How Spain’s "Real Decreto" impacts football player transfers and solidarity contributions under FIFA Regulations

Published 03 November 2016 By: Alfonso León Lleó

How Spain’s

Recently a dispute (“the Award”) between Sevilla Fútbol Club S.A.D. (Sevilla) and another club affiliated to the Fédération Française de Football, AS Monaco, was heard before the FIFA Judicial Bodies and subsequently the Court of Arbitration for Sport (“CAS”). The case is based upon the Spanish Real Decreto 1006/19851 ("Real Decreto").

The Real Decreto is a specific piece of legislation introduced in Spain in 1985 following a mandate included in the Spanish Worker’s Statute. The mandate entrusted the legislator with the task of implementing specific labour regulations meant to govern a particular type of special labour relationships, i.e. the ones involving athletes. In order to so, it was specified within the mandate that the new legal framework, the Real Decreto, had to incorporate labour law principles while taking due consideration of any related specificities existing in the sports sphere.

One of the particularities of the Real Decreto is that it provides sportspersons the right to unilaterally and prematurely terminate their employment contract subject to the payment of an amount of compensation which could have been defined contractually or left to the discretion of the Spanish labour courts.

This was the legal resort used by a French football player (hereinafter, the “Player”) who was under the employment of a Spanish club, Sevilla. The Player unilaterally terminated his employment contract with Sevilla and attended the offices of the Spanish Professional Football League (hereinafter, the “LFP”) where he deposited, together with a representative of AS Monaco, a cheque in the sum of EUR 20 Million to be paid to Sevilla.

The right provided to sportspersons in Spain by means of Article 13 and 16.1 of the Real Decreto is explicitly referred to by the FIFA Commentary to the FIFA Regulations on the Status and Transfer of Players (hereinafter, the “FIFA RSTP”)2 and its consequences equated to the existence of a buy-out clause in the relevant employment contract.

The move of the Player in the Award was based on the exact same circumstances which took place in the Keita case3.

This article will examine and discuss the key issues that arose in this case which may be of utmost relevance for any club seeking to acquire the services of any professional football player under an employment contract with a Spanish club.

 

Atypical Transfers

The case involved an unusual set of facts relating to the "transfer" of a player. These type of "transfers" are known as atypical transfers. It is worth noting that when addressing these types of atypical movements of players it is critical to evaluate:

  1. whether these are tantamount to a "transfer" or "movement" in the terms of the aforementioned FIFA RSTP provisions; or,

  2. if it is a mere unilateral termination of the contract effected by the player concerned without the cooperation of his former club, which should not be qualified as a transfer.

The importance of clarifying whether a move falls under point 1 or 2 above will determine whether solidarity contribution is due to the player’s former clubs or not4.

The FIFA Dispute Resolution Chamber ruled that the international move of the Player taking place by operation of the Real Decreto was tantamount to a “transfer” under the FIFA RSTP.

This issue was not contested by the appellant and therefore the CAS panel was allegedly precluded from addressing it, despite this is not an uncontroversial legal question.5 As per said ruling from the FIFA DRC, the EUR 20 Million fee paid by AS Monaco to Sevilla had to be considered as a “transfer compensation” triggering the application of the solidarity contribution mechanism6.

In such scenario said EUR 20 Million compensation entailed the obligation of the acquiring club, AS Monaco, to deduct 5% out of it and distribute it among clubs having participated in the training and education of the Player in light of Article 1 Annex no. 5 of the FIFA RSTP, i.e. all the clubs the Player was registered with in between the sporting seasons of his 12th and 23rd birthday. In case the acquiring club failed to deduct said percentage out of the transfer compensation, the FIFA Judicial Bodies ordered the transferring club to reimburse to the acquiring club the relevant portion of the solidarity contribution paid by the latter.

However, contractual parties are allowed to divert from said customary practice established by the FIFA RSTP and agree that the solidarity contribution levy will be entirely burdened by the acquiring club, i.e. not deducted from the transfer compensation to be received by the transferring club. Namely, that the transfer compensation convened by and between them is not subject to any deduction and shall be paid in its entirety to the former club of the player. 

Several decisions issued by the FIFA Dispute Resolution Chamber7 argue that said private agreement leading to a deviation from the FIFA RSTP provisions can lead to uncertainty, particularly for training clubs who will not be in a position to ascertain in full the amounts they are entitled to by simply being informed of the final transfer fee.

However, CAS jurisprudence is well-established in this respect and has consistently declared the validity of said private arrangements in between contractual parties.8 In particular the following principles are regarded as prevailing when it comes to the application of the FIFA RSTP solidarity contribution mechanism:

  1. It is the new club that has the obligation to pay the solidarity contribution to the club(s) entitled to it;

  2. Towards third parties, i.e. clubs entitled to the solidarity contribution, the obligation to pay the contribution remains with the new club, even if there are internal arrangements between the new club and the transferring club;

  3. The transferring club and the new club are free to agree on a shift of the final financial burden of the solidarity contribution and, in particular, to agree on a rule regarding any reimbursement due or not due.9

If the agreement on a shift of the final financial burden has taken place, no deduction is due by the acquiring club over the transfer compensation to be received by the former club, and consequently, the transfer compensation is considered as “net” of FIFA solidarity contribution mechanism as it will be received in in its entirety by the transferring club.

In sum, it was up to CAS to evaluate whether when a transfer occurred by operation of the Real Decreto it had to be considered as “net” of FIFA solidarity contribution, i.e. if the transferring (Spanish) club had to reimburse to the acquiring club any payment the latter was obliged to do vis-à-vis clubs entitled to solidarity contribution.

 

Indemnity under the Real Decreto

First of all, the Panel deemed that whereas parties are allowed to contractually derogate from the customary practice established by the FIFA RSTP with regards of the solidarity contribution, this can be operate as well by means of a statutory derogation as the one provided by the Real Decreto.

The exercise of said statutory right by the Player entailed a double benefit for the latter and the acquiring club as it is not considered as a termination rendering them liable to disciplinary sanctions under the FIFA RSTP and simultaneously allows them to enter into a new employment relationship. Furthermore, the amount of compensation was already determined a benefit in terms of security and certainty for AS Monaco. In case the player breached his employment contract without just cause the amount of compensation to be paid to Sevilla would have been fixed by the adjudicating authority and it could have been set higher than EUR 20 Million; plus Monaco would have been held jointly and severally liable. Thereby, the acquiring club obtained several advantages out of having the player terminating his employment contract with Sevilla on the basis of the Real Decreto in comparison with the other available alternatives.

As per the above, the Award ruled that while the new club “made use of the opportunities offered” by the Real Decreto it must also submit itself to any “inconvenient consequences related thereof”.

As correctly stated by the CAS Panel constituted in the arbitration proceedings CAS in CD El Nacional v. Villarreal Football Club (2009/A/1793) - Qui sentit commodum, debet et sentire onus, i.e. whoever obtains any benefit by opting for a particular legal transaction shall burden any and all related risks and consequences.

In fact, if the new club together with the player had deposited one euro less than the amount set forth in the player’s employment contract, i.e. one euro less than said EUR 20 Million at the LFP, he would not have been immediately released of his employment contract with Sevilla. Said consideration further reinforces the fact that said compensation had to be received in full, i.e. net of any solidarity contribution by Sevilla and therefore was not subject to any deduction.

 

Transfer compensation

In the Award, the amount of compensation had been predetermined contractually, although it was possible for the parties, in light of the Real Decreto, not to stipulate in advance said amount and leave it to the discretion of the judge or court.

In said second scenario, whether a “transfer” under the FIFA RSTP takes place after a new club pays an amount of compensation established by a judge or court remains controversial.

Certain legal practitioners deems that “any” compensation is subject to the FIFA solidarity contribution no matter whether fixed by the FIFA DRC or a labour judge in any domestic court10.

Their arguments would be more than consistent in the underwritten view before the CAS. However this view is not shared by other CAS panels, such as in the Award where it is indicated that a termination without just cause under Article 17 of the FIFA RSTP would “most likely” not have been considered as a “transfer” and therefore triggered the solidarity contribution mechanism. In such scenario, the CAS Panel anticipated, although without expressing a definitive conception that:

CAS 2015/A/4188
8.37. The Player could have simply walked away from the Contract without just cause. However, pursuant to the Regulations, doubtless the Respondent would have pursued the Player under Article 17 of the Regulations. The Respondent would have claimed the EUR 20,000,000 referred to in the Contract, and if the Player had joined the Appellant, then it would be requested to be jointly and severally liable too. Whilst this alternative would most likely not be classed as a transfer, it would raise the risk of disciplinary sanctions. […]
                    (emphasis added by the underwritten)

This alternative would “most likely” not be classed as a transfer. By analogy, a similar rationale could be applied in case instead of the FIFA DRC, it would have been up to the Spanish labour courts to decide on consequences related to the unilateral termination of the employment contract.

In conclusion, whether an employment contract termination operated under the Real Decreto is tantamount to a “transfer” under the FIFA RSTP and therefore triggers the FIFA solidarity contribution is still open to discussion11. However, any experienced club in the world of football should acknowledge the consequences of instructing the players they are interested in to opting for one type of transaction or another.

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Author

Alfonso León Lleó

Alfonso León Lleó

Associate at Ruiz-Huerta & Crespo SPORTS LAWYERS. Specialist in Sports Law. LL.M. inInternational Sports Law (ISDE). Member of the AEDD. Graduated in Law andBusiness Administration. Member of the Board of Directors at Club de TenisValencia.

Aleon@ruizcrespo
+ 34-650031353