C.A. River Plate v. US Citta di Palermo

I. THE PARTIES — A. Club Atlético River Plate

2. River Plate is an Argentinean football club, affiliated with the Asociación del Fútbol Argentino (hereinafter also referred to as “AFA”), which in turn is affiliated with FIFA.

B. US Città di Palermo

3. Palermo is an Italian football club, affiliated with the Federazione Italiana Giuoco Calcio (hereinafter referred to as “FIGC”), which in turn is affiliated with FIFA.

VI. THE PARTIES’ REQUESTS FOR RELIEF

38. The Appellant’s requests for relief are the following:

The Appellant respectfully requests the CAS: I. To accept the appeal against the decision adopted by FIFA on 11 May 2012. II. To annul the decision issued by FIFA on 11 May 2012 and issue a new decision establishing that: a. Pursuant to the agreement dated January 20, 2005, Palermo’s credit should be calculated exclusively on the transfer price of the player E. to the club Porto (that being EUR 3.4 million), deduction all the transfer’s costs and all the payments made previously by River Plate. b. Considering the result of the claim, half of the costs of the proceedings before FIFA shall be borne by Palermo. c. The costs related to the present arbitration shall be borne by Palermo. d. Palermo shall pay the legal fees and other expenses incurred by River Plate in connection with the present arbitration procedure.

39. The Respondent’s requests for relief are the following:

1. (...) 2. We request that the Appellant’s claims be dismissed and that the decision reached on 11th May 2012 by the Single Judge of the FIFA Player’s Status Committee be upheld in its entirety. 3. In any case, we request this Honourable Court to order the Appellant to bear all costs incurred with these proceedings.

4. In any case, we request this Honourable Court to order the Appellant to cover all legal expenses of the First Respondent related to theses proceedings.

VII. CAS JURISDICTION

40. The jurisdiction of the CAS to hear this dispute derives from Article 67 par. 1 of the FIFA Statutes and Article R47 of the CAS Code, and was confirmed by the Parties when signing the Order of Procedure. The jurisdiction of the CAS in the present case was not disputed by the Parties.

41. Under Article R57 of the Code, the Panel has the full power to review the facts and the law and may issue a de novo decision superseding, entirely or partially, the appealed one.

VIII. ADMISSIBILITY OF THE APPEAL

42. The appeal was filed within the deadline provided by Art. 67 par. 1 of the FIFA Statutes, namely within 21 days after notification of the Appealed Decision. It further complies with the requirements of Article R48 of the CAS Code.

43. It follows that the appeal is admissible, which is also undisputed.

IX. APPLICABLE LAW

44. 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”.

45. Pursuant to Article 66 par. 2 of the FIFA Statutes, “[t]he 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”.

46. Regarding the issue at stake, the Parties have not, in the Transfer Agreement, agreed on the application of any specific national law. As a result, subject to the primacy of applicable FIFA’s regulations, Swiss law shall apply complementarily. It can be observed that, in their respective submissions, the Parties adopted the same approach.

X. MERITS — A. Introduction

47. First, the Panel points out that when the Appellant refers to a certain percentage of a player’s economic rights, and when the Respondent refers to a sell-on fee, they are actually referring to the same concept, and both terminologies can be used.

48. With respect to the substance of the case, the Parties disagree on which basis the sell-on fee (the percentage of the Player’s economic rights) shall be calculated. The Appellant considers that the basis shall be the sole transfer compensation (i.e. EUR 3,400,000) proposed by FC Porto, whereas the Respondent deems that the operative costs of the transfer imposed in Argentina and paid by FC Porto shall be included in the calculation (i.e. EUR 4,233,000).

B. Clause 5 par. 2 of the Transfer Agreement

49. There is a dispute between the Parties concerning the interpretation of the Transfer Agreement, in particular Clause 5 par. 2.

50. In this regard, the Appellant considers that in Clause 5 of the Transfer Agreement, it was not agreed that the Respondent would be entitled to receive 50% from the total payment made by the third club but only to “50% of the economic rights over the transfer”. As to the Respondent, it considers that the Transfer Agreement is very clear when it refers to the economic result of the transfer, and that this corresponds to the payment made by any third party for 100% of the Player’s economic rights and thus, the sell-on fee must consider all monies agreed and paid by the acquiring club (in this case FC Porto) for the release of the Player, with no deduction or differentiation whatsoever.

C. Clause 5 par. 1 and 3 of the Transfer Agreement

51. Clause 5 of the Transfer Agreement reads as follows:

“Should River Plate permanently transfer the Player to a third club before 31 January 2008, Palermo will be entitled to receive the sum it is owed within thirty days of the transfer agreement being deposited in the third club.

…

River needs the PALERMO’s authorization to transfer the Player to a third club. PALERMO may offer a different transfer agreement with another club for a higher sum of money. RIVER PLATE shall inform PALERMO about the terms and conditions of the offer made by a third club and PALERMO shall have seven days term to offer a better proposal in terms of price and payment conditions. If following the seven days term PALERMO had not made a better proposal; RIVER PLATE shall be free to accept the first offer and carry out the Player’s transfer”.

52. This article actually consists of three different parts, two of which are quoted above, dealing with different aspects of the co-ownership of the economic rights and the consequences of a transfer of the Player to a third club.

53. The first paragraph deals with the right of Palermo to receive its share in the transfer fee paid by the third party. Although the Parties could have chosen a better and clearer wording in drafting their obligations and responsibilities, it is clearly understood that the term “the sum it is owed” actually refers to the share that Palermo would have been entitled to receive and reflecting its “ownership” (50%) in the economic rights.

54. The second paragraph reflects the understanding of the Parties that Palermo would always be entitled to the minimum amount of EUR 1,200,000 stipulated in clause 3 of the Transfer Agreement and the fact that this amount will be taken into consideration in the calculation the amount owed to Palermo.

55. The third paragraph deals with the obligations and responsibilities of the Parties in respect of the way to handle third parties’ offers. The clear wording of this provision imposes on the Appellant the obligation to inform the Respondent of any offer made by a third club with regard to the transfer of the Player. The Respondent then has the opportunity to propose a better offer from another club, or the initial offer would be considered as accepted after seven days without reaction.

56. The Panel considers that in such a case, where two clubs share the economic rights and are supposed to share (even if not in equal shares) the sell-on fee, the club which maintains the registration of the Player and who is the one actually having the control on the transfer and does transfer a player (here the Appellant) has a heavy degree of responsibility of information with regard to the terms and conditions of the transfer, in view of the financial profit-sharing rights of the previous club (here the Respondent), and the fact that the latter is a remote party to the transfer and thus not being involved in the negotiation with the third club (here FC Porto) which desires to acquire a player.

D. Interim conclusion

57. The Panel considers that in order to decide what was the intention of the Parties in the expression “the sum it is owed” it does not have to interpret Clause 5 of the Transfer Agreement in an objective manner as would have been the case if the Panel would have to solve a theoretical question or to issue a declaratory judgment in respect of the intent of the Parties. In order to solve the issue at stake, the Panel is assisted and actually is bound to rely also on the actual behaviour and conduct of the Parties in the specific circumstances of the case.

58. Indeed, Clause 5 par. 3 of the Transfer Agreement assumes the existence of a proposed agreement between River and a third club which calls upon the establishment of notifications and contacts between the Parties (River & Palermo), in the event that the Respondent would receive an offer from a third party. As a consequence of such an offer and the following

correspondence and notifications, Clause 5 par. 3 provides for a subsequent agreement between the Parties in respect of the transfer of the Player to a third club.

59. It is therefore this subsequent contacts between the Parties in respect of the specific circumstances of this case which shall be analysed by the Panel, in order to determine whether it was agreed between the Parties that the sell-on fee would be calculated on the total monies paid by FC Porto in the context of the Player’s transfer, or only on the amount paid to River and remaining with River which can be considered as the transfer compensation per se. These contacts amount to a specific and subsequent agreement between the Parties which will enlighten the situation and will guide the Panel in its objective to establish what was the Parties’ intention and what was, in the circumstances of this case, “the sum it [Palermo] is owed”.

E. The agreement between the Parties with regard to FC Porto’s offer

I. The letters dated 23 and 24 July 2007

60. As seen above, on 23 July 2007, the Appellant sent a letter to the Respondent, informing it of the offer made by FC Porto for the acquisition of the Player’s services. The most relevant part of this letter reads as follows (translation from Spanish to English provided by the Panel):

“Pursuant to and for the purposes of the provisions of the fifth clause, second paragraph of the contract between our clubs dated January 20, 2005, find attached this club´s offer, consisting of the acquisition of the whole (100%) of the federative and economic rights over the player´s transfer, in the sum of € 3.400,000, - net, taking care the acquiring club of the operational costs. Payment: € 1.700,000 - cash, within five days of signing the contract. The remaining amount of € 1.700,000 -, on July 31, 2008, to be documented of a promissory note with a bank guarantee. The celebration of a friendly match between the clubs is expected, according to the offer”.

61. The offer made by FC Porto to the Respondent was attached to the latter’s letter to FIFA. In this offer, FC Porto offered to acquire the Player’s services, under the following conditions:

• transfer compensation of EUR 3,400,000 payable in two instalments;

• payment of the taxes (total of 24,5%);

• organization of a friendly match between the Appellant and FC Porto, for which the Respondent would receive the amount of EUR 800,000, to be paid in two instalments.

62. On 24 July 2007, the Respondent notified FIFA of its consent to the Player’s transfer to FC Porto. The letter was copied to the Appellant as well as the AFA. The most relevant part of this letter reads as follows (translation from Spanish to English provided by the Panel):

“We communicate you our acceptance to the sale of the player E. to the Club FC Porto for the total amount set out in the Club Porto´s attached proposal of yesterday, July 23, and we give our consent to the transfer of the player in question, under the only condition that before and immediately the Club River must pay the overdue debt of € 1.600000,- and that the rest of the credit will be paid to us under the terms of the contract of 20 January 2005” (emphasis added by the Respondent).

63. As already explained, the Panel considers that this exchange of correspondence between the Parties, FIFA and the AFA established a new agreement (hereinafter referred to as “the Subsequent Agreement”), in accordance with Clause 5 par. 3 of the Transfer Agreement.

II. The interpretation of the Subsequent Agreement

i. In general

64. The Parties do not agree with the meaning of the Respondent’s acceptance dated 24 July 2013, in particular with the meaning of the following sentence (translation from Spanish to English provided by the Panel):

“We communicate you our acceptance to the sale of the player E. to the Club FC Porto for the total amount set out in the Club Porto´s attached proposal of yesterday, July 23, and we give our consent to the transfer of the player in question”.

65. The Appellant is of the opinion that this acceptance relates only to the transfer compensation of EUR 3,400,000, whereas the Respondent asserts that it relates to the transfer compensation, and the operative costs (taxes) of the transfer.

66. At this point, the Panel notes that it is agreed between the Parties that the friendly match referred to in FC Porto’s offer never took place. It shall therefore not be considered in the present proceedings.

67. In accordance with CAS jurisprudence (in particular: CAS 2007/A/1219), pursuant to Article 1 CO, a contract requires the mutual agreement of the parties. This agreement may be either express or implied.

68. When the interpretation of a contract is in dispute, the judge seeks the true an mutually agreed upon intention of the parties, without regard to incorrect statements or manner of expressions used by the parties by mistake or in order to conceal the true nature of the contract (Article 18 CO). When the mutually agreed real intention of the parties cannot be established, the contract must be interpreted according to the requirement of good faith (ATF 129 III 664; 128 III 419 consid. 2.2 p. 422). The judge has to seek how a declaration or the external manifestation of a party could have been reasonably understood dependent upon the individual circumstances of the case (129 III 118 consid. 2.5 p. 122; 128 III 419 consid. 2.2 p. 422).

69. The requirements of good faith tend to give the preference to a more objective approach. The emphasis is not so much on what a party may have meant but on how a reasonable man would have understood his declaration (ATF 129 III 118 consid. 2.4 p. 122; 128 III 419 consid. 2.2 p. 422).

70. Together with the CAS panel in the above-mentioned case (CAS 2007/A/1219), the Panel considers that in determining the intent of a party or the intent which a reasonable person would have had in the same circumstances, it is necessary to look first to the words actually used or

the conduct engaged in. However, the investigation is not to be limited to those words or the conduct even if they appear to give a clear answer to the question. In order to go beyond the apparent meaning of the words or the conduct by the parties, due consideration is to be given to all relevant circumstances of the case. This includes the negotiations as well as any subsequent conduct of the parties and usages.

ii. In particular

71. As seen above, the Parties disagree on the meaning of their intent when they entered into the Subsequent Agreement.

72. In view of the above-mentioned consideration with regard to the interpretation of contracts according to Swiss law, the Panel considers that it shall determine how the Parties’ declarations would have been reasonably understood dependent on the individual circumstances of the case.

73. The Panel would first like to recall the context of transfers of football players in Argentina. As seen above, the transfer of football players is subject to taxes amounting to 24,5% of the transfer compensation due. The payment of those taxes is mandatory in order for the AFA to issue the Player’s ITC. This has not been contested by the Parties.

74. It is the Panel’s opinion that the AFA system with regard to those taxes should have been known to Palermo and for sure was known to Palermo already at the time when the Second Agreement and Subsequent Agreement were concluded, since it was reflected in the exchange of letters between River and FC Porto that was sent to Palermo in order to receive its confirmation to the transfer.

75. In this context, the Appellant informed, through his letter dated 23 July 2007, the Respondent of FC Porto’s offer. In this letter, the Appellant made a clear distinction between the economic compensation of the transfer and the operative costs of the transfer.

76. The Appellant clearly stated that the transfer compensation was EUR 3,400,000, payable in two instalments, and that the operative costs of the transfer would be borne by FC Porto, the latter costs not even being quantified, neither in the letter dated 23 July 2007, nor in FC Porto’s offer.

77. The Panel is of the opinion that the Respondent, a first division club in Italy, was probably aware, as is the case with other clubs in the football family who already experienced transfers from Argentinean clubs, of the various operative costs over transfers in Argentina. Nevertheless, even if the Panel is wrong in this assumption, Palermo for sure became aware of the existence and the need to pay this operative costs at the moment it received the very clear letter from River.

78. In accordance with the above mentioned rules of interpretation, the Respondent’s letter dated 24 July 2007, in which the Respondent declared that it accepted FC Porto’s offer for the “total sum” indicated in the offer, shall be interpreted as an acceptance that the transfer compensation related only to the amount of EUR 3,400,000, and not to the additional applicable taxes.

79. In view of the above, the Panel, in majority, concludes that according to the communication made by the Appellant, which attached a copy of FC Porto’s offer, the transfer compensation was fixed to EUR 3,400,000, and that the Respondent agreed to this sum.

F. The amount to be paid by the Appellant to the Respondent

80. According to Clause 5 of the Transfer Agreement, the amount to be received in relation with the sell-on fee shall be reduced “in accordance with the payments” already made by the Appellant on the basis of Clause 4 of the Transfer Agreement. In other words, any payments already made to the Respondent under the Clause 4 of the Transfer Agreement should be deducted from the amount of EUR 1,700,000 (50% of the above-mentioned amount of EUR 3,400,000).

81. In this respect, the Panel points out that in its decision dated 9 August 2007, the Single Judge of the Players’ Status Committee had condemned the Appellant to pay the amount of EUR 1,600,000 to the Respondent and that said amount represented three instalments, two of which were due under Clause 4 of the Transfer Agreement. In particular, the Single Judge of the Players’ Status Committee underlined that the two instalments that had to be paid as per Clause 4 of the Transfer Agreement represented a total amount of EUR 800,000, an amount composed of the sum of EUR 400,000, originally due on 31 January 2006, and the sum of EUR 400,000, originally due on 31 January 2007.

82. It was further established during the proceedings before CAS that the Appellant paid, on 14 September 2007, an additional amount of EUR 100,000 to the Respondent. The Appellant had therefore, at that time, already paid a total amount of EUR 900,000 in accordance with Clause 4 of the Transfer Agreement.

83. Therefore, the Panel concludes that, based on Clause 5 of the Transfer Agreement, the amount of EUR 900,000, shall be deducted from the sell-on fee of EUR 1,700,000.

84. In view of all the above, the Panel considers that the Appellant owes to the Respondent a total amount of EUR 800,000 as sell-on fee, i.e. 1,700,000 minus EUR 900,000, based on the terms of Clause 5 of the Transfer Agreement.

85. On the basis of the submissions of the Parties, which are silent in this regard, and in view of the fact that Clause 9 of the Transfer Agreement does not specifically mention the exact percentage to be applied, the Panel deems that an interest of 5% p.a. (the applicable legal interest rate under Article 104 CO) shall be applied.

86. As agreed between the Appellant and FC Porto in the Second Transfer Agreement, the amount of EUR 3,400,000 was payable in two instalments, the first instalment of EUR 1,700,000 being due within five days of the signing of the Second Transfer Agreement and the second instalment of EUR 1,700,000 being due on 31 July 2008.

87. Therefore, applying the same division schedule for the sum of EUR 800,000, the Panel holds that the interest of 5% p.a. should apply as from 29 July 2007 (i.e. five days after the signing of

the Second Transfer Agreement) on the partial amounts of EUR 400,000 (i.e. amount due in connection with the first instalment of EUR 1,700,000). Equally, the Panel holds that that an interest of 5% p.a. should apply on the partial amount of 400,000 (i.e. the amount due in connection with the second instalment of EUR 1,700,000) as from 1 August 2008, i.e. one day after the aforementioned amount of EUR 1,700,000 had become due.

XI. COST RELATED TO THE PROCEEDINGS BEFORE FIFA

88. In addition to its prayers for relief on the merits, the Appellant requested that half of the costs related to the proceedings before FIFA shall be borne by the Respondent.

89. The Panel considers that it is not for CAS to reallocate the costs of the proceedings before previous instances, and that therefore the appeal shall be dismissed in this respect.

XII. CONCLUSION

90. On the basis of the foregoing, the Panel, in majority, considers that:

- The Parties entered into a Transfer Agreement, which included the share of the Player’s economic rights;

- Clause 5 par. 3 of the Transfer Agreement imposed obligations and responsibilities of the Parties in respect of the way to handle third parties’ offers;

- The Appellant fulfilled its obligations in accordance with Clause 5 par. 3 of the Transfer Agreement, by transmitting FC Porto’s offer to the Respondent;

- In the Appellant’s letter dated 24 July 2007 to the Respondent, as well as in FC Porto’s offer, a clear distinction was made between the transfer compensation per se (EUR 3,400,000) and the operative costs (taxes) related to the transfer (24,5% of the transfer compensation);

- The Respondent, was aware, at the latest after receiving the Appellant’s letter, of the various operative costs over transfers in Argentina, agreed to FC Porto’s offer, and this agreement related only to the transfer compensation per se;

- It is not for CAS to reallocate the costs related to the FIFA proceedings.

91. The Panel therefore concludes, in majority, that the appeal shall be partially upheld.