The football transfer that wasn’t to be – the unfortunate case of Mauricio Pinilla and the importance of having sports-specific legal solutions
Published 05 April 2019 By: Pablo Mettroz Holley
In January 2019, the San Miguel Court of Appeal overturned a decision of the San Miguel Labour Court that ruled Universidad de Chile (La U) must pay 460 million pesos (approximately $685,000) to Chilean footballer, Mr. Mauricio Pinilla, for unfair dismissal.
It’s an interesting case because it is the first time that a Chilean court has ruled - using only Chilean labour law and not FIFA’s rules - on the termination of a footballer’s employment contract.
This article reviews the case, highlights the most relevant issues, and offers the author’s thoughts on the potential effects of the ruling going forward. The main issue, in the author’s view, is how the current domestic labour laws might fail (in an unintended way) to protect arguably the most vulnerable party in the proceedings: the athlete.
Mr Pinilla is a professional footballer who was trained in the La U youth academy programme. He has earned 45 caps with “La Roja” (the Chilean national team) and in July 2017, aged 33, after spending a long career abroad, returned to Chile and re-signed with his home team.
During the final days of July 2018, he received two emails from the President of Colón de Santa Fe, offering him the option of joining the Argentinean club. Both emails were leaked to the press and contained a wage offer, a bonus and details on other clauses.1 Mr Pinilla agreed in principle to the offer and, on 27 July 2019, while in Antofagasta for an away fixture, he left the team hotel (with La U’s permission) to return to Santiago to sign the “Federative and Economic Rights Transfer Contract” (Transfer Contract). La U consented to the transfer and (together with Colón) had already signed the Transfer Contract.
While Mr Pinilla was flying back to Santiago, La U’s Sporting Director, Mr Ronald Fuentes, stated publicly at a press conference that Mr Pinilla was to leave the club.2 When landing at the airport in Santiago, Mr Pinilla was approached by reporters who asked him about his situation with the club. He answered, ignoring Mr Fuentes’ statement, “I am still an Universidad de Chile player”,3.
The Transfer Contract was leaked to the press a short time later. It was dated 27 July 2018 and signed by La U, Colón and Mr Pinilla.4 It stated that La U would transfer both the Federative and Economic Rights for Mr. Pinilla to Colón in return of $100,000, or “a friendly game against La U” (a curiously low value deal for a player of Mr Pinilla’s quality). Another of the clauses stated (importantly) that Mr. Pinilla had full knowledge of the whole deal, and that he had already agreed terms for his new employment with Colón and was ready to celebrate his new deal.5
Unfortunately for Mr Pinilla, however, he never completed a new employment contract with Colón. Apparently, he never received a complete offer from them and, according to his words, the Argentine club may have been asking him to commit fraudulent acts under Argentine tax law6. The following week, Mr Pinilla showed up for training at La U’s training ground but was refused access by the club. On 31 July, the Chairman of the club, Mr. Heller (along with Mr. Fuentes and La U’s lawyer, Mr. José Joaquín Laso) announced at a press conference that Mr. Pinilla would not be returning to the club after failing to sign with Colón.7
Mr. Pinilla then filed a suit against La U in the Santiago Labour Court for unfair dismissal, claiming more than 1 billion Chilean Pesos (approximately $1.5 million), plus other items. 8
The applicable law and the arguments put forward
Mr. Pinilla claimed La U unfairly dismissed him during the press conference on 31 July 2018, and he relied on (principally) Articles 161 (dismissal by the employer) and 168 (unjustified dismissal) of the Labour Code. His main arguments were that:
There was never a complete agreement between himself and Colón for a new employment contract;
The Transfer Contract was evidence that the employment relationship between Mr. Pinilla and La U remained in force; and
He had not signed a document to recognise the end of his employment relationship with La U.
Mr. Pinilla also managed to produce in evidence a document signed by the General Secretary of the Chilean Football Association (ANFP) stating that he was still registered as a La U player.10
La U’s position was that the employment contract came to an end by mutual consent under a special rule of the Chilean Labour Code – namely Article 152bis I11, paragraphs 1 and 412 13 (see footnotes for the full text of the Article in Spanish).
The practical effect of this provision, La U argued, was that Colón’s compensation to them (i.e. the $100,000 or friendly game) was consideration for an anticipated termination of Mr Pinilla’s employment contract. La U argued that the requirements for an anticipatory breach under Article 152bis I were present because:
The Transfer Contract was signed while Mr Pinilla’s employment contract with La U was still in force;
The Transfer Contract was written;
All three parties (La U, Colón and Mr. Pinilla) showed that they accepted the deal by signing the Transfer Contract; and
There was a compensatory sum to be paid to La U in consideration.
La U also substantiated their argument by pointing out that, pursuant to the Transfer Contract, they no longer own the athlete’s federative and economic rights, which now belong to Colón.
First instance ruling
On 30 November 2018, the San Miguel Labour Court ruled in favour of Mr Pinilla and found he had been unfairly dismissed by Chairman Heller on 31 July 2018 during his press conference with Mr. Laso and Mr. Fuentes. The judge applied Article 161 of the Chilean Labour Code (a rule applied to normal employees rather than specific to athletes), and did not consider Article 152bis I applicable. The ruling was based upon three main reasons:
Article 5 of the Transfer Contract required La U to send a signed copy of their settlement agreement with Mr Pinilla to the Chilean Football Association within 72 hours of completion (which did not happen).
Colón and Mr Pinilla were still negotiating their own employment contract.
Since there was no signed settlement agreement recognising the end of Mr Pinilla’s employment relationship with La U, Mr Pinilla and Colón were unable to sign a new contract in any event and, therefore, the Transfer Contract had no legal effect.
Accordingly, the judge found that La U had dismissed Mr Pinilla rather than ending the employment contract by mutual consent.
The Court ordered La U to compensate Mr. Pinilla for unfair dismissal in the amount of 460 million Chilean Pesos (approximately $685,000), and therefore partially admitted his claim.
Court of Appeal - Recurso de Nulidad y Sentencia de Reemplazo
In January 2019, both parties filed for annulment of the decision in front of the San Miguel Court of Appeal14. La U claimed the first instance judge had failed to rule according to the specific applicable law. Mr. Pinilla, on the other hand, was unsatisfied with the amount of money the judge had awarded to him15.
On reviewing the case, the Court of Appeal overturned the initial judgement for the following reasons:
On its view, it is irrelevant for the termination of an employment contract whether the settlement is signed or not.
Moreover, the first instance court set conditions that were not foreseeable under employment law – in particular, that termination of Mr Pinilla’s employment contract with La U was subject to the obligation of signing a settlement agreement and sending it to the Chilean Football Association.
When it comes interpreting Chilean Labour Law, it is irrelevant how federative and economic rights are transferred from one club to another. The case was all about a domestic employment contract and how it was ended before time.
The Court was persuaded by La U’s argument that Article 152 bis I of the Labour Code was indeed the correct provision to apply, as the contract was terminated by the payment of compensation rather than the player being dismissed. Accordingly, the Court ruled that the employment relationship was terminated when Mr. Pinilla (the last of the three parties) signed the Transfer Contract on 27 July 2018. The termination was by mutual consent with La U since the club had already also signed the Transfer Contract. This way of ending an employment relationship, which consists of a sum of money payed to the current employer, so that they accept an anticipated termination of the employment contract, is characteristic of professional athletes contracts.
La U did not have to compensate Mr. Pinilla who, on the contrary, was forced to pay the trial’s costs.
The importance of ascertaining which is the applicable law in the present case is that, according to the Chilean Labour Code (in particular Article 152 bis I) the Transfer Contract of federative and economic rights alone was sufficient to terminate Mr Pinilla’s employment contract, by mutual consent of the parties, as it contained all the elements required under domestic law.
This stands in contrast to a traditional "sports law" analysis, whereby pursuant to Article 9 and Annexe 3 of the FIFA Regulations on the Status and Transfer of Players (RSTP), an international transfer involves several acts, one of which is the anticipated termination of the current employment contract. If the court had taken into consideration the RSTP rules, it may well, in the author’s view, have concluded that there were still several acts to be completed before the transfer was considered finished, and accordingly that La U had dismissed Mr Pinilla before the process was complete.
The most important element of the whole case, which finally determined the decision of the Court of Appeal, is that the compensatory sum offered had the effect of terminating the existing employment contract. However, it does not mention whether the new club is obliged to hire the player afterwards. (See paragraphs 11 and 12)
On reviewing the Pinilla case, there are several conclusions of note.
Both judgements were based upon the current Chilean Labour Code, and in particular an assessment of whether Article 161 or Article 152 bis I was the correct rule to apply. Only the first instance judgment considered the concurrent application of the RSTP.18 The Court of Appeal concluded that all the necessary elements to solve the case were to be found in the Labour Code. So, according to both courts, the case was to be assessed under domestic employment law only (i.e. the Chilean Labour Code); international sports law principles were disregarded partially by the first court and entirely by the Court of Appeal.
Domestic employment law falls short on the “sports-specificity” of this matter, particularly when referring to compensation for anticipated termination of an employment contract between a professional athlete and a club, as it only considers the extinctive action (i.e. the compensation), but says nothing about what the footballer is expecting to happen next: i.e. the signing of a new employment contract with the compensating club. This is a crucial oversight, as without full consideration of it, the law arguably fails to protect professional athletes, as evidenced in the case of Mr Pinilla.
The specificity of this matter suggests that it’s necessary to establish specialised Sports Arbitration Tribunals in Chile. The nature of a football transfer, whereby the employment contract exists alongside and a civil contract (i.e. the Transfer Contact) is not present in other employment relationships and, therefore, demands specialised assessment to ensure fairness.
Regarding athletes, it is advisable to ensure that their rights and obligations arising out any documents they sign are made completely clear, in order to avoid unforeseen harm. It is also sensible to avoid excessive time between signing contracts. In this case, to sign both contracts, the federative transfer contract and the new employment contract on the same day, or even on the same meeting, would have avoided this unfortunate issue.
In conclusion, Chilean domestic labour law will not always full protect athletes. The author expects that, unfortunately, this won’t be the last example of an athlete being left without a contract, and that necessary legal modifications and measures are required to ensure the specificity of sports-related employment matters are duly considered.
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- Tags: Argentina | Athlete Welfare | Chile | Chilean Football Association (ANFP) | Chilean Labour Code | Employment | Football | San Miguel Court of Appeal | San Miguel Labour Court
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Abogado, Universidad Adolfo Ibáñez
Pablo Mettroz is a lawyer graduated from Pontificia Universidad Católica de Chile, and works at Universidad Adolfo Ibáñez. With experience as an in-house lawyer in a football club and in the insurance market, he is partner of sports law specialised firm Mettroz y González and has recently joined the Football Federation Anti Doping Comission Board.