Cruzeiro Esporte Clube v. Fédération Internationale de Football Association (FIFA)

II. FACTUAL BACKGROUND

3. Below is a summary of the main relevant facts and allegations based on the parties’ written submissions, pleadings and evidence adduced during these proceedings. Additional facts and

allegations may be set out, where relevant, in connection with the legal discussion that follows. Although the Sole Arbitrator has considered all the facts, allegations, legal arguments and evidence submitted by the parties in the present proceedings, he refers in this Award only to the submissions and evidence he considers necessary to explain his reasoning.

A. Proceedings before the FIFA Players’ Status Committee

4. On 22 November 2016, the Single Judge of the FIFA Players’ Status Committee (the “PSC”) decided on the dispute between the club Atlético Atenas (“Atenas”) and the Club as follows (the “FIFA PSC Decision”):

“1. The claim of [Atenas], is partially accepted.

2. The [Club], has to pay to [Atenas], within 30 days as from the date of notification of this decision, the amount of USD 3,400,000 plus 5% interest p.a. on said amount as from 11 July 2015 until the date of effective payment.

3. If the aforementioned sums, plus interest are not paid within the aforementioned deadline, the present matter shall be submitted, upon request, to FIFA's Disciplinary Committee for consideration and a formal decision.

4. Any further claims lodged by [Atenas], are rejected.

5. The final costs of the proceedings, amounting to CHF 20,000, are to be paid by the [Club] within 30 days of notification of the present decision as follows:

5.1 The amount of CHF 15,000 has to be paid to FIFA to the following bank account (…)

5.2 The amount of CHF 5,000 has to be paid directly to [Atenas].

6. [Atenas] is directed to inform the [Club] directly and immediately of the account number to which the remittances are to be made in accordance with the above points 2. and 5.2. and to notify the Single Judge of the Players' Status Committee of every payment received”.

B. First proceedings before the Court of Arbitration for Sport

5. On 13 February 2017, the Club filed an appeal at the Court of Arbitration for Sport (the “CAS”) against Atenas in relation to the FIFA PSC Decision.

6. On 11 July 2017, the CAS ruled as follows (the “CAS Award”):

“1. The appeal filed by [the Club] on 3 February 2016 against the [FIFA PSC Decision] is dismissed.

2. [The FIFA PSC Decision] is confirmed.

3. The costs of the arbitration, to be determined and served to the parties by the CAS Court Office, shall be paid in full by [the Club].

4. [The Club] is ordered to pay an amount of CHF 4,000 to [Atenas] as contribution towards the costs and legal and other expenses incurred in connection with these arbitration proceedings.

5. All other motions or prayers for relief are dismissed”.

7. On 31 August 2017, Atenas informed the FIFA PSC of the Club’s failure to comply with the CAS Award.

8. On 4 October 2017, Atenas requested the case be forwarded to the FIFA Disciplinary Committee (the “FIFA DC”) in view of the failure of the Club to fulfil its debt towards Atenas.

9. On 14 November 2017, Atenas was informed that it could not be established that it effectively remitted its bank details to the Club in order for the latter to proceed with the payment of the amounts due and therefore was informed that the FIFA PSC would only be able to forward the matter to the FIFA DC once it had received the requested documentation.

10. On 21 November 2017, Atenas forwarded the requested information to the FIFA PSC.

11. On 28 November 2017, the Club was urged to pay the outstanding amounts to both Atenas and FIFA before 18 December 2017.

12. On 19 December 2017, the parties were informed by the FIFA PSC that the matter was being forwarded to the FIFA DC for consideration and a formal decision.

13. On the same day and on 8 March 2018, Atenas confirmed that the amount due was still outstanding.

C. Proceedings before the FIFA Disciplinary Committee

14. On 26 April 2018, as the amounts due were not paid to Atenas nor to FIFA, the FIFA DC opened disciplinary proceedings against the Club due to its failure to respect the CAS Award. By means of that correspondence, the Club was urged to pay the amount due to Atenas by 10 May 2018 at the latest and was informed that the case would be submitted to a member of the FIFA DC once the time limit had expired. Moreover, the Club was informed that the FIFA DC would take a decision based on the documents in its possession, should it fail to submit any statement or pay the outstanding amount by the specified deadline.

15. On 10 May 2018, the Club informed the FIFA DC that, due to a “monetary financial turbulence” caused by the Brazilian economic crisis, it could not comply with its financial obligations with regard to the transfer agreement. Moreover, the Club asked that these “special circumstances” be taken into account in the disciplinary proceedings. It also requested confirmation that “there is no factual nor legal basis to CRUZEIRO pays any fine […] there is no factual nor legal basis to impose any sanction whatsoever, which deducts from CRUZEIRO any points (or relegation to a lower division) in the

domestic Brazilian National Championship”. Additionally, the Club requested to be granted a “period of grace of 150 days as from the notification of any decision” to comply with the payment of the outstanding amount due to Atenas.

16. On 17 May 2018, Atenas informed the FIFA DC that the amount due was still outstanding.

17. On 22 May 2018, the FIFA DC urged the Club for the final time to pay by 1 June 2018 at the latest the outstanding amounts due and to provide any copy of the relevant proof of payment. Additionally, the parties were informed that any possible payment plan and/or extension of the deadline to pay the amounts due had to be agreed together with Atenas.

18. On 4 June 2018, Atenas informed the FIFA DC that the amount due was still outstanding.

19. On 6 June 2018, the FIFA DC passed a decision as follows (the “Appealed Decision”):

“1. The [Club] is found to have infringed art. 64 of the FIFA Disciplinary Code as it is guilty of failing to comply with the decision passed by the Court of Arbitration for Sport on 11 July 2017, which confirmed the decision issued by the Single Judge of the Players' Status Committee on 22 November 2016, and according to which it was ordered to pay: a. To [Atenas]; i. EUR 3,400,000 plus 5% interest p.a. on the said amount from 1 January 2016 until the date of effective payment; ii. CHF 5,000 as costs of the proceedings; iii CHF 4,000 as contribution of the costs and legal fees incurred in connection with the arbitration proceedings; b. To FIFA: CHF 15,000 as costs of the proceedings. 2. The [Club] is ordered to pay a fine to the amount of CHF 30,000. The fine is to be paid within 90 days of notification of the present decision. (…) 3. The [Club] is granted a final period of grace of 90 days as from notification of the present decision in which to settle its debt to [Atenas] and to FIFA. 4. If payment is not made to [Atenas] and proof of such a payment is not provided to the secretariat to the FIFA Disciplinary Committee and to the [CBF] by the abovementioned deadline, six (6) points will be deducted automatically by the [CBF] without a further formal decision having to be taken nor any order to be issued by the FIFA Disciplinary Committee or its secretariat. 5. If the [Club] still fails to pay the amounts due to [Atenas] even after the deduction of points in accordance with point 4 above, the FIFA Disciplinary Committee, upon request of [Atenas], will decide on a possible relegation of the [Club’s] first team to the next lower division. 6. As a member of FIFA, the [CBF] is reminded of its duty to implement this decision and provide FIFA with proof that the points have been deducted in due course. If the [CBF] does not comply with this decision, the FIFA Disciplinary Committee will decide on appropriate sanctions on the member. This can lead to an expulsion from FIFA competitions.

7. The costs of these proceedings amounting to CHF 3,000 are to be borne by the [Club] and shall be paid according to the modalities stipulated under point 2. above. 8. The [Club] is directed to notify the secretariat to the FIFA Disciplinary Committee as well as the [CBF] of every payment made and to provide the relevant proof of payment. 9. [Atenas] is directed to notify the secretariat to the FIFA Disciplinary Committee as well as the [CBF] of every payment received”.

20. On 11 June 2018, the findings of the Appealed Decision were duly communicated to the Club.

21. On 23 July 2018, the grounds of the Appealed Decision were duly communicated to the Club.

III. PROCEEDINGS BEFORE THE COURT OF ARBITRATION FOR SPORT

22. On 13 August 2018, in accordance with Articles R47 and R48 of the Code of Sports-related Arbitration (the “CAS Code”), the Club filed a Statement of Appeal at the CAS against FIFA challenging the Appealed Decision. The Club requested the following prayers for relief:

“On the merits:

FIRST — To dismiss in full the Appealed Decision;

SECOND — To accept the present appeal;

At any rate:

THIRD — To order the Respondent to pay all arbitration costs and be ordered to reimburse the Appellant the minimum CAS court office fee of CHF 1,000 and any other advance of costs paid to the CAS;

FOURTH — To order the Respondent to pay to the Appellant and contribution towards the legal and other costs incurred and regarding the ongoing proceedings in an amount to be duly established at discretion of the Panel”.

23. In its Statement of Appeal, the Club requested that Mr. Mark A. Hovell, Solicitor, Manchester, United Kingdom be appointed as a sole arbitrator.

24. On 20 August 2018, FIFA wrote to the CAS Court Office confirming its acceptance of the Club’s proposal for Mr. Mark A. Hovell to be appointed as a sole arbitrator.

25. On 21 August 2018, the parties were informed that the disciplinary proceedings were suspended for the duration of the present proceedings before CAS.

26. On 28 August 2018, pursuant to Article R51 of the CAS Code, the Club submitted its Appeal Brief with the CAS Court Office. The Appeal Brief contained the following prayers for relief:

“FIRST — To confirm that the sanction imposed by the Commissioner of the FIFA Disciplinary Committee on the Appellant in the Appealed Decision is arbitrary and, consequently, shall be fully dismissed;

SECOND — To revert the case back to FIFA to issue proportionate disciplinary measure on the Appellant;

THIRD — To order the Respondent to pay all arbitration costs and be ordered to reimburse the Appellant the minimum CAS court office fee of CHF 1,000 and any other advance of costs paid to the CAS; and

FOURTH — To order the Respondent to pay to the Appellant any contribution towards the legal and other costs incurred and regarding the ongoing proceedings in an amount to be duly established at discretion of the Panel”.

27. On 3 September 2018, pursuant to Article R54 of the CAS Code and on behalf of the President of the CAS Appeals Arbitration Division, the CAS Court Office informed the parties that the Arbitral Tribunal appointed to this case was constituted as follows:

Sole Arbitrator: Mr. Mark A. Hovell, Solicitor, Manchester, United Kingdom

28. On 24 September 2018, pursuant to Article R55 of the CAS Code, FIFA submitted its Answer to the CAS Court Office. The Answer contained the following prayers for relief:

“Finally, we would like to request CAS:

1. To reject the Appellant's appeal in its entirety.

2. To confirm the [Appealed Decision] hereby appealed against.

3. To order the Appellant to bear all costs and legal expenses related to the present procedure”.

29. On 26 September 2018, FIFA confirmed to the CAS Court Office that it wished for the Sole Arbitrator to render an award solely on the written submissions, without the need for a hearing.

30. On 2 October 2018, the Club wrote to the CAS Court Office stating its preference for a hearing to be held in this matter.

31. On the same date, on behalf of the Sole Arbitrator, the CAS Court Office invited the Club to confirm whether it would agree to waive its request for a hearing if it was permitted to file written witness statements.

32. On 5 October 2018, the Club wrote to the CAS Court Office confirming that it “has no objection on sending the written submission”, however the Club reiterated its request for a hearing to be held.

33. On 7 November 2018, on behalf of the Sole Arbitrator, the CAS Court Office informed the parties that pursuant to Article R57 of the CAS Code, the Sole Arbitrator had decided not to hold a hearing in this matter and that he would be issuing an award on the written submissions.

Further, the CAS Court Office invited the Club to file written witness statements for any witnesses cited in its written submissions.

34. On 9 November 2018, FIFA submitted a signed copy of the Order of Procedure.

35. On 14 November 2018, the Club submitted a signed copy of the Order of Procedure, together with witness statements of Mr. Benecy Queiroz and Mr. Marcelo Kiremitdjian.

IV. THE PARTIES’ SUBMISSIONS

36. The following summary of the parties’ positions is illustrative only and does not necessarily comprise each and every contention put forward by the parties. The Sole Arbitrator however, has carefully considered all the submissions made by the parties, even if no explicit reference is made in what immediately follows.

A. The Club’s Submissions

In summary, the Club submitted the following in support of its Appeal:

a) Preliminary Considerations

37. The Club submitted that the intention of the current Appeal was not to question the facts of the Appealed Decision but to highlight the merits and wrongful approach taken by FIFA while rendering the Appealed Decision.

38. Further the Club submitted that it accepted that failure to meet its financial obligations means that it is liable to face disciplinary sanctions imposed by FIFA. The Club also pointed out that they had never previously received a sanction for failing to comply with a decision of FIFA or the CAS.

39. The Club cited Article 64 of the FIFA Disciplinary Code (the “FDC”) to make the point that the terms and conditions set out within Article 64 of the FDC do not mean that the FIFA DC shall not consider the specificities of each case before rendering a decision and imposing sanctions.

b) Matter of Exceptional Circumstances/Financial Disability

40. The Club argued that the FIFA DC “usually takes into account” exceptional circumstances such as the impossibility to pay within a deadline due to ongoing exchange or financial restrictions imposed on a country, or the ongoing armed conflicts in a country. The Club submitted that it had exceptional circumstances in the present case which the FIFA DC failed to take into account.

41. The Club submitted that it never denied that it owed Atenas an outstanding transfer fee and it fully intended to meet this obligation but the economic and political crisis in Brazil at that

time severely inhibited its ability to follow through on this. The Club also pointed to the significant devaluation of the Brazilian currency (the exchange rate dropped from USD 1 to R$3.1 to USD 1 to R$4.023) making the payment of the first instalment “impossible and impracticable”.

42. The Club further submitted that FIFA absolutely failed to recognise this major economic crisis and rather chose not to comment on this at all. The Club acknowledged that a “lack of financial means cannot be invoked as a justification for the non-compliance with an obligation” (CAS 2006/A/1110 and CAS 2014/A/3840), however, this did not mean that FIFA could take into account the referenced exceptional circumstances when imposing sanctions.

43. The Club noted the discrepancy between the treatment of clubs undergoing bankruptcy and those which were not; as clubs undergoing bankruptcy were able to avoid payments until the end of the bankruptcy proceedings, whereas other clubs had to pay their debts (CAS 2011/A/2646). In that regard, the Club submitted that “as an incontestable demonstration of good faith” of the Club, it did not “use any sort of subterfuge based upon Brazilian law (i.e. Bankruptcy or under Administrative procedures)” to deny Atenas its right to receive the money. The Club submitted that FIFA failed to recognise the Club’s “good faith and gesture of honesty”.

44. The Club also noted that Article 5 of the FIFA Statutes states that FIFA is required to “promote friendly relations” between its members, but FIFA failed to find a balance between imposing a fair sanction and consideration of the referenced “exceptional circumstances”.

45. Further in this regard the Club cited CAS 99/A/246, which stated:

“The severity of a penalty must [sic] in proportion with the seriousness of the infringement. The penalties imposed by an international federation can be overturned when the penalties provided by the rules can be deemed excessive or unfair”.

c) Unexplained – The notion of the termed “well-established practice”

46. The Club submitted that despite repeatedly referring to “well-established practice” throughout the Appealed Decision, FIFA failed to ever provide any explanation of this “absolutely vague and confusing term”. Further, FIFA’s implication that the Club unlawfully withheld funds was “baseless and false”.

47. The Club also took issue with the period of grace given to pay the outstanding amount due to Atenas, saying that 90 days was not a reasonable or proportional period to pay such a high amount. They contrast this decision with the decision taken in a case involving Clube Atletico Mineiro where the sum due was much lower at EUR 2,500,000, plus 12% interest per annum. The Club submitted that as their debt is much higher at EUR 3,400,000 plus 5% interest they too should have been granted 150 days grace to settle the amount. The Club argued that it was “absolutely disproportionate to grant a similar time of grace, considering the financial situation of the [Club] as well as the high amount in default at this case”.

48. The Club submitted that it was becoming “the norm” for sanctions to be imposed by FIFA without explanation and to cover this, the catch all term “well established practice” being put forward instead. Furthermore the Club submitted that “since the files of the cases are kept confidential and not once the reasoning or explanation for the use of the term “well-established practice” it has become next to impossible for the aggrieved parties to challenge the same”.

d) Disproportional and Biased Decision

da) Procedural Issues

49. The Club submitted that there were a number of Legal and Regulatory provisions that FIFA had to adhere to including the Swiss Civil Code (“CC”), the FIFA Statutes, the FDC and CAS jurisprudence in particular. It cited CAS 2007/A/1298-1300, which stated as follows: “Several mandatory principles of Swiss law limit the regulatory and decisional freedom of an association in order to protect its members. One such principle is that an association must correctly apply its own regulations, another being that its regulations must be applied, and its decision made in a predictable and cognisable manner, notably to ensure equality of treatment and due process”.

50. The Club also submitted that under Article 60 of the CC, FIFA has an obligation to comply with its own Statutes. Further, pursuant to Articles 94 and 115(1) of the FDC, parties in a dispute are entitled to “obtain a reasoned decision”, however FIFA failed to provide a reasoned decision.

51. Further, the Club submitted that CAS jurisprudence has also formulated and applied what has been termed the “predictability test” so that arbitrary decisions without proper legal or regulatory basis are less likely (CAS OG 98/002, CAS 2001/A/330, CAS 2007/A/1363). For example, CAS 2007/A/1363 stated:

“[…] the principle of legality and predictability of sanctions which requires a clear connection between the incriminated behaviour and the sanction and calls for a narrow interpretation of the respective provision”.

52. The Club submitted that this notion was not considered in this case and that FIFA “absolutely and completely” failed to apply it. Further, the Club stated that the maximum and minimum amounts governing the imposition of a fine under Articles 15(2) and (3) of the FDC were wide parameters such that it fails the “predictability test”.

53. Finally, the Club submitted that “by not rendering a decision with the necessary grounds/explanation and within a predictable manner [sic] is undisputed that the Appealed Decision violated mandatory rules set out in the FIFA Statutes and the FIFA Disciplinary Code, as well as principles of Swiss law, i.e. the equality of treatment and due process”.

db) The Violation of the Principle of Proportionality

54. The Club submitted that under Article 190(2)(e) of the Federal Act on Private International Law (“PILA”), an award can be set aside where such an award is incompatible with public

policy. Further it is a well-known international notion of arbitration, which is also followed by Swiss law, that one of the principles of “public policy” is the principle of proportionality.

55. The Club submitted that this principle has been “severely hampered” by the Respondent. The Club identified three components within this proportionality principle, namely:

• Adequacy – the imposition of severe monetary sanctions would never be able to achieve the goal of the case. The Club argued that by imposing an additional fine and not providing with the proper reasoning for the said additional monetary sanctions, “the Appealed decision did not achieve its goal”.

• Necessity – the Club maintained that in line with CAS jurisprudence this test denotes “whether there was no other meaningful weapon to be used against the said claim”. The Club submitted that the deduction of 6 points was a severe sanction and because it leads to serious financial and sporting consequences this mitigates against the Club’s ability to generate income through additional bonuses based on league ranking. The Club also pointed to the fact that the Appealed Decision failed to provide at least one similar case to demonstrate the FIFA DC’s “well established practice”. In essence, the Club took the view that the imposition of severe monetary sanctions in various forms was not justified and other more lenient sanctions could have been imposed instead to achieve the same result.

• Proportionality stricto sensu - The Club submitted that this criterion was abused by FIFA with no rationale given for the sanctions imposed. It again made the point that the deduction of 6 points “does not serve as an activating component towards the payment of the default amount, rather as a punishment making the collection of funds even impossible”. Here the Club submitted that a different sanction such as a 1 year transfer ban would have acted as “a much more activating factor” towards the payment of the outstanding amount. Further, the Club submitted that the principle of proportionality, “in essence, provides a reasoning criterion, which an adjudicating body needs to fulfil, in order to balance the rights and liabilities of both opposing parties in the proceedings, which has not been done in this case”.

56. The Club argued that the Appealed Decision violated all of the above principles, which leads to the conclusion that the sanctions were evidently and grossly disproportionate (CAS

57. The Club concluded its submissions by citing CAS 2015/A/4291 to make the point that if the sanction imposed is evidently and grossly disproportionate to the offence, the Panel will have the authority to amend or set aside the decision. In the light of this it stated that there had indeed in this case been “an evident display of disproportionality” on behalf of the Club and not only had FIFA grossly and unambiguously violated the principle of proportionality but also the “predictability test”. On this basis the arbitrary nature of the Appealed Decision, it should be fully dismissed by CAS.

e) Summary of the written witness statements

58. The Club submitted two witness statements, and their statements have been very briefly summarised below.

59. Mr. Benecy Queiroz, the Club’s former Deputy General Director stated as follows:

• He was part of the Club for 40 years in a variety of roles.

• At the time the agreement which led to the present dispute was signed in 2015, the Club did not have a General Manager, so he assisted the Club in drafting/agreeing the relevant agreement.

• In his experience, he had never “witnessed the kind of catastrophically known financial crisis” like the one in 2015 in Brazil.

• He “intensely” challenged the 90 day grace period provided under the Appealed Decision because, inter alia, the payment transaction involved tedious paper work for the exchange and the Club had not yet completely recovered from the 2015 financial crisis.

60. Mr. Marcelo Kiremitdjian, the Club’s General Manager stated as follows:

• He had been the General Manager of the Club since 2018. There was no General Manager before him, especially during 2015 when the relevant agreement in dispute was entered into.

• The Club was “struggling to conclude the outstanding payments relating to not just the current case, but also various other contracts of all kinds being signed during the year of 2015 and start of the year 2016”.

• The grace period of 90 days in the Appealed Decision was an “unrealistic and highly unreasonable time frame” to complete a payment of USD 3.4m.

B. FIFA’s Submissions

In summary, FIFA submitted the following in its Answer to the Appeal of the Club.

a) Validity of the Appealed Decision

61. FIFA observed that the Appeal Brief mainly revolved around the idea that the elements and criteria used by the FIFA DC to impose disciplinary measures were not duly determined and thus, such procedure does not comply with the “predictability test” and as a consequence the Appealed Decision violated the FIFA Statutes, the FDC and Swiss law.

62. FIFA noted that pursuant to CAS jurisprudence, under Swiss law the right of associations to impose sanctions or disciplinary measures on clubs is not the exercise of a power delegated by the State, rather it is the expression of the freedom of associations and federations to

regulate themselves (CAS 2008/A/1583, CAS 2008/A/1584). Further, this CAS jurisprudence has confirmed that:

“the analogous application of criminal principles to limit the powers of sports organizations is therefore only a possibility if the principle in question is an expression of a fundamental value system that penetrates all areas of the law. Even if a principle of criminal law is the expression of this fundamental value system (across all areas of the law), it does not follow that the principle applies without exception and irrefutably in the relationship between a sports association and the athlete/club”.

63. FIFA submitted that there is a general consensus that certain contents of the nulla poena sine lege principle which is an emanation of the legality principle are also applicable to disciplinary provisions and proceedings in the context of sports organisations. It further submitted that the CAS in particular has adopted certain contents of this principle with regard to disciplinary proceedings and regulations of sports organisations by establishing a so-called “predictability test”. The approach that the CAS has taken in this regard has not led to them specifying the exact contents and requirements of such a “test” (CAS 2008/A/1545). Rather, the CAS evidently takes the approach that, in order for disciplinary provisions and sports organisations to be in line with the principle of nulla poena sine lege, the stakeholder subject to such provisions and proceedings must know or must be able to know that a certain conduct is wrong.

64. In this sense, CAS jurisprudence (CAS 94/129; CAS 2007/A/1363) appears to indicate that the CAS considers disciplinary provisions and proceedings of sports organisations to be in line with the principle of nulla poena sine lege if:

• The relevant regulations and provisions emanate from duly authorized bodies;

• The relevant regulations and provisions have been adopted in constitutionally proper ways;

• The relevant regulations and provisions are not the product of an obscure process of accretion;

• The relevant regulations and provisions are not mutually qualifying or contradictory;

• The relevant regulations and provisions are not able to be understood only on the basis of the de facto practice over the course of many years of a small group of insiders;

• There is a clear connection between the incriminated behaviour and the sanction imposed.

65. FIFA pointed out that in the matter at stake, the Club at no point has contested that the FDC emanates from a duly authorized body and was adopted in a fair manner and in a transparent way complying with the rules of the association (Article 60 et seq. of the CC). The Club has neither claimed that the FDC cannot be understood generally or that such rules are contradictory. FIFA considers that it was clear for the Club that not fulfilling its financial obligations towards Atenas was wrong, that it was breaching the disciplinary regulations and that an appropriate sanction would therefore be imposed. Therefore, all the points mentioned above have been met in the present case.

66. FIFA further submitted that in order for the principles of predictability and legality to be respected, it is not necessary that the sanctioned stakeholder should know in advance the exact sanction that will be imposed. On the contrary, CAS has clearly explained that “Such fundamental principles are satisfied whenever the disciplinary rules have been properly adopted, describe the infringement and provide, directly or by reference, for the relevant sanction. The fact that the competent body applying the FIFA DC has the discretion to adjust the sanction mentioned in the rules deemed applicable to the individual behaviour of a player breaching such rules is not inconsistent with those principles” (CAS

67. FIFA went on to say that in this respect, it wished to underline that the Club, although it contested that the sanctions imposed against it were not predictable, seemed to be quite aware of the possible sanctions it would have faced even before the Appealed Decision was pronounced. Indeed, by means of its letter dated 11 May 2018 (nearly a month prior to the Appealed Decision), the Club requested FIFA “to confirm that there is no factual nor legal basis to CRUZEIRO pays any fine to grant CRUZEIRO a period of grace of 150 days as from the notification of any decision to the latter comply with the payment in full of the outstanding amount to [Atenas] to confirm that there is no factual nor legal basis to impose any sanction whatsoever, which deducts from CRUZEIRO any points (or relegation to a lower division) in the domestic Brazilian National Championship […]”. In FIFA’s opinion, the sanctions the Club incurred were well known and well predictable (as a matter of fact, well predicted) by the Club itself when it requested the FIFA DC not to impose such sanctions against it.

68. FIFA also submitted that it is worth noting that the Swiss Federal Tribunal (“SFT”) had deemed as lawful the system of sanctions used by FIFA in the event of non-compliance with its decisions or those of CAS which has been applied in the present case (decision 4P.240/2006 of the SFT dated 5 January 2007, X. S.A.D. v. FIFA and CAS).

69. FIFA argued that it was clear that the FIFA DC had not violated the FIFA Statutes, the FDC nor any provision of Swiss law since the system and procedure concerning the application of Article 64 of the FDC is solid and lawful. Thus the main argument of the Club could already be dismissed and, in FIFA’s opinion, should not be taken into consideration by the Sole Arbitrator.

b) Breach of Article 64 of the FDC by the Club

70. FIFA submitted that pursuant to Article 64(1) of the FDC, anyone who fails to pay another person - such as a player, a coach, or a club or FIFA a sum of money in full or part, even though instructed to do so by a body, a committee or an instance of FIFA or a subsequent CAS appeal decision (financial decision), or anyone who fails to comply with another decision (non-financial decision) passed by a body, a committee or an instance of FIFA or CAS (subsequent appeal decision):

• will be fined for failing to comply with a decision;

• will be granted a final deadline by the judicial bodies of FIFA in which to pay the amount due or to comply with the (non-financial) decision;

- if it is a club, it will be warned and notified that, in the case of default or failure to comply with a decision within the period stipulated, points will be deducted or demotion to a lower division ordered. A transfer ban may also be pronounced.

71. FIFA further submitted that the FIFA DC cannot review or modify the substance of a previous decision, which is final and binding and thus has become enforceable. Consequently, the FIFA DC is not allowed to analyse a case decided by the relevant body, but has as a sole task to analyse if the debtor complied with the final and binding decision of the relevant body as CAS 2015/A/4271). Moreover, the CAS should only address the question whether the Club respected and fulfilled that decision, but no longer its content (CAS 2012/A/3032).

72. FIFA pointed out therefore, that in order to impose any possible disciplinary sanction as provided for under Article 64 of the FDC, the main question to be answered by the FIFA DC remains whether or not the financial amounts as defined in the final and binding decision have been paid to the party claiming it.

73. Furthermore, FIFA added that if the FIFA DC is not provided with proof that the payment of the whole amount due has been paid or that a payment plan has been agreed, it will render a decision imposing a fine on the debtor for failing to comply. They will also grant the debtor a final period of grace from the notification of the decision to settle its debt to the creditor as clearly foreseen under Article 64(1) of the FDC.

74. FIFA also submitted that as a general principle, in order to be able to assess the issue of whether or not the financial amounts as stated in the decision have been paid to the creditor, or the reason the outstanding amount is not due anymore, the FIFA DC can only take into consideration all possible facts arising after the date on which the decision has been rendered. Any other consideration would fall out of the scope of the disciplinary proceedings under Article 64 of the FDC.

75. FIFA pointed out in this respect that it is clear and uncontested that the Club was ordered to pay a sum of money to Atenas (USD 3,400,000 plus interest, CHF 4,000 as a contribution towards legal fees and expenses in connection with the arbitration proceedings and CHF 5,000 as costs of proceedings) and to FIFA (CHF 15,000 as costs of the proceedings) by means of a final and binding decision passed by the CAS (confirming the FIFA PSC Decision). It is equally undisputed that at that time no payment, not even a partial amount was paid by the Club and no agreement on a payment plan was reached with Atenas.

76. FIFA noted that after disciplinary proceedings were opened, the Club were provided a deadline to either pay the amounts due or explain why it did not. It was only on the final day of the deadline provided when the Club finally participated in the proceedings, when it stated that due to the economic difficulties faced by Brazil that it could not make the payment. Further, the Club stated that due to the exceptional circumstances, a final grace period of 150 days should be granted. In that regard, FIFA noted that the Club had attempted to give the impression that 150 days would be sufficient in order for it to pay its debts. However, FIFA noted that at the date of its Answer in these CAS proceedings, 440 days had elapsed since the

CAS Award was passed (11 July 2017) and 136 days passed since the Club requested the period of grace to be set at 150 days (11 May 2018). To the date of FIFA’s submissions, the totality of the outstanding debt remained unpaid and no agreement to pay had been entered into.

77. FIFA submitted that the Club was adopting the same delaying tactics at the CAS by using farfetched, unfounded and false arguments to support its allegations. In support of this view, FIFA referenced the Club’s false assertion in its Appeal Brief that they have “never ever received any sanction whatsoever before having eventually disrespected a decision passed by one of the referenced decisionmaking bodies of FIFA or CAS nor does it intend doing so now”. In fact, the FIFA DC had recently sanctioned the Club for a breach of Article 64 of the FDC in a separate matter.

78. FIFA concluded its submissions under this heading and were unequivocal in its position, by stating that “it is without doubt that the FDC correctly applied Art. 64 of the FDC to the facts at its disposal in the case at stake”.

c) Inexistence of exceptional circumstances in the present case

79. FIFA submitted that the Club argued in its Appeal Brief at some considerable length about the failure of the FIFA DC to take into account the “exceptional circumstances” prevalent in Brazil during this period. In response, FIFA submitted that the arguments put forward do not fall into that category and therefore cannot be taken into account as they are not comparable to the conditions experienced previously in Argentina and Greece (exchange and financial restrictions imposed on the country making payment an impossibility) or Ukraine and Libya (ongoing armed conflicts).

80. Further, FIFA pointed out that at no point did the Club provide any factual or documentary evidence of the “financial turbulence” that they were allegedly subjected to and the recipient of. The Club blamed the economic and political crisis in the country at the time for its inability to meet its financial obligations but FIFA pointed out that from the date the FIFA PSC Decision (November 2016) was passed to the date of the Appealed Decision (June 2018), the Club engaged 16 new players and released 26. In terms of the released players the Club received EUR 4,300,000 and USD 11,230,000 in exchange for their transfers. FIFA concluded that in the light of the above, the failure to pay their outstanding debts appeared to be a choice by the Club rather than the impossibility that they frequently maintained.

81. Finally, FIFA submitted that the Club had a duty to be aware of its financial strength and cut its cloth accordingly in line with the principle of pacta sunt servanda. FIFA also cited Article 2 of the CC according to which “every person is bound to exercise his rights and fulfil his obligations according to the principle of good faith” (CAS 2010/A/2144). Thus the sole fact that the Club may be undergoing financial problems does not exonerate it from its obligations to pay the outstanding amounts owed to Atenas.

82. To that end, referring to its “constant jurisprudence (CAS 2005/A/957; CAS 2004/A/1008, confirmed by the judgement of the Swiss Federal Tribunal 4P.240/2006/Ien of 5 January 2007)”, the CAS has held that “the difficult financial situation alleged by the Appellant is not a justification for its failure to pay its debt to the club (…). Lack of financial means to satisfy an obligation of payment, or risk of

bankruptcy, does not excuse the failure to make the required payment” (CAS 2013/A/3358; CAS

83. FIFA submitted that “in the present case there are no circumstances that can be considered “exceptional” and therefore that the Committee rendered a well-founded decision taking into account the facts pertaining and surrounding the case”.

d) The sanctions imposed on the Club were proportionate

84. FIFA submitted that, notwithstanding its de novo powers under Article R57 of the CAS Code, the Panel could only amend the disciplinary decision of a FIFA judicial body if it considered that it acted arbitrarily and it exceeded the margin of discretion afforded to it by the principle of association autonomy (cf. RIEMER H. M., Berner Kommentar, no. 230 on art. 70). That is to say, even if the Sole Arbitrator disagreed with a specific sanction, he should only amend it “if the sanction concerned is to be considered as evidently and grossly disproportionate to the offence”. (FIFA

85. Moreover, FIFA submitted that Article 75 of the CC states that only grossly disproportionate decisions constitute violations of relevant laws and/or an association’s own statutes and regulations. Only those alleged violations can be claimed in the context of challenges under Article 75 of the CC.

86. Further, FIFA argued that it has always dealt with cases on case-by-case basis taking into account the relevant circumstances pursuant to Article 39(4) of the FDC and as confirmed by the CAS, “similar cases must be treated similarly, but dissimilar cases could be treated differently” (CAS

87. FIFA noted that when deciding on the appropriate sanctions to be imposed, the FIFA DC always takes into account the amount outstanding, pursuant to longstanding jurisprudence which has been confirmed by the CAS (CAS 2012/A/2730). When the FIFA DC considered the amounts outstanding in this case, it considered that a meagre fine would have contradicted the principle of repression and prevention and would have failed to encourage prompt payment. The purpose of the fine is to serve as a deterrent to parties who wish to not comply with their financial obligations (CAS 2010/A/2148).

88. In support of its view that the sanctions imposed on the Club were indeed proportionate and justified, FIFA provided a table highlighting similar levels of amounts outstanding with the attendant sanctions levied.

Case Number Outstanding Fine Grace period Deduction amount 140293 PST ZH 3,977,870 30,000 90 Days 6 points 160475 PST ZH 2,967,980 30,000 90 Days 6 points 170342 PST ZH 3,132,806 30,000 90 Days 6 points 171068 PST ZH 2,692,814 30,000 90 Days 6 points

89. FIFA further submitted that although the table only represents a small sample of cases, it clearly demonstrates that the Appealed Decision was passed in accordance with the overriding principle of proportionality, it was in line with the FIFA DC’s longstanding practice and all the specific circumstances of each case are always taken into account by the FIFA DC. Further, the CAS has confirmed that a fine imposed on a club which “is equal to fines imposed on other clubs for very similar violations” cannot be “disproportionate in view of the [FIFA DC’s] longstanding practice” (CAS 2016/A/4594).

90. Further, FIFA submitted that the proportionality of the fine (CHF 30,000) is demonstrated by the fact that this amount represents less than 3% of the total amount due. Moreover, in keeping with the table above, the fine is inherently proportionate and consistent with the other cases set out. FIFA also submitted that under Article 39(1) of the FIFA DC there is also a discretion in relation to the establishment of the conditions under which such sanctions are to be served. Here, the 90 day period of grace comes under this discretion and is again proportionate. A longer period of grace would certainly not be proportionate or fair to Atenas in this case.

91. In relation to the 6 point deduction, again FIFA rejected the Club’s claim that it is unreasonable. FIFA submitted that in line with longstanding practice and the contents of the table, the amount outstanding is taken into account and is proportionate. Additionally, FIFA also pointed out that this sanction will not be triggered if the outstanding amount is settled within the period of grace. Finally on this point, FIFA submitted that the Club failed to prove that “the deduction of points has undisputed serious financial and sporting consequences”.

92. FIFA also submitted that it would like also to underline the fact that the CAS has regularly confirmed the legality and the proportionality of the enforcement system created by FIFA and the related sanctions, in particular the points deductions. In this sense, it should be noted that the CAS has regularly confirmed that the wording of Article 64 of the FDC provides for a clear statutory basis and precisely reflects the principle of proportionality. A first decision may only include a fine and the deduction of points since it is the less severe and therefore proportionate sanction for a first infringement. However, in case of continued failure to comply with the decision, a more severe sanction must be possible, in order to take account of the continued failure to comply and the consequential disrespect of the judicial authority of both FIFA and the CAS (cf. inter alia CAS 2005/A/944; CAS 2011/A/2646, CAS

93. Finally, FIFA submitted that the Appealed Decision was proportionate in relation to the offence committed and was correctly imposed in compliance with the FDC and the FIFA DC’s longstanding jurisprudence. For these reasons the Club’s arguments on proportionality or lack of it in the Appealed Decision are to be firmly rejected.

94. To conclude and to summarise its position, FIFA submitted that:

- The procedure established under Article 64 of the FDC is lawful and meets all the requirements of the “predictability test”;

• The Club did breach Article 64 of the FDC in the present case since it unlawfully withheld a considerable amount of money from Atenas and FIFA;

• There are no exceptional circumstances in the present case that may allow the departure from the procedure and sanctions foreseen in Article 64(1) of the FDC, and

• The Appealed Decision is perfectly proportionate and in line with the FIFA DC’s longstanding practice that has been corroborated by CAS on numerous occasions.