Why FIFA needs to provide a specific regulatory framework for football coaches (the difficulties in resolving club-coach disputes and the application of Swiss law)

Published 18 September 2019 By: Josep F. Vandellos Alamilla

Football Coach

One of the primary issues affecting disputes between football coaches and their clubs is the lack of an applicable regulatory framework. The FIFA Regulations on the Status and Transfer of Players (RSTP) do not directly apply to coaches/managers (a point confirmed in recent decisions1 of both the FIFA Players’ Status Committee (PSC) and the Court of Arbitration for Sport (CAS2)), and there are no other specific intra-federation regulations governing their status.

In the author’s experience this situation is causing considerable difficulties in terms of consistency and expectations when it comes to trying to resolve club-coach disputes – typically relating to termination of employment – before the PSC and CAS. Part of the problem is that many of the employment contracts expressly refer to disputes being settled “in accordance with FIFA regulationsorin accordance with the RSTP” (or words to that effect). The parties (and practitioners) therefore presume that they have the backing of a flexible and sport-specific regulatory framework, when in fact they do not. The reality is that Swiss law can end up being applied in default, leading to unexpected and unsatisfactory outcomes for the parties.

Drawing on the author’s experiences, this article examines club-coach disputes before the PSC and CAS (i.e. those with an international dimension) and looks at the current misconceptions regarding the application of FIFA regulations, why Swiss law can be applied in default, and the problems that this can lead to for the parties.

What laws apply in a dispute between club and coach?

The lack of specific regulations relating to football coaches is in the author’s experience making it difficult for practitioners and judicial bodies to establish the applicable material law to apply to a club-coach dispute and to anticipate its consequences.

Many contracts that the author has seen simply refer to disputes being resolved “in accordance with FIFA regulations” (or language to that effect) - but of course, for coaches, there are no regulations. And while certain Articles from the RSTP3 could theoretically be applied by analogy (and there have been reports of this occurring), in the author’s experience this does not happen in practice. So, what laws do apply when a club-coach employment dispute is brought before the PSC or CAS?

Proceedings before the Players’ Status Committee

Article 2 of FIFA’s Procedural Rules

In FIFA’s regulatory ecosystem, the conflict-of-laws rule is found in Article 2 of the FIFA Rules Governing the Procedures of the PSC and the DRC4 (“Applicable material law”), which states:

In their application and adjudication of law, the Players’ Status Committee and the DRC shall apply the FIFA Statutes and regulations whilst taking into account all relevant arrangements, laws and/or collective bargaining agreements that exist at national level, as well as the specificity of sport.

The Article therefore instructs the PSC to determine issues on the basis of FIFA’s statutes and regulations (of which none exist to govern coach-related disputes) while simultaneously taking into account any applicable national laws. In the author’s experience, however, the PSC rarely refers to any national law and generally ends up deciding coach-related disputes on the basis of general principles of law (e.g. pacta sunt servanda” – agreements must be kept) and the well-established jurisprudence in similar matters.

This approach however lends itself to uncertainty, which is further aggravated when the dispute escalates to the CAS.

Appeals to the Court of Arbitration for Sport

Article 57 FIFA Statutes

In relation to an appeal to CAS, Article 57of the FIFA Statutes5 states:

FIFA recognises the independent Court of Arbitration for Sport (CAS) with headquarters in Lausanne (Switzerland) to resolve disputes between FIFA, member associations, confederations, leagues, clubs, players, officials, intermediaries and licensed match agents.

The provisions of the CAS Code of Sports-related Arbitration shall apply to the proceedings. CAS shall primarily apply the various regulations of FIFA and, additionally, Swiss law. (Emphasis added)

The emphasized reference has in the author’s experience historically generated confusion among panels as to what role Swiss law should play and how it should interact with any other possible choices of domestic laws specified in the contract.

After some conflicting decisions in the past, the most recent CAS jurisprudence6 (which in the author’s view concurs with the opinions of reputed Swiss scholars7) seems to limit the role of Swiss law in the context of football-related disputes to interpreting and completing those matters already contemplated in FIFA’s regulations, rather than extending it to issues that are not foreseen (as would be the case in coach-related disputes). In other words, Swiss law applies in addition to FIFA’s regulations (supplementing their provisions); but not in place of them, (i.e. Swiss law cannot alone be used to cover possible gaps or lacunas).

Article R58 of the CAS Code

In additional to this, the CAS Panel also have to consider the mandatory hierarchy of laws stipulated in Article R58 of the CAS Code8, which provides that applicable regulations prevail over any explicit choice of law in the contract9:

Law applicable to the merits

The Panel shall decide the dispute according to the applicable regulations and, subsidiarily, to the rules of law chosen by the parties or, in the absence of such a choice, according to the law of the country in which the federation, association or sports-related body which has issued the challenged decision is domiciled or according to the rules of law that the Panel deems appropriate. In the latter case, the Panel shall give reasons for its decision.

Therefore, only when there are no regulations to resort to (as with football coaches) will the dispute be solved in accordance with the law chosen by the parties (when such choice exists10); and only in absence of a choice-of-law by the parties, the panel will look at the law of the country in which the federation that has issued the decision is domiciled, (i.e. Swiss law) or alternatively, to the law which it deems appropriate.

Understanding the mechanics of Article R58 is fundamental because it operates as an additional and compulsory source of law upon the parties when they decide to submit to the jurisdiction of the CAS. Further to that, R58 also evidences why and how Swiss law becomes relevant in coach-related disputes when the parties fail to include a governing law clause in their employment contract.

The implications of applying Swiss law to coach-club disputes

The author would like to stress at the outset that, in his experience, the application of Swiss law to club-coach disputes occurs frequently11 and leads to unsatisfactory results for the parties. The author has had cases in which it has occurred and is aware of others with colleagues, and suspects that most employment contracts between coaches and clubs at top-flight level reference FIFA regulations.

The next step therefore is to consider the implications of applying Swiss law to such disputes (when no other governing law is specified) and examine why it might be unsatisfactory in the context of international football.

For the purposes of this analysis, we will consider a hypothetical regular fixed-term employment contract between a coach and a club with the required international dimension for FIFA’s jurisdiction to apply (Article 22c RSTP). The contract provides for a penalty clause equivalent to two-month salary in favor of each party, payable in case one of them unilaterally breaches the employment contract without just cause. The parties, unaware that the RSTP does not apply to football coaches, generally refer to the RSTP as the applicable material law and fail to specify any other applicable domestic law in their governing law clause.

The CAS, on appeal, is asked to assess the legality of the premature termination by one of the parties and determine the consequences for the party at fault.

As above, the panel will first turn to Article R58 of the CAS Code to assess the applicable law. The Panel will, in the author’s experience, ignore the parties’ references to the RSTP and will not apply its provisions by analogy. Then, as there are no FIFA regulations relating to coaches, and as there is no governing law clause in the contract, the panel will resort to using Swiss law on the basis that:

  1. it is of the view that the parties tacitly agreed to its application12; or alternatively,

  2. it concludes that, in lack of regulations and with no agreement between the parties (explicit or tacit), Swiss law applies by default as being the law of the country where FIFA is domiciled.

When Swiss labor law alone is used to assess employment-related disputes, the panel will confront three possible different scenarios:

  1. One of the parties (coach or club) terminates the employment contract with just cause

When the termination of contract occurs with good cause, i.e. as a result of a serious breach by one of the parties, the party at fault will have to repair the damage caused in accordance with article 337 b) par. 1 of the the Swiss Code of Obligations (CO – an English version of which is available here13).

This principle is of “absolute mandatory nature14 so cannot, as a general rule, be altered or derogated from. The parties cannot therefore rely on their contractual penalty clause and the party at fault will be required to repair the damages caused to the other party in full, and any other clause in the contract that provides for any other form of compensation will be null and void from the outset15.

The amount of damages will be freely determined by the judge in light of the circumstances of each case, under the guidance of the principle of positive interest and in general will consist as follows:

  • The damage for the employer (club), will consist of the loss (gain manqué/lost profit) and additional expenses incurred by the sudden termination of the employment relationship16, to the exception of those expenses the employer (club) would have incurred in any case if the termination would have occurred naturally (e.g. costs associated to finding a new coach17). There must necessarily exist a “rapport de causalité” (causal connection) between the termination of the contract and the loss suffered18.

  • The damage for the employee (coach) under a fixed-term contract will consist in the residual value of contract19 after deducting any income effectively earned or to which he/she voluntarily waived.

  • According to the jurisprudence of the Tribunal Federal, the coach cannot ask for the indemnity for moral damages foreseen in article 337c par. 3 CO only for cases where the employee terminates the contract without just cause, which therefore, cannot be applied by analogy.20

  • Article 337b par. 2 provides for an exception to the hypothesis in par. 1 (where there is necessarily a termination of contract based on the breach of the other party) and establishes that in all other cases (i.e. where the is no fault by any of the parties; or they both terminate the contract with just cause; or the termination is based on objective reasons i.e. independently of any fault of the parties) the judge will freely appreciate the financial consequences of the termination in account of all the circumstances of the case. This last provision seems to leave the door open for the parties to include - for instance - reciprocal termination clauses whereby any of them would be allowed to walk out of the employment contract in certain situations (e.g. at the end of each contractual season) while being able to anticipate the consequences of such decision by way of liquidated damages or penalties which will be in any case subject to the scrutiny of the judge21. Likewise, it gives the arbitrator scope to moderate the damages provided under par. 1 of the same article.

  1. The employer (club) terminates the employment contract without just cause:

In this second scenario, Article 337 c) par. 1 CO applies and, accordingly the employee (coach) would be entitled to damages in the amount he would have earned had the employment relationship ended after the required notice period or on expiry of its agreed duration . As in the previous scenario, such damages will be reduced by any amounts that he/she saved as a result of the termination or earned by performing other work or could have earned if he had not intentionally foregone the opportunity to work22.

Article 337 c) par. 1 is of a “relative23 or semi-mandatory24 nature”, meaning that their provisions cannot be derogated from to the detriment of the employee (coach)25. Therefore, a contractual clause preestablishing the amount of damages (e.g. contractual penalty or liquidated damages clause) will only be valid if the amount is more favourable than the situation resulting from the application of the article itself (i.e. above the residual value of contract). Hence, a contractual penalty of two monthly salaries would be null if the residual value of the contract was higher26.

Further to that, the employee (coach) who is the victim of a termination without just cause will also benefit, as a general rule, from the additional compensation to be determined equitably by the judge27 of up to six months provided in par. 3 of Article 337 c) CO28. This compensation is due even if the employee has not suffered any damages. According to the doctrine, the nature of this additional amount is double: punitive and compensatory29, aiming simultaneously at sanctioning the employer for the termination without just cause, and compensatory, for the possible moral damages suffered by the employee30.

  1. The employee (coach) terminates the employment contract without just cause as a result of unjustified absences or abandoning his/her place of work.

In this third and final situation, the panel would necessarily have to apply Article 337 d) CO. The scope of this provision was delineated in depth in Raja Club Athletic de Casablanca v. Baniyas Football Sports Club & Ismail Benlamalem (a dispute involving a player), where the panel reasoned as follows:

114. According to Swiss law, the individual employment contract is a contract whereby the employee has the obligation to perform work in the employer’s service for either a fixed or indefinite period of time, during which the employer owes him a wage (Article 319 para. 1 CO). On the basis of the principle of loyalty set forth under Article 321a CO, if the employee decides to stop carrying out his work, he must warn his employer without delay in order to safeguard the latter’s legitimate interests. The employer may reasonably expect from an employee who suddenly abandons his position to be immediately informed by the latter of his intentions. In this light, if the employee fails to make contact with his employer for an extended period of time, the employer can, in good faith, assume that he is no longer interested in keeping his position (decisions of the Swiss Federal Court of 14 March 2002, 4C.370/2001, consid. 2a; of 24 August 1999, 4C.143/1999, consid. 2a). If the employee fails to appear at work for a relatively short period of time, he cannot be dismissed for failure to attend work on time before a prior warning and a further episode (ATF 121 V 277, consid. 3.a).”31

In that context, the Panel in CAS 2015/A/4161 Valdimir Sliskovic v. Qingdao Zhongneng FC 39, remarked that the failure of the assistant coach to oversee three training sessions with no previous similar behavior, and without giving prior notice was to be considered too harsh and irrational.

Instead, if the absence is sufficiently serious and the club can reasonably assume that it is not in the coach’s intention to return and that his decision is final, then club can assume that the contract has ended without having to explicitly dismiss the coach (as happened in the Decision of the Single Judge of the FIFA Player’s Status Committee of 30 January 201233).

When this happens however, the CO establishes that the employer (club) will be entitled to a compensation equal to one-quarter of the employee’s monthly salary. The indemnity of one-quarter of the employee’s monthly salary has the nature of a contractual penalty for which the employer (club) is dispensed of the obligation to prove the existence of the damage. The employee (coach) will be entitled to prove that the damage incurred by the employer (club) is less or even non-existent.

On the other hand, the employer (club) will also be allowed to claim for any additional damages he might have suffered as a result of the illicit termination of the employee (coach), but only to the extent these additional damages can be proven and are not considered expenses the employer (club) would have incurred in any case if the termination would have occurred naturally.

Article 337 d) CO is of an absolutely mandatory nature34 and therefore, it cannot be altered or derogated in favor of any of the parties, as for instance, Article 17 RSTP allows when the party involved is a football player. It appears that in this scenario, the strict application of Swiss law would necessarily lead35 to the nullity of any clause stipulating in advance the amount to be paid by the coach in case of an illicit termination of the employment contract36 due to absenteeism and again, the contractual penalty of two months would remain void.

Comment

The suitability of the Swiss CO must be assessed in the very particular economic context of Switzerland where the labor market is mature and well-functioning. The context of international football is very different and that is why FIFA enacted the RSTP, primarily with the objective to offer an adequate answer to it, by balancing the need for contractual stability on the one hand, and the right to free movement of players on the other hand. There is, from this perspective, no apparent reason why coaches should be left out and - allow me the expression - be “thrown under the bus” of the Swiss CO.

Put simply, the application of Swiss labor law without the filter of the RSTP does not seems fit for purpose as it implies several restrictions upon the parties when compared to football players, especially regarding the flexibility to negotiate the terms of contract and establish the calculation of damages arising from a premature termination. This has a direct impact on the contractual stability of coaches. Hence, whilst football players benefit (within the limits of the law37) from freedom of contract when negotiating the compensation due in case of termination without just cause (as foreseen in Article 17 RSTP, i.e. “unless otherwise provided in the contract”), clubs and coaches do not.

Some practitioners, including myself, have therefore raised doubts as to the appropriateness of the current predominant view (expressed by both the PSC and CAS) that rejects the application of the RSTP to coach-related disputes and have called for a reconsideration aiming at providing international coaches with a clear status that reflects the reality of the industry.

  • The first reason for this is the existence of a direct and clear instruction in the RSTP for the PSC to decide cases by applying “these regulations” (see Article 25 Para. 6 RSTP and Article 2 of the Procedural rules) which remains void of any meaning with the current interpretation.

  • The second reason is that the PSC has confirmed the general application of the principle of contractual stability within the framework of organized football and in particular to employment relationships between a football club and a coach38. Such a statement lacks any legal basis or justification outside the dispositions of the RSTP.

  • The third and final reason is that the direct application of Swiss law is not foreseen in the either the RSTP or the Procedural Rules as the applicable material law and this obliges the PSC to deploy a high degree of creativity when grounding decisions on the basis of general principles of law which do not always have an answer to the multiple legal challenges posed by the parties.

Suggestions

T he current regulatory labyrinth for coaches and the fact that they cannot benefit from provisions such as Articles 12bis, 24bis or 17 RSTP is far from desirable and, in the authors view, is a form of discrimination that has no justification and must be urgently addressed given the fundamental role of these professionals in their teams.

Lately, FIFA has made a number of important and far reaching reforms to their regulations (including the RSTP, Disciplinary Code and Code of Ethics) demonstrating a strong commitment towards improving the sport. Why then not take advantage of this praiseworthy wave of reforms and consider also providing coaches with a specific status within the RSTP, that would extend to them some of the rights of which players already benefit.

In the meantime, clubs, coaches and practitioners offering them legal assistance must deploy a high degree of diligence and care, trying to clearly identify the governing law to employment contracts and understand the implications of their choice.

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Author

Josep F. Vandellos Alamilla

Josep F. Vandellos Alamilla

Josep is an independent lawyer with extensive experience in international sports law. During the last ten years his practice has entirely focused in representing athletes, clubs, national associations, agents and coaches in front of the different dispute resolution bodies and the Court of Arbitration for Sport in Lausanne (Switzerland). He also advises his clients on a regular basis in contract drafting and negotiations.