FC Shakhtar Donetsk v. Fédération Internationale de Football Association (FIFA), Real Zaragoza SAD

I. THE PARTIES

1. FC Shakhtar Donetsk (hereinafter: the “Appellant” or “Shakhtar Donetsk”) is a football club with its registered office in Donetsk, Ukraine. Shakhtar Donetsk is registered with the Football Federation of Ukraine, which in turn is affiliated to the Fédération Internationale de Football Association.

2. The Fédération Internationale de Football Association (hereinafter: the “First Respondent” or “FIFA”) is an association under Swiss law and has its registered office in Zurich, Switzerland. FIFA is the governing body of international football at worldwide level. It exercises regulatory, supervisory and disciplinary functions over continental confederations, national associations, clubs, officials and players worldwide.

3. Real Zaragoza S.A.D. (hereinafter the “Second Respondent” or “Real Zaragoza”) is a football club with its registered office in Zaragoza, Spain. Real Zaragoza is registered with the Royal Spanish Football Federation (Real Federación Española de Fútbol - hereinafter: the “RFEF”), which in turn is affiliated to FIFA.

V. DISCUSSION — A. Jurisdiction

82. The jurisdiction of CAS, which is not disputed, derives from article 63(1) FIFA Statutes 2011 edition as it determines that “[a]ppeals against final decisions passed by FIFA’s legal bodies and against decisions passed by Confederations, Members or Leagues shall be lodged with CAS within 21 days of notification of the decision in question” and article R47 of the CAS Code. The jurisdiction of CAS is further confirmed by the Order of Procedure duly signed by the Parties.

83. It follows that CAS has jurisdiction to decide on the present dispute.

84. Under article R57 of the CAS Code, the Panel has full power to review the facts and the law and it may issue a new decision that replaces the decision challenged.

B. Applicable Law

85. Article R58 of the CAS Code provides the following:

“The Panel shall decide the dispute according to the applicable regulations and 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, the application of which the Panel deems appropriate. In the latter case, the Panel shall give reasons for its decision”.

86. The Panel notes that article 62(2) FIFA Statutes stipulates the following:

“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”.

87. The Parties agreed to the application of the various regulations of FIFA and subsidiary to the application of Swiss law. The Panel is therefore satisfied to accept the subsidiary application of Swiss law should the need arise to fill a possible gap in the various regulations of FIFA.

88. Shakhtar Donetsk and FIFA agreed to the subsidiary application of Swiss law only. However, Real Zaragoza relied principally on Spanish law in its submission. In accordance with article R58 CAS Code, the Panel finds it appropriate to apply Spanish law in the present dispute. The reason is that insolvency proceedings are not governed by the various regulations of FIFA, but are solely governed by the law of the country where the insolvency is established, i.e. Spain. The application of Spanish law is nevertheless strictly limited to the insolvency proceedings of Real Zaragoza insofar as Spanish law contravenes the application of the various regulations of FIFA.

C. Admissibility

89. The appeal was filed within the deadline of 21 days set by article 63(1) FIFA Statutes. The appeal complied with all other requirements of article R48 of the CAS Code, including the payment of the CAS Court Office fees.

90. FIFA objects the admissibility of the appeal because it is of the opinion that FIFA’s correspondence of 24 February 2012 was only a letter sent by the FIFA administration informing Shakhtar Donetsk that FIFA is not in a position to further proceed with the requested measure of execution due to the legal situation of Real Zaragoza. FIFA merely informed Shakhtar Donetsk of the fact that the proceedings against Real Zaragoza became baseless as the club entered into administration. Such letter cannot be considered a final decision passed by one of FIFA’s legal bodies as is required by article R47 CAS Code and article 63(1) FIFA Statutes.

91. Article R47 CAS Code stipulates the following:

“An appeal against the decision of a federation, association or sports-related body may be filed with the CAS insofar as the statutes or regulations of the said body so provide or as the parties have concluded a specific

arbitration agreement and insofar as the Appellant has exhausted the legal remedies available to him prior to the appeal, in accordance with the statutes or regulations of the said sport-related body. (…)”.

92. Article 63 FIFA Statutes determines that:

“1. Appeals against final decisions passed by FIFA’s legal bodies and against decisions passed by Confederations, Members or Leagues shall be lodged with CAS within 21 days of notification of the decision in question. 2. Recourse may only be made to CAS after all the other internal channels have been exhausted”.

93. The Panel noted that the Swiss Federal Supreme Court established the following definition of a “decision”:

“[T]he decision is an act of individual sovereignty to an individual, by which a relation of concrete administrative law, forming or stating a legal situation, is resolved in an obligatory and constraining manner. The effects must be directly binding both with respect to the authority as to the party who receives the decision” (cf. ATF 101 Ia 73).

94. According to CAS jurisprudence, a decision is a unilateral act sent to one or more determined recipients and is intended to produce legal effects3. Or in other words, “an appealable decision of a sport association is normally a communication of the association directed to a party and based on an “animus decidendi”, i.e. an intention of a body of the association to decide on the matter, being also only the mere decision on its competence (or non-competence)”4.

95. In addition, it is constant CAS jurisprudence that “the form of a communication has no relevance to determine whether there exists a decision or not. In particular, the fact that the communication is made in the form of a letter does not rule out the possibility that it constitutes a decision subject to appeal”5.

96. The Panel considered the wording used by the secretariat to the FIFA Disciplinary Committee in its letter of 24 February 2012, in particular the statement that “[t]aking into account all the above mentioned circumstances and in view of the legal situation of [Real Zaragoza], we are not in a position to request to the [RFEF] to execute the decision taken by the FIFA Disciplinary Committee on 31 August 2010 against [Real Zaragoza] and we declare the present proceedings, in respect to [Real Zaragoza], closed”.

97. FIFA alleged in its submission that it was entitled to close the proceedings against Real Zaragoza on the basis of article 107(b) FIFA Disciplinary Code. As will be set out below together with the legal merits of the case, the Panel is of the opinion that FIFA has certain discretion to close proceedings if a party has entered into insolvency proceedings, but no obligation to do so. FIFA’s letter of 24 February 2011 not only informed the Appellant of the consequences of the fact that Real Zaragoza was in insolvency proceedings, but was indeed a decision in light of the discretion given to it.

4 CAS 2008/A/1633, §11; see also: BERNASCONI M., When is a “decision” an appealable decision?, in: RIGOZZI/

BERNASCONI (eds.), The Proceedings before the Court of Arbitration for Sport, Bern 2007, p. 273.

98. Hence, FIFA intended to close the disciplinary proceedings against Real Zaragoza, which were opened on the request of Shakhtar Donetsk; FIFA thereby affected the legal situation of Real Zaragoza and Shakhtar Donetsk. The correspondence of the secretariat to the FIFA Disciplinary Committee of 24 February 2011 was directly binding on FIFA, Shakhtar Donetsk and Real Zaragoza, while there were no remaining internal remedies left for Shakhtar Donetsk against such decision.

99. Finally, as was held by another CAS Panel in CAS 2007/A/1251 in respect of the FIFA Dispute Resolution Chamber and/or the FIFA Players’ Status Committee6, the Panel finds that any FIFA decision which is intended to be made on behalf of the FIFA Disciplinary Committee and which is formulated as a final decision must be deemed subject to an appeal in front of CAS. For the avoidance of doubt, this conclusion is without derogation to the question as to whether the secretariat had competence to close the proceedings on behalf of the FIFA Disciplinary Committee.

100. Consequently, since all the preconditions of article R47 CAS Code and article 63 FIFA Statutes have been complied with, the Panel finds that FIFA’s correspondence of 24 February 2012 is a final decision susceptible to an appeal to CAS. The appeal is therefore admissible.

VI. PRELIMINARY ISSUES — A. Admissibility of the late Submissions

101. On 6 July 2012, the Appellant submitted a judicial decision of the Zaragoza Commercial Court dated 27 June 2012, as notified to the parties in such proceedings on 2 July 2012. According to the Appellant, it appears from such “Statement of Accounts” that three of the ordinary creditors of Real Zaragoza have been paid the full credit owed to them, despite the bankruptcy proceedings initiated by Real Zaragoza. In the opinion of Shakhtar Donetsk, Real Zaragoza thus had the opportunity to pay creditors, but decided to give preferential treatment to creditors other than the Appellant.

102. The Appellant argues that such submission is admissible based on the fact that, although it was issued after the submission of the appeal brief, it is of paramount importance to this procedure, it therefore constitutes an exceptional circumstance under article R56 of the CAS Code.

103. On 10 July 2012, the First Respondent objected to the admissibility of the new document since parties are not authorised to supplement their submissions based on article R56 of the CAS Code. Furthermore, in FIFA’s opinion the documents are not relevant for the case at stake.

104. On 11 July 2012, the Second Respondent objected to the new documents by arguing that the Appellant filed such documents in bad faith. Real Zaragoza alleged that the same counsel representing the Appellant, Mr Juan de Dios Crespo Pérez, also represented the three creditors

mentioned by the Appellant. Mr Crespo Pérez must therefore have known the content of such document before 2 July 2012 and must have been aware that this extra judicial agreement was concluded before Real Zaragoza entered into administration. Real Zaragoza offered Shakhtar Donetsk a similar extra judicial agreement in order to avoid bankruptcy, but Shakhtar Donetsk dismissed such offer. The Second Respondent provided certain documents in respect of these contentions.

105. As announced in the letter of the CAS Court Office of 11 July 2012, the issue was discussed at the outset of the hearing on 12 July 2012.

106. The Panel notes that article R56 of the CAS Code stipulates the following:

“Unless the parties agree otherwise or the President of the Panel orders otherwise on the basis of exceptional circumstances, the parties shall not be authorized to supplement or amend their requests or their argument, nor to produce new exhibits, nor to specify further evidence on which they intend to rely after the submission of the appeal brief and of the answer”.

107. Considering the documents submitted by the Parties in this respect and the discussion at the outset of the hearing, the Panel informed the Parties during the hearing that all the late submissions would remain in the file, but that no particular weight would be given to them. The Panel is convinced that the extra judicial agreement with the three creditors was reached before the commencement of the administration of Real Zaragoza. Real Zaragoza was therefore free to make an extra judicial offer to its creditors, who in turn were free to reject such offer, as Shakhtar Donetsk apparently did. Whether certain other creditors of Real Zaragoza accepted such extra judicial offer is irrelevant for the present case.

B. Amendment of Requests for Relief in Appeal Brief

108. FIFA alleged in its answer that Shakhtar Donetsk’s requests for relief in the appeal brief vary significantly from the requests for relief in the statement of appeal. According to FIFA, pursuant to article R48.1 CAS Code, an appellant shall submit its requests for relief in the statement of appeal. The requests for relief in the appeal brief, insofar as they vary from the requests for relief in the statement of appeal, should therefore be disregarded.

109. During the hearing, the Appellant referred the Panel to article R56 of the CAS Code and contended that the wording of such provision speaks for itself.

110. The Panel noted that indeed article R48.1 CAS Code determines that an appellant shall file its requests for relief in the statement of appeal and considered the wording of article R56 CAS Code as paraphrased supra.

111. The Panel is of the opinion that since article R56 CAS Code determines that parties are not authorized to amend their requests after the submission of the appeal brief, this implies that parties are authorized to amend their requests for relief in the appeal brief.

112. The Panel feels itself comforted by and adheres to a previous CAS Award, where the Panel held that:

“The Panel observes that the CAS Code does not prohibit the amendment in the appeal brief of the relief requested in the statement of appeal. Such a significant procedural limitation could be enforced only if it had been expressly foreseen by the CAS Code as it is the case, for instance, with regard to the submission of new arguments which are explicitly not allowed after the filing of the appeal brief and of the answer, except when agreed to by all parties (see article R56 of the CAS Code). Amendments to the original claims are very common in international arbitrations, as long as they are submitted within the time limit provided by the applicable regulations (see for instance articles 18 ff of the ICC Rules of Arbitration). Likewise, article R51 of the CAS Code allows the specification in the appeal brief of requests for evidentiary measures not contemplated in the statement of appeal”7.

113. The Panel furthermore noted that based on article R56 of the 2012 CAS Code this is even more so if this provision is compared to article R56 of the 2004 CAS Code which was applied in the above CAS Award. The provision in the 2012 CAS Code specifically determines that the amendment of requests is not authorized after the submission of the appeal brief, thereby leaving open the possibility to do so in the appeal brief, whereas the provision in the 2004 CAS Code does not specifically refer to amendment of requests.

114. Consequently, the Panel finds that the Appellant is not prevented by the CAS Code from amending its requests in the appeal brief and will accordingly consider the requests for relief as specified in the appeal brief.

VII. LEGAL MERITS — A. The Main Issues

115. In view of the above, the main issues to be resolved by the Panel are:

1) Is the FIFA Disciplinary Committee in general entitled to declare disciplinary proceedings closed if a party enters into voluntary insolvency?

2) Was the FIFA Disciplinary Committee in this specific case entitled to declare the disciplinary proceedings against Real Zaragoza closed?

a. The status of the FIFA disciplinary proceedings against Real Zaragoza before the proceedings were closed by letter of 24 February 2012.

b. The status of the decisions rendered by the Zaragoza Commercial Court.

i. The suspensive effect of the Zaragoza Commercial Court decisions in respect of the deduction of six points of Real Zaragoza’s first team.

ii. The suspensive effect of the Zaragoza Commercial Court decisions in respect of the period of grace of 90 days.

3) Should the FIFA Disciplinary Committee have suspended the disciplinary proceedings against Real Zaragoza?

1. Is the FIFA Disciplinary Committee in general entitled to declare disciplinary proceedings closed if a party enters into voluntary insolvency proceedings?

116. According to Shakhtar Donetsk, the RFEF is a member of FIFA, which is an association registered under Swiss law and as such enjoys a large degree of autonomy in its organisation and the regulation of the relationship with and between its members. Pursuant to article 13(1) FIFA Statutes members have certain obligations. Among other, they have “to comply fully with the Statutes, regulations, directives and decisions of FIFA bodies at any time as well as the decisions of the Court of Arbitration for Sport (CAS) passed on appeal on the basis of art. 62 par. 1 of the FIFA Statutes (…)”. Article 64 FIFA Statutes provides that member associations must ensure that their own members “comply with the decisions passed by CAS”. Sanctions for non-compliance with the above provisions are set out in article 64 FIFA Disciplinary Code.

117. Shakhtar Donetsk finds it essential for FIFA to apply article 64 FIFA Disciplinary Code consistently in its relationship with any member without any exception, in the interest of the proper governance of football and in order to maintain legal certainty. The relevant objectives of a (Swiss) association could not be achieved if (i) a third state could implement national laws/orders forbidding a member of such association to comply with rules contained in the association’s statutes and regulations (thereby directly affecting the relationship between the association and its members) and (ii) the association (FIFA) had to recognise the validity of such foreign laws/orders.

118. Pursuant to Switzerland’s PILA, the relationship between FIFA (being a Swiss association) and its members is solely governed by the FIFA Statutes, the FIFA regulations and Swiss law and is not governed by any foreign law (be it Spanish or any other law). This is confirmed by article 62(2) FIFA Statutes which provides that the CAS shall apply Swiss law in addition to the primarily applicable provisions contained in the FIFA Statutes and regulations. Likewise, according to Shakhtar Donetsk, orders/judgments of foreign courts that were rendered in application of foreign laws cannot have an influence on the relationship between a Swiss association and its members. The existence of such a system would make it impossible for FIFA to successfully pursue its statutory objectives. Shakhtar Donetsk corroborated this statement with the following example: “if a national insolvency court would issue an order that, to improve the insolvent club’s profits, the club shall have the right to participate in any games, whether they are organised under the auspices of the federations and FIFA or whether they are organised by en emerging competitor of FIFA, and FIFA had to recognise such order (…)”.

119. According to the Appellant, the above assumption is further substantiated by a decision of the UEFA Appeal Body dated 30 July 2010, where it was held that an order of a Spanish Commercial Court forbidding the RFEF to revoke a license granted to a Spanish club to

participate in the Europa League has no relevance when considering the legal relationship between the Spanish club and UEFA.

120. FIFA basically adduced that a proceeding before the FIFA Disciplinary Committee may be closed if a party declares bankruptcy. In this respect it referred to article 107(b) of the FIFA Disciplinary Code.

121. The objective of administration proceedings is to rescue a company and for this purpose governments have established two measures: the company’s assets are protected and the company does not have control of payment. In this context, it would not be correct for FIFA to sanction a club if the club can, in reality and due to a decision of an ordinary court, not make any payments without the authorization of an administrator nominated by the court. There is clearly a lis pendens in favour of national courts.

122. FIFA contests the Appellant’s argument, that according to the FIFA regulations there is no possibility to take into account orders or decisions taken by foreign courts. FIFA points out that despite the fact that the issue of the enforcement is regulated on an exclusive basis in article 64 FIFA Disciplinary Code, the FIFA Disciplinary Code also contains a clear exemption for cases of bankruptcy in article 107(b) FIFA Disciplinary Code.

123. FIFA argued that one of the main reasons in order for article 107(b) FIFA Disciplinary Code to be applied is the fact that parties should be treated equally in similar situations. A continuation of the proceedings would lead to an unequal treatment of all the creditors of the club.

124. According to FIFA it is clear that the FIFA Disciplinary Code, by article 107(b), recognises orders taken by national courts, since only a national court can declare a club under administration or in bankruptcy proceedings. The reasons behind this exemption are quite logical according to FIFA; the legislation that regulates bankruptcy proceedings is governed by public law, whereas association disciplinary proceedings are governed by civil law.

125. The legal framework is not completely independent from national and international legal systems. The members of national associations, i.e. the clubs, are also legal entities that are subject to obligations in accordance with the national legislation of the countries where they are registered, in particular when such legislation is of imperative nature.

126. Real Zaragoza aligned itself with the stance taken by the RFEF in its correspondence to FIFA of 17 January 2012 and with the position of FIFA set out above. It did not have any specific comments regarding the general possibility of the FIFA Disciplinary Committee to close the proceedings if a club is involved in insolvency proceedings. In its submission Real Zaragoza merely focussed on FIFA’s discretion to close the proceedings in this specific matter, which will be set out in the following section.

127. The Panel notes that article 64(1) FIFA Disciplinary Code determines that sanctions will be imposed on:

“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 by CAS (subsequent appeal decision)”.

128. Article 107(b) FIFA Disciplinary Code reads as follows:

“Proceedings may be closed if: a) the parties reach an agreement; b) a party declares bankruptcy; c) they become baseless”.

129. Bearing in mind the positions of the Parties, the Panel adheres to the position of FIFA that article 107(b) is to be considered as an exception to the general application of article 64 FIFA Disciplinary Code. Based on article 107(b) FIFA Disciplinary Code, the FIFA Disciplinary Committee is in general entitled to close proceedings before it, if one of the involved parties enters into insolvency proceedings.

130. In this respect, orders of national courts can be relevant for FIFA in order to determine the exact status of an alleged insolvent club. The Panel therefore finds the position of Shakhtar Donetsk incorrect insofar as it contends that national orders/judgments cannot be taken into account by the FIFA Disciplinary Committee in deciding to close proceedings.

131. The Panel finds the jurisprudence cited by the Appellant not relevant as the present matter concerns disciplinary measures, whereas the cited decision concerned selection criteria to participate in a competition. As observed by FIFA, contrary to insolvency proceedings, selection criteria are solely regulated in the regulations of a sports governing body and are fully independent from any national legal system.

132. Although the Panel thus finds that FIFA is in general entitled to close disciplinary proceedings if a club is involved in insolvency proceedings, the Panel finds that the word “may” in article 107(b) FIFA Disciplinary Code, implies that the FIFA Disciplinary Committee has a discretion to close proceedings, but no obligation to do so. If this were the intention of FIFA by adopting article 107(b) in the FIFA Disciplinary Code, the wording of such provision would have to have been formulated in more restrictive terms. The fact that a party has been declared subject to insolvency proceedings by a national court does therefore not necessarily imply that proceedings must be closed. Accordingly, other factors must also be taken into account in deciding whether or not to close the proceedings.

133. The Panel finds that it is indeed important, as maintained by FIFA, to have a consistent approach towards parties involved in insolvency proceedings and that similar situations have to be treated equally. However, because article 107(b) FIFA Disciplinary Code leaves a discretion to the FIFA Disciplinary Committee, the particular circumstances of a case have to be taken into account in deciding whether or not to close the proceedings in a particular case. Similar cases have to be treated similar, but dissimilar cases could be treated differently.

134. In light of the above, the Panel will proceed to resolve whether the FIFA Disciplinary Committee was entitled to close the proceedings against Real Zaragoza on a definitive basis under the circumstances of this specific case and whether it had the obligation to order the RFEF to deduct six points from Real Zaragoza’s first team.

2. Was the FIFA Disciplinary Committee in this specific case entitled to declare the disciplinary proceedings against Real Zaragoza closed?

135. Before answering this question, the Panel finds it important to clearly separate the proceedings before the “sporting authorities” (FIFA DRC, FIFA Disciplinary Committee and CAS) from the proceedings before the “national authority” (Zaragoza Commercial Court).

a) The status of the FIFA disciplinary proceedings against Real Zaragoza before the proceedings were closed by letter of 24 February 2012

136. On 31 August 2010, the FIFA Disciplinary Committee rendered its decision (the FIFA Disciplinary Committee Decision) regarding Real Zaragoza’s alleged “failure to comply with a decision passed by a FIFA body or CAS (Art. 64 of the FIFA Disciplinary Code)” and held, inter alia, that Real Zaragoza was “pronounced guilty of failing to comply with a decision of CAS in accordance with art. 64 of the FDC” and that if the payment was not made within a period of 90 days “Shakhtar Donetsk may demand in writing from FIFA that (…) six (6) points be deducted from the first team of [Real Zaragoza] in the domestic championship. Once Shakhtar Donetsk has filed [this request] (…) the points will be deducted automatically from the first team of [Real Zaragoza] without further formal decisions having to be taken by the FIFA Disciplinary Committee. (…) The order to implement the points deduction will be issued on the association concerned by the secretariat to the FIFA Disciplinary Committee”.

137. On 29 June 2011, CAS confirmed the FIFA Disciplinary Committee Decision in appeal (the 2011 CAS Award).

138. The Panel noted that no appeal was filed with the Swiss Federal Supreme Court by Real Zaragoza against the 2011 CAS Award, the FIFA Disciplinary Committee Decision therefore became final and binding in respect of Real Zaragoza.

139. By virtue of the FIFA Disciplinary Committee Decision, Real Zaragoza was granted a period of grace of 90 days to pay the due amounts. Because all involved parties appealed the FIFA Disciplinary Committee Decision with CAS, this period of 90 days was suspended during the proceedings before CAS. Consequently, the period of 90 days granted to Real Zaragoza in the FIFA Disciplinary Committee Decision only commenced on the date the 2011 CAS Award was rendered, i.e. 29 June 2011.

140. On 27 September 2011 (after Shakhtar Donetsk assumed the period of grace of 90 days had elapsed), the secretariat to the FIFA Disciplinary Committee, following a request of Shakhtar Donetsk, asked the RFEF to execute the FIFA Disciplinary Committee Decision and to send proof that the six points had been deducted from Real Zaragoza’s first team.

b) The status of the decisions rendered by the Zaragoza Commercial Court

i. The suspensive effect of the Zaragoza Commercial Court decisions in respect of the deduction of six points of Real Zaragoza’s first team

141. On 13 June 2011, the Zaragoza Commercial Court declared Real Zaragoza to be in voluntary insolvency proceedings. In §20 of the operative part of the decision it is determined that “if any sanction of any kind derived from internal regulations or the regulations of the bodies of which the insolvent is a member is imposed, this will be notified to this court for appropriate action”.

142. The Panel finds that the wording of this first decision of the Zaragoza Commercial Court does not strictly forbid the RFEF to impose sanctions on Real Zaragoza; it merely orders that if a sanction is imposed on Real Zaragoza this must be notified to the Zaragoza Commercial Court. This decision does therefore not prevent the RFEF to impose sanctions on Real Zaragoza during or after the insolvency proceedings.

143. The second decision of the Zaragoza Commercial Court dated 7 July 2011 ordered the RFEF “to abstain from enforcing any sanction derived from possible non-payment of sums by [Real Zaragoza] to [Shakhtar Donetsk] or in general, as a consequence of the [FIFA Disciplinary Committee Decision] or the [2011 CAS Award] or any other ruling implementing or fulfilling any of the above, so that in future, and until [Real Zaragoza’s] insolvency proceedings have concluded, it abstains from adopting any decision or imposing or enforcing any sanction of any kind derived from its internal regulations or the regulations of the bodies of which it is a member, including FIFA, in respect of the insolvent or its players as a consequence of the insolvency debt of this sporting body towards its players”.

144. The Panel understands that when confronted with this decision of the Zaragoza Commercial Court, the RFEF was in some kind of dilemma. On the one side FIFA ordered the RFEF to deduct six points of Real Zaragoza’s first team; however, on the other side the Zaragoza Commercial Court ordered the RFEF not to impose any sanction.

145. On 19 October 2011, the RFEF informed the secretariat to the FIFA Disciplinary Committee of the instructions received from the Zaragoza Commercial Court and that it was prevented from imposing any sanction on Real Zaragoza. The RFEF was thus apparently of the opinion that the order of the Zaragoza Commercial Court was to prevail over the instructions from FIFA. FIFA accepted this point of view and closed the proceedings on 24 February 2012.

146. The dispute between the Parties thus narrows down to the question whether FIFA, for the reasons set out above, was right in closing the proceedings on a permanent basis in the given circumstances and not to order the RFEF to deduct six points of Real Zaragoza’s first team.

147. As mentioned above already, Shakhtar Donetsk is of the opinion that the decision of the Zaragoza Commercial Court is not relevant for the relationship between FIFA and the RFEF and does not prevail over the application of the democratically established and legitimate rule of article 64 of the FIFA Disciplinary Code.

148. In respect of the specific circumstances of the present matter, Shakhtar Donetsk put forward that the 2009 CAS Award deciding on the Appellant’s claim vis-à-vis Real Zaragoza was rendered more than two years ago (19 May 2009) and the FIFA Disciplinary Committee Decision was rendered nearly one year before insolvency proceedings regarding Real Zaragoza were initiated in Spain (31 August 2010 – 13 June 2011). Insolvency proceedings that are initiated after the issuance of a decision against a club cannot possibly have an influence on the enforcement of disciplinary sanctions pronounced long before the opening of such insolvency proceedings with regard to the non-payment of debts, which in turn have been confirmed by the CAS ever earlier. Otherwise, the abusive behaviour of Real Zaragoza in delaying the enforcement of the 2009 CAS Award and the sanctions pronounced by the FIFA Disciplinary Decision by filing a futile appeal with the CAS and later asking for the opening of insolvency proceedings would be protected by FIFA. Such would lead to absolute judicial uncertainty and complete imbalance and injustice in the world of football.

149. Consequently, Shakhtar Donetsk finds that FIFA has the duty to strictly apply article 64(2) FIFA Disciplinary Code in the present case and must pronounce an appropriate sanction against the RFEF should the association not immediately enforce the sanction previously pronounced by the FIFA Disciplinary Committee (deduction of six points).

150. FIFA maintained that by RFEF’s correspondence of 18 October 2011 it became evident and substantiated that Real Zaragoza was subject to bankruptcy proceedings and contrary to the allegations of Shakhtar Donetsk, it is evident that FIFA is prevented under Spanish law from forcing Real Zaragoza to pay the amounts owed. It is clear that Real Zaragoza cannot pay because the Zaragoza Commercial Court prevents it from doing so in an imperative act. For FIFA it was then clear that the conditions established in article 107(b) FIFA Disciplinary Code were fulfilled and thus the closure of the proceedings at FIFA is completely justified.

151. FIFA further contended that it applied article 107(b) of the FIFA Disciplinary Code in the present case because of the fact that parties should be treated equally in similar situations. If FIFA had not closed the proceedings against Real Zaragoza, Shakhtar Donetsk were likely to have received a disproportionately higher percentage of the distribution than other creditors of Real Zaragoza and accordingly, this would lead to unequal treatment of all the creditors of the club.

152. As already mentioned above, Real Zaragoza, in general, aligned itself with the stance taken in the RFEF’s correspondence to FIFA of 17 January 2012 and with the stance taken by FIFA in its answer.

153. In addition, Real Zaragoza contends that the RFEF is of a hybrid legal nature: on the one hand it is a private entity with its own legal personality and enjoys sufficient autonomy and independence to regulate its activity; but, on the other, it also exercises public power of an administrative nature. Since bankruptcy proceedings are solely governed by Spanish laws, the present proceedings are not subject to Swiss or any other foreign law, but only to Spanish law. According to Real Zaragoza this is the conduct and position that FIFA has recently adopted in relation to similar cases and it referred the Panel to a similar letter as the Appealed Decision of FIFA in an alleged similar case.

154. Furthermore, Real Zaragoza maintains that the Spanish Insolvency Act enjoys a legal status, whereas the RFEF Statutes and all federative regulations emanating from it, have a regulatory status, entailing that the former is hierarchically superior to the latter. In case of a conflict between the Insolvency Act and the RFEF Regulations, the former will always prevail. Likewise, the enforcement of a decision like the FIFA Disciplinary Committee Decision would have a truly severe economic impact on the club’s financial situation that might greatly affect the club’s ability to continue its business activity and would seriously undermine the remaining creditor’s rights and legitimate aspirations to ever have their debts, satisfied in total or in part. According to Real Zaragoza, this is the reason why the Insolvency Act is mandatory and shall prevail over any other law or regulation prohibiting the imposition of any sanction on a company involved in insolvency proceedings.

155. The Panel is of the opinion that based on the exact wording of the decision of the Zaragoza Commercial Court, the RFEF is ordered to abstain from imposing any sanction “(…) until [Real Zaragoza’s] insolvency proceedings have concluded (…)”. Thus, the ruling does not order the RFEF to abstain from imposing any sanction permanently; the order is limited in time. In other words, the decision of the Zaragoza Commercial Court is without prejudice to the enforceability of disciplinary measures after the insolvency proceedings have concluded.

156. The Panel finds that based on the second decision of the Zaragoza Commercial Court, the RFEF was at that moment not in a position to deduct six points from Real Zaragoza’s first team as was ordered by FIFA. Accordingly, FIFA was correct in not insisting on the deduction of the six points from Real Zaragoza’s first team, as this would indeed violate the mandatory order of the Zaragoza Commercial Court that in the present case prevails over the FIFA Disciplinary Committee Decision. However, the order of the Zaragoza Commercial Court did not prevent the RFEF from imposing any disciplinary measures on Real Zaragoza once the insolvency proceedings are concluded and it is therefore to be examined whether FIFA was right in closing the proceedings on a permanent basis when in reality the enforcement of the FIFA Disciplinary Committee Decision was only temporarily impossible for the RFEF.

157. The Panel noted that the FIFA Disciplinary Committee Decision became final and binding and that it was determined in such decision that “the points will be deducted automatically from the first team of [Real Zaragoza] without further formal decisions having to be taken by the FIFA Disciplinary Committee”.

158. Based on this final and binding FIFA Disciplinary Committee Decision, no discretion was left to FIFA to deduct six points or not, the decision merely summoned FIFA to order the RFEF to deduct six points once two conditions were fulfilled; (1) when Shakhtar Donetsk makes such demand in writing (which it did); and (2) when Real Zaragoza did not pay within a period of grace of 90 days (which will be assessed below).

159. Assuming both conditions are fulfilled, the six points would normally have to be deducted. However, the temporary inability of the RFEF to impose such sanction based on the decisions of the Zaragoza Commercial Court prevents the enforcement of the FIFA Disciplinary Decision. As this is without derogation to the possible imposition of the disciplinary measures after the insolvency proceedings of Real Zaragoza have concluded, the Panel finds that the

FIFA Disciplinary Committee was not in a position to permanently close the proceedings against Real Zaragoza in these specific circumstances.

160. As set out above, in applying article 107(b) FIFA Disciplinary Code, all circumstances of the case have to be taken into account in deciding to close the proceedings or not. The fact that FIFA apparently issued a similar letter as the Appealed Decision in respect of an alleged similar case, neither excludes the possibility that the facts of that case might have been different, nor was the Panel provided with the facts of that case.

161. Consequently, the Panel concludes that even if the period of grace of 90 days would have elapsed and the disciplinary measures stipulated in the FIFA Disciplinary Committee Decision should normally have been imposed, because of the voluntary insolvency of Real Zaragoza, these measures could not be enforced as long as Real Zaragoza was under voluntary insolvency proceedings. The Appellant’s request to order FIFA “to honour the request of the Appellant dated 27 September 2011 for the deduction of points from Real Zaragoza” must therefore be dismissed as no points could be deducted or other disciplinary measures could be taken by the RFEF at that time.

162. Subsequently, also the Appellant’s requests for relief insofar as the Panel is requested to order FIFA to impose disciplinary measures on the RFEF must be dismissed. Not only because of the reason mentioned above but also because the RFEF is not a party to these proceedings before CAS.

163. Finally, since the Panel decided that FIFA could not permanently close the disciplinary proceedings against Real Zaragoza in the given circumstances, the Appealed Decision shall be overturned. The Appellant’s arguments in respect of the competence of the secretariat to the FIFA Disciplinary Committee as opposed to the FIFA Disciplinary Committee itself to close proceedings no longer needs to be resolved by this Panel.

164. However, as mentioned above, one of the criteria for deduction of six points from Real Zaragoza’s first team is the passing of the period of grace of 90 days. Whether such period had indeed elapsed will be assessed in the following paragraph.

ii) The suspensive effect of the Zaragoza Commercial Court decisions in respect of the period of grace of 90 days

165. On 13 June 2011, before the 2011 CAS Award was rendered (29 June 2011) and before FIFA ordered the RFEF to deduct six points from Real Zaragoza’s first team (27 September 2011), the Zaragoza Commercial Court declared Real Zaragoza to be in voluntary insolvency proceedings.

166. On 16 June 2011, during the course of the proceedings leading to the 2011 CAS Award, Real Zaragoza informed CAS that Real Zaragoza was declared to be in insolvency proceedings by the Zaragoza Commercial Court. These documents, that were filed after the hearing in the CAS proceedings had already taken place (26 April 2011), were not admitted to the file since the requirements for filing new exhibits after the submission of the appeal brief and of the answer

of article R56 CAS Code, were not met. These documents were therefore not taken into account in the 2011 CAS Award.

167. On 29 June 2011, the CAS rendered the 2011 CAS Award, confirming the FIFA Disciplinary Committee Decision. The 90 days period of grace for Real Zaragoza to pay the due amounts to Shakhtar Donetsk would therefore normally commence from this date as the period of grace was suspended pending determination of the proceedings.

168. Since Real Zaragoza entered into insolvency proceedings and because Real Zaragoza’s debt towards Shakhtar Donetsk dates from before the declaration of insolvency, the debt was integrated into the insolvent club’s liabilities. From the moment Real Zaragoza entered in insolvency proceedings, it was no longer in a position to fully comply with the FIFA Disciplinary Committee Decision and to pay the due amounts within the period of 90 days granted to it in such decision. In voluntary insolvency proceedings, as correctly mentioned in FIFA’s and Real Zaragoza’s submissions, a “company” cannot pay without the authorization of an administrator nominated by the court. In the opinion of the Panel, the period of grace of 90 days for Real Zaragoza to pay the due amounts was therefore suspended from the moment it entered into voluntary insolvency proceedings, i.e. before the period of grace of 90 days even commenced.

169. On 27 September 2011, although FIFA was aware that Real Zaragoza was involved in insolvency proceedings8, FIFA found itself obliged by the 2011 CAS Award to proceed with the deduction of six points from Real Zaragoza’s first team.

170. In doing so, FIFA did however not take into account the fact that Real Zaragoza was prevented by the Zaragoza Commercial Court to pay the amounts due because of the insolvency proceedings. As determined above, during insolvency proceedings a “company” is not in charge of its own finances. Since Real Zaragoza was not in a position to pay the amounts due, the period of grace of 90 days should therefore have been considered as suspended until Real Zaragoza’s insolvency proceedings were concluded.

171. Although not directly disputed by the Parties, in the opinion of the Panel, FIFA erred in neglecting the insolvency proceedings of Real Zaragoza by requesting the RFEF on 27 September 2011 to execute the FIFA Disciplinary Decision and to send proof that the six points have been deducted from Real Zaragoza’s first team, while being aware that Real Zaragoza was involved in voluntary insolvency proceedings.

172. It appears from the facts of the case that the second decision of the Zaragoza Commercial Court dated 7 July 2011 was only notified to FIFA by the RFEF on 19 October 2011. This decision could therefore not have been taken into account by the secretariat to the FIFA Disciplinary Committee in its request of 27 September 2011 to the RFEF. It was however this

8 Real Zaragoza’s correspondence of 16 June 2011 was also forwarded to FIFA, a fact that was confirmed in FIFA’s

submission in the present proceedings.

second decision of the Zaragoza Commercial Court that finally led the secretariat to the FIFA Disciplinary Committee to close the proceedings.

173. In the opinion of the Panel, this second decision of the Zaragoza Commercial Court does not influence the fact that Real Zaragoza was involved in insolvency proceedings and that the period of grace of 90 days to pay the due amounts was to be regarded as suspended from the day Real Zaragoza entered into insolvency proceedings.

174. Consequently, since the period of grace for Real Zaragoza to pay the due amounts was to be regarded as suspended, Shakhtar Donetsk was not yet entitled to “demand in writing from FIFA that (…) six (6) points be deducted from the first team of [Real Zaragoza] in the domestic championship”. Subsequently, the secretariat to the FIFA Disciplinary Committee should not have requested the RFEF to deduct six points from Real Zaragoza’s team.

175. As a supplementary request for relief, the Appellant requests the Panel to decide that the secretariat to the FIFA Disciplinary Committee should not have closed the proceedings against Real Zaragoza, but that it should have suspended the proceedings and is obliged to continue the proceedings once the voluntary insolvency proceedings of Real Zaragoza have concluded. The Panel will therefore continue to adjudicate this remaining issue below.

3. Should the FIFA Disciplinary Committee have suspended the disciplinary proceedings against Real Zaragoza?

176. Shakhtar Donetsk argued in its appeal brief that even if the Panel were to reject all its primary arguments, the Panel must revoke the Appealed Decision since FIFA was not entitled to simply close the disciplinary proceedings which would operate as a huge injustice, if, having clearly breached fundamental provisions of the FIFA Statutes and regulations, Real Zaragoza could forever avoid sanction by FIFA/RFEF simply due to the fact that it initiated insolvency proceedings. To avoid such situation, FIFA should have suspended the disciplinary proceedings against Real Zaragoza until further notice but not completely closed them.

177. FIFA is of the opinion that the Appellant’s request to suspend the proceedings instead of closing them is against the system put in place by the Zaragoza Commercial Court since the objective of insolvency proceedings is that finally the club will become financially healthy. To suspend the disciplinary proceedings would contravene the principles applicable in insolvency proceedings, could lead to evident inequality of treatment between creditors and could finally put the debtor’s existence at risk.

178. FIFA also maintained that if a club is involved in insolvency proceedings, it is of the utmost importance that the disciplinary proceedings are stopped in order to avoid contradictory or conflicting decisions on the same subject matter, (i.e. the enforceability of a certain amount of money owed as a consequence of a legally binding decision) and, also, even more importantly, that the jurisdiction of FIFA ends in affairs which involve matters where the exclusive jurisdiction of the ordinary state courts is established, such as in matters pertaining to insolvency and bankruptcy law.

179. The Second Respondent argues that in the event that the CAS, contrary to the positions of FIFA, the RFEF and Real Zaragoza, would annul the Appealed Decision and would order FIFA to proceed with the disciplinary proceedings against Real Zaragoza, such decision could never be enforced in Spain based on the bilateral International Treaty between Spain and Switzerland and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter: the “New York Convention”).

180. As concluded above, the Panel is not in a position to order FIFA to request the RFEF to deduct six points from Real Zaragoza’s first team as requested by Shakhtar Donetsk and the Panel has decided that FIFA was wrong in closing the disciplinary proceedings against Real Zaragoza on a permanent basis.

181. The Panel finds that the principles applicable in insolvency proceedings would not be harmed had FIFA suspended the enforcement of the FIFA Disciplinary Committee Decision until the insolvency proceedings had concluded. The allegation of FIFA that it is of the utmost importance to avoid contradictory decisions and that therefore the disciplinary proceedings should be closed is not upheld. Since the proceedings were to be suspended, there was no risk of contradictory decisions during this period.

182. Real Zaragoza’s argument that in case the Panel decided to order FIFA to proceed with the disciplinary proceedings against Real Zaragoza, such decision would not be enforceable based on the bilateral International Treaty between Spain and Switzerland or the New York Convention, does not hold. The Panel does not order FIFA to proceed with the enforcement of disciplinary measures in contradiction with the decisions of the Zaragoza Commercial Court, but orders FIFA to continue the disciplinary proceedings once the insolvency proceedings of Real Zaragoza have terminated. The Panel does not see why such decision would not be enforceable under the bilateral International Treaty between Spain and Switzerland or the New York Convention and neither does Real Zaragoza contend why this would be the case. In any event, this is not a matter to be adjudicated by this Panel.

183. Further the Panel is of the view that FIFA’s argument that it cannot enforce disciplinary measures if the proceedings became baseless does not hold. The 2011 CAS Award made the FIFA Disciplinary Committee Decision final and binding and pursuant to that decision FIFA has no further discretion to decide whether or not to order the RFEF to deduct the six points from Real Zaragoza’s first team once the two factual conditions for such disciplinary measure are complied with.

184. This does not mean that FIFA should automatically order the RFEF to deduct six points from Real Zaragoza’s first team once the insolvency proceedings of Real Zaragoza have terminated. Instead, it means that the enforcement of the FIFA Disciplinary Committee Decision remains suspended until the insolvency proceedings of Real Zaragoza have been concluded and that such decision revives thereafter. Thus, the deduction of six points should only follow automatically “without further formal decisions having to be taken by the FIFA Disciplinary Committee” if the full amounts pronounced in the 2009 CAS Award due to Shakhtar Donetsk have not been paid within the final period of grace of 90 days, which period commences the day after the insolvency proceedings of Real Zaragoza have concluded.

185. Real Zaragoza submitted in its answer that on 9 May 2012 a settlement agreement was concluded with its creditors. A necessary majority of 53,33% of the creditors agreed with the settlement and accordingly the Zaragoza Commercial Court ratified such creditors’ agreement. The judge of the Zaragoza Commercial Court ruled “[t]hat I had to agree and therefore I agree to APPROVE the Agreement Proposal submitted by the insolvent [Real Zaragoza] which content is considered as reproduced [sic: ratified], suspending all effects of the Insolvency decree, without prejudice of the general obligations established for the debtor in Art. 42. It is considered finished the common stage of the Insolvency”.

186. The Panel understands that all the suspensive effects of the insolvency proceedings are therefore lifted by the decision of the Zaragoza Commercial Court dated 9 May 2012 and that the 90 day period of grace commenced on that day.

187. Whether the deduction of six points from Real Zaragoza’s first team or the other possible sanctions set out in the FIFA Disciplinary Committee Decision are finally to be imposed on Real Zaragoza are mere factual observations which cannot be adjudicated at the present stage by this Panel. As determined in the FIFA Disciplinary Committee Decision, “[i]f payment is not made by this deadline. Shakhtar Donetsk may demand in writing from FIFA that (…) six (6) points be deducted from the first team of [Real Zaragoza] in the domestic championship”.

B. Conclusion

188. Based on the foregoing, and after taking into due consideration all the evidence produced and all arguments made, the Panel finds that:

1) The secretariat to the FIFA Disciplinary Committee was not entitled to declare the disciplinary proceedings against Real Zaragoza closed.

2) The secretariat to the FIFA Disciplinary Committee should have suspended the disciplinary proceedings against Real Zaragoza until the insolvency proceedings of Real Zaragoza concluded.