracts consequent upon the situation caused by the global pandemic. The Club had not attempted to vary the Player’s contract and so could not rely on those documents.

Consistency of approach?

The wording of the decision correlates with the FAQs, which clarified the earlier Guidelines. However, it is not difficult to see how confusion may have arisen.

The Introduction section at internal page 2 of the FIFA Guidelines provided that “[t]he Bureau recognised that the disruption to football caused by COVID-19 was a case of force majeure” and that “Article 27 of the RSTP states that cases of force majeure shall be decided by the FIFA Council, whose decisions are final. The COVID-19 situation is, per se, a case of force majeure for FIFA and football.”

The FAQs however clarified the position further and stated the following on internal page 4:

“In this context, on 6 April 2020, the Bureau made several decisions regarding regulatory and legal issues as a result of COVID-19. In order to temporarily amend the RSTP, the Bureau relied upon article 27 as its source of power, determining that the COVID-19 outbreak was a matter not provided for and a force majeure situation for FIFA and football generally.

The Bureau did not determine that the COVID-19 outbreak was a force majeure situation in any specific country or territory, or that any specific employment or transfer agreement was impacted by the concept of force majeure.

For clarity: clubs or employees cannot rely on the Bureau decision to assert a force majeure situation (or its equivalent).

Whether or not a force majeure situation (or its equivalent) exists in the country or territory of an MA is a matter of law and fact, which must be addressed on a case-by-case basis vis-à-vis the relevant laws that are applicable to any specific employment or transfer agreement.” (emphasis in original)

Armed with only the decision, it is impossible to know the documents that Esteghlal submitted in its defence. However, paragraph 27 of the decisions says in no uncertain terms, that Esteghlal “did not submit any form of documentary evidence or allegations that the situation it faced, was to be considered a situation of force majeure.

Further, it does not appear that Esteghlal even attempted to vary the Player’s contract, either by agreement or unilaterally, as a consequence of the financial effects of the global pandemic. The Panel was clear (see paragraph 17 of the decision) that the Guidelines and FAQs (see FAQ no. 16) were only applicable to unilateral variations of contracts and so could not be invoked ex post facto, where clubs had not varied player contracts prior to any contractual termination.

Comment

In reality, this case was a very simple one, and does not provide us with a great deal of insight into how FIFA will interpret terminations following unilateral variations to contracts and, in particular, what type of evidence or level of financial difficulty will be considered adequate.

What is clear is that clubs will only be able to rely on the Guidelines and FAQs if they had varied the employment contract prior to any termination on the part of the player. Evidence will also be of fundamental importance to any club seeking to demonstrate the extent to which force majeure existed at the time of any non-payment.

If you have any questions relating to this topic, please contact Simon Grossobel.

[1] The FIFA DRC is competent to hear employment related disputes with an international dimension in accordance with Articles  24.1 and 22(b) RSTP