Al Nassr Football Club v. Fenerbahçe Spor Kulübü

V. JURISDICTION

34. Art. R47 of the Code states:

“An appeal against the decision of a federation, association or sports-related body may be filed with CAS if the statutes or regulations of the said body so provide or if the parties have concluded a specific arbitration agreement or if the Appellant has exhausted the legal remedies available to him prior to the appeal, in accordance with the statutes or regulations of that body”.

35. The jurisdiction of the CAS, which is not disputed, derives from Art. 58 FIFA Statutes as well as Art. 6.2 of the Transfer Agreement. Art. 58 para. 1 of the FIFA Statutes provides that appeals against final decisions passed by FIFA's legal bodies shall be lodged with CAS within 21 days of receipt of the decision in question.

36. The jurisdiction of the CAS is further confirmed by the Order of Procedure duly signed by the Parties.

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

VI. ADMISSIBILITY

38. The Appealed Decision was communicated to the Parties by email on 31 March 2020.

39. The Appellant filed its Statement of Appeal on 21 April 2020 and, therefore, within 21 days from the communication of the Appealed Decision. The Appeal complied with all other requirements of Article R47 et seq. of the Code, including of the payment of the CAS Court Office fee.

40. It follows that the Appeal is admissible.

VII. APPLICABLE LAW

41. Article R58 of the Code provides the following:

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

42. Article 6.1 of the Transfer Agreement states: “This agreement shall be governed by and construed in accordance with FIFA Regulations and/or Swiss law”.

43. The Parties concur and the Sole Arbitrator agrees that based on the before cited Article 6.1 of the Transfer Agreement first of all the FIFA Regulations and, subsidiarily, Swiss law shall be applicable.

VIII. MERITS — A. Has there been a breach of procedural rules in front of the PSC?

44. Firstly, the Appellant alleges several breaches of procedural rules in front of the PSC, amongst which the Single Judge of the PSC not to be impartial due to his work as General Counsel of the ECA and the Respondent's President being a member of the ECA board.

45. In this respect, first of all, the Sole Arbitrator points out to the fact that the PSC is not considered to be a court or an arbitration panel in the legal sense: It is an organ of FIFA, an association under Swiss law, and as such the principles of impartiality and independence applicable to state courts or arbitral tribunals do not apply mutatis mutandis. The Appellant itself correctly observed that the Single Judge of the PSC cannot be considered a judge in the sense of Article 6 ECHR; such role of the Single Judge of the PSC was never alleged, neither by the Respondent nor by FIFA.

46. Further, the Sole Arbitrator points out to Article R57 of the Code which states:

“The Panel has full power to review the facts and the law. It may issue a new decision which replaces the decision challenged or annul the decision and refer the case back to the previous instance. […]”.

47. Based on the CAS jurisprudence, the appeal to the CAS has a healing effect for different forms of irregularities which (may have) happened in the first instance: “[…] such irregularities may take the form of an alleged unfairness, the lack of independence of the first-instance tribunal, the non-participation in the proceedings or a risk of conflict of interest” (MAVROMATI/REEB, The Code of the Court of

48. In looking at the CAS jurisprudence and the legal authorities cited before, the Appellant’s argument regarding the alleged lack of impartiality of the Single Judge of the PSC, therefore, is to be considered as healed with the proceedings before the Sole Arbitrator. In this respect, the

Sole Arbitrator highlights that, at the beginning of the hearing, both Parties confirmed that they do not have any objection to Mr. Bernhard Welten being the Sole Arbitrator to decide this case. At the end of the hearing, they further confirmed that their right to be heard has been fully granted and they were treated equally.

49. The Appellant argued that, based on the applicable FIFA Rules Governing the Procedures of the Players' Status Committee and the Dispute Resolution Chamber (the “Procedural Rules”) being in force since 1 January 2018, it was not obliged to pay the procedural costs of the PSC. The Sole Arbitrator notes that in the Appealed Decision, the Single Judge of the PSC stated in II.1.: “[…] In this respect, he took note that the present matter was submitted to FIFA on 2 April 2019. Taking into account the wording of art. 21 of the 2019 edition of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (hereinafter: the Procedural Rules), the aforementioned edition of the Procedural Rules is applicable to the matter at hand”. However, Article 21 of the 2019 edition does only state that it enters into force on 1 November 2019, while there is no specific regulation for ongoing procedures which started during the year 2019.

50. The Sole Arbitrator has compared the 2018 and 2019 editions of the Procedural Rules and notes that both versions of Article 18 para. 1 have the same wording and read “Costs are to be borne in consideration of the parties' degree of success in the proceedings”. Therefore, the Single Judge of the PSC decided that it was for the Appellant to bear all the costs of the FIFA proceedings. In this regard, the Sole Arbitrator notes that it is uncontested that the Appellant was the losing party and, as such, had to pay the costs for the FIFA proceedings. Even if the 2018 edition of the Procedural Rules would be applicable, the Appellant, as losing party, would have had to pay the FIFA procedural costs anyway.

51. Furthermore, the Sole Arbitrator also notes that, in fact, Article 15 para. 4 (which reads: “Whenever procedural costs are due, the grounds of decision will only be notified to the party requesting the grounds and upon payment of the relevant procedural costs”) was only introduced with the 2019 edition of the Procedural Rules, while the 2018 edition did not provide any specific rule regarding the payment of the relevant procedural costs as condition to receive the grounds of a decision. This notwithstanding, the Sole Arbitrator is of the opinion that this issue is of no relevance for the outcome of the present matter since, as mentioned above, the Appellant would have had to pay the costs in any event. In addition, and most importantly, the Appellant was, in the end, not prevented to bring its case before the CAS, as it eventually did. Consequently, by virtue of the healing effect of CAS appeals, the Sole Arbitrator considers that any possible procedural mistake occurred before the previous instance in relation to the applicable edition of the Procedural Rules and the request to pay the procedural costs in order to receive the grounds of the Appealed Decision, has been cured by the mere fact that the Appellant filed its Appeal with the CAS. Accordingly, the Appellant’s arguments in this regard are dismissed.

B. Are the outstanding payments due?

52. The Sole Arbitrator further acknowledges that it remained uncontested that the Appellant owes the Respondent the second installment of EUR 3,500,000 and that such amount is overdue since 1 March 2019, as well the additional payment of EUR 250,000 based on Article 2.3 lit. b of the Transfer Agreement, which is overdue as the Player scored or assisted more than 15 goals

in one football season. In this regard, the Sole Arbitrator notes that Article 2.3 lit. c of the Transfer Agreement states: “The amounts mentioned in Article 2.3 above shall be paid by AL NASSR to FENERBAHÇE within 15 (fifteen) days after conditions for the payment are met”.

53. The Respondent, in its default notice of 13 March 2019, requested the payment of the amount based on Article 2.3 lit. b of the Transfer Agreement. In this regard, the Sole Arbitrator notes that the Appellant did not contest that the Player scored at least 17 goals in the period prior the sending of the default notice of 13 March 2019. Therefore, pursuant to Article 2.3 lit. b and c of the Transfer Agreement, the Sole Arbitrator is of the opinion that the amount of EUR 250,000 became overdue on the fifteenth day after the sending of the default notice of 13 March 2019, i.e. on 28 March 2019. However, as no interest for the delayed payment was granted by the PSC on this additional amount of EUR 250,000 and the Respondent did not appeal against this point, the Sole Arbitrator has not to look into further details since when possibly an interest on the additional amount for delayed payment of 5% p.a. would be due by the Appellant.

54. The Appellant’s arguments according to which the Respondent did not respect the formal requirements of Article 12bis RSTP were rejected by the Single Judge of the PSC. Nevertheless, the Appellant tries again to reject the Respondent's claim with this reasoning. The Sole Arbitrator is of the opinion that the formal requirements based on Article 12bis para. 3 RSTP – i.e. a written default notice with a 10 days deadline to fulfill the outstanding financial obligations – is only a precondition for a debtor club to be considered to have overdue payables, as such, to be sanctioned according to Article 12bis para. 4 RSTP. More precisely, Article 12bis para. 3 RSTP specifies the condition for an application of the general rule of Article 12bis para. 2 RSTP, according to which “[a]ny club found to have delayed a due payment for more than 30 days without a prima facie contractual basis may be sanctioned in accordance with [Article 12bis para. 4 RSTP]”. As observed in CAS 2016/A/4874, “the 10-day deadline in Article 12bis para. 3 RSTP applies to a determination as to whether a Club is in arrears of its payment obligations for purposes of seeking sanctions against it”.

55. Furthermore, CAS 2016/A/4874 states that “[t]he lack of a 10-day deadline in a warning letter does not mean the debt is inexistent, nor insubstantial”. Consequently, even if a creditor club does not completely comply with the rules of Article 12bis RSTP, this will not hinder the creditor club to file a claim for amounts due in front of the competent FIFA authority: the creditor club would only be prevented from seeking sanctions pursuant to Article 12bis para. 4 RSTP against the debtor club. In fact, for assessing whether a payment is overdue or not, the underlying contractual regulations are of essence. In the case at hand, this means that mainly Articles 2.2 and 2.3 of the Transfer Agreement are important. As stated before, it remained uncontested by the Appellant that the second installment of the transfer fee in the amount of EUR 3,500,000 as well as the additional payment for the Player scoring more than 15 goals in one football season in the amount of EUR 250,000 were overdue on 1 March respectively on 13 March 2019. The Sole Arbitrator acknowledges that these are uncontested facts. Therefore, it is obvious for the Sole Arbitrator that the Respondent was allowed to file its claim before the competent FIFA authorities for the payment of these two amounts on 2 April 2019. With this, the Appellant’s allegations are rejected.

56. The Appellant in its submissions further alleged that the Respondent is prevented from asking for the penalty amount foreseen in Article 2.2. lit. d of the Transfer Agreement as the

Respondent did not wait the requested 20 days but sent its reminder on 13 March 2019 instead.

57. First of all, the Sole Arbitrator acknowledges that in the Respondent's default notice of 13 March 2019, the Respondent did not ask for the penalty amount based on Article 2.2 lit. d of the Transfer Agreement. Only in the claim filed on 2 April 2019, the Respondent requested the payment, in addition to the two uncontested amounts, of the penalty amount of EUR 350,000.

58. The Sole Arbitrator further notes that in the FIFA file there is a letter of the Respondent dated 9 August 2019 in which reference is made to another request sent by the Respondent to FIFA on 10 May 2019; this second request is based on Article 12bis RSTP. However, for unknown reasons, FIFA did not include this additional request in the case file sent to the CAS Court Office. Nevertheless, the Respondent provided in its Answer the final notice of default sent to the Appellant by email on 11 April 2019. In this letter, the Respondent asked for the additional payment of the penalty amount of EUR 350,000 and set the Appellant a deadline of 22 April 2019 to pay the total due amount of EUR 4,100,000.

59. The Single Judge of the PSC did not state any details how and when the penalty amount of EUR 350,000 was requested by the Respondent. He mainly rejected the Appellant’s argumentation and confirmed that the penalty amount cannot be considered as unfair or disproportionate.

60. Looking at the wording of Article 2.2 lit. d of the Transfer Agreement and the Respondent's final notice of default of 11 April 2019, the Sole Arbitrator is satisfied with the Respondent’s compliance with the conditions set in Article 2.2 lit. d of the Transfer Agreement. The Appellant’s argumentation that the Respondent did not wait 20 days after the due date of the second installment, but sent its reminder for payment already on 13 March 2019 and, therefore, the Respondent's request for the penalty amount cannot be considered, is rejected. For whatever reasons, the Appellant did not refer in its argumentation to the final notice sent by the Respondent on 11 April 2019. During the hearing, the Appellant only referred to the fact that its secretary-general in charge during the season 2018/19 did leave the Appellant by the end of the season and did not inform the new secretary-general of the Appellant about all facts and correspondence. In the Sole Arbitrator's view, this is no excuse as it is the duty of the Appellant alone to be organized in a sense that all important information is kept within the club and accessible to the persons in charge. Even if the UPS document provided by the Respondent for sending this final notice on 11 April 2019 does not give any proof that such letter was received by the Appellant, the copy of the email sent on 11 April 2019 clearly shows that it was sent to the email address of the secretary-general of the Appellant. Therefore, it is obvious for the Sole Arbitrator that at least such email was received by the Appellant and as a consequence the Respondent fulfilled the conditions set in Article 2.2 lit. d of the Transfer Agreement and the penalty amount of EUR 350,000 became due.

61. The Appealed Decision does grant the Respondent the total amount of EUR 4,100,000 which included the penalty amount of EUR 350,000. The Appealed Decision, however, did not grant any interests on the amount of EUR 600,000 (additional payment of EUR 250’000 and the penalty amount of EUR 350’000). As stated before, the Sole Arbitrator is of the opinion that also the penalty amount of EUR 350’000 became due, but as the Respondent did not appeal

himself against the Appealed Decision, the Sole Arbitrator has not to take any decision regarding a possible interest due by the Appellant on the penalty amount.

C. Is the penalty to be considered excessive and therefore should it be reduced?

62. To the Appellant’s allegation that a penalty amount of EUR 350,000 pursuant to Article 2.2 lit. d of the Transfer Agreement has to be considered as excessive, the Sole Arbitrator notes the following.

63. The Sole Arbitrator first considers that the validity of the penalty clause of the Transfer Agreement has to be assessed according to Swiss law, pursuant to Article 6.1 of the Transfer Agreement and Article R58 of the Code. The applicable Article 163 Swiss Code of Obligations (CO) states:

“1 The parties are free to determine the amount of the contractual penalty. The penalty may not be claimed where its purpose is to reinforce an unlawful or immoral undertaking or, unless otherwise agreed where performance has been prevented by circumstances beyond the debtor’s control. At its discretion the court may reduce penalties that it considers excessive”.

64. The Sole Arbitrator, based on the subsidiarily applicable Swiss law, holds that in general the parties are free to agree on a penalty amount and only if such penalty amount is excessively high and to be considered as being against justice and fairness, it is possible, based on Article 163 para. 3 CO, to reduce it. There is a long-standing CAS jurisprudence existing to the question if a penalty has to be considered as excessive and accordingly be reduced. Reference is made to references made in these awards.

65. There are further several decisions of the Swiss Federal Tribunal (“SFT”) mainly stating that a reduction of a penalty shall only be decided if the disproportionality between the agreed penalty amount and the interest of the creditor to maintain his entire claim is obvious. The judge shall decide on a case-by-case basis and take into consideration all the circumstances of the case, e.g.:

− the ratio between the agreed penalty and the creditor's interest in the fulfilment of the secured claim (“das Verhältnis zwischen der vereinbarten Konventionalstrafe und dem Interesse des Gläubigers an der Erfüllung der gesicherten Forderung”; SFT of 25.08.2011,4A.107/2011, E. 3.1; SFT 82 II 142, 146);

− the seriousness of the fault of the parties involved (“die Schwere des Verschuldens der Beteiligten”; 383);

− the importance of the fulfilment of the principal claim for the other party (“die Wichtigkeit der Erfüllung der Hauptforderung für die andere n Partei”);

− the debtor's interest and profit in non-performance or defective performance (“das Interesse und der Gewinn des Schuldners an der Nicht- oder Schlechterfüllung”);

− the seriousness of the breach of the primary obligation guaranteed (“die Schwere der Verletzung der gesicherten Hauptverpflichtung”; SFT of 01.05.2013,4A.656/2012, E. 2.3;

− the economic situation of the parties (SFT of 01.05.2013,4A.656/2012, E. 2.3; 21.12.2012, 14.10.2003,4C_143/2003; SFT 103 II 129, 135; 95 II 532, 539 f.), mainly the debtor. The more strained the financial situation of the debtor is, the more likely the contractual penalty must be regarded as excessive (“die wirtschaftliche Lage der Beteiligten, namentlich des Verpflichteten. Je angespannter die finanzielle Lage des Pflichtigen ist, umso eher muss die Konventionalstrafe als überhöht angesehen werden”; SFT of 20.02.2004,4C.276/2003);

− the maximum presumed damage suffered by the creditor; however, the damage actually suffered is not decisive (“der mutmassliche Schaden, den der Gläubiger höchstens erlitten hat; der effektiv eingetretene Schaden ist hingegen nicht massgebend”; SFT of 25.08.2011,4A.107/2011, E. 3.1).

− the risk of damage to which the creditor was exposed in the specific case (“das Schadensrisiko, dem der Gläubiger im konkreten Fall ausgesetzt war”; SFT of 17.10.2012,4A.160/2012, E. 1.2;

66. In its submissions, the Appellant pointed out several factors that, in its opinion, would justify a reduction of the penalty. In particular, the Appellant considered that the balance of interests, the fact that the Respondent was not very collaborative in finding a solution, the fact that the first installment was timely and fully paid in accordance with the Transfer Agreement and the Appellant had – and still has – severe financial difficulties since the end of the season 2018/19. Further, the Appellant also stressed out that, following the COVID-19 pandemic, the Respondent will resume the football games in June 2020, while the Saudi Professional League will not resume before August 2020. Consequently, the Appellant argued that this element shall also be taken into account in the assessment of the penalty clause. In addition, the Appellant argues that a reduction of the penalty should also be granted since the Respondent was already awarded with the payment of default interests at a rate of 5%, which is clearly higher than the interest rate applied by any bank in the actual market situation.

67. The Respondent mainly replied that the damage caused by the non-payment is far bigger than the agreed penalty amount. During the hearing, the Respondent further pointed out that the transfer of the Player is the single biggest transfer done by the Respondent in many years and the transfer fee corresponds to roughly 12.5% of its annual budget. Due to the non-payment, the Respondent was financially struggling and it was lucky to finally get a license for the season 2020/21. Therefore, the Respondent is of the opinion that the contractual penalty amount is not excessive.

68. First of all, the Sole Arbitrator compares the penalty amount to the transfer fee of the Player as

agreed between the Parties. The penalty amount of EUR 350,000 is merely 3.33% of the total transfer fee (i.e. EUR 10,500,000). As the penalty is due each time the Appellant fails to make the payment for each installment, the penalty amount is further compared to the two outstanding installments: compared to the second installment of EUR 3,500,000 it corresponds to 10% and compared to the third installment of EUR 2,000,000 it corresponds to 17.5%. The Sole Arbitrator is, therefore, of the opinion that based on the ratio alone, the penalty amount cannot be considered as disproportionate.

69. Further, the Sole Arbitrator considers that the Appellant failed to substantiate its allegation regarding its financial difficulties by the end of the season 2018/19, since no evidence nor statement have been provided in this regard by the Appellant.

70. In any event, the Sole Arbitrator considers that the alleged financial difficulties do not constitute a valid reason to consider the penalty amount as being disproportionate. In fact, the first installment was apparently paid by 6 September 2018 in accordance with the Transfer Agreement. The second installment became overdue on 1 March 2019 and, therefore, still during the season 2018/19. There are no proofs that the Appellant was in financial difficulties in this moment.

71. Further, the COVID-19 pandemic does not favor any Party, since it is foreseen that also the Appellant will finish the games of the season 2019/20 in late August/early September 2020. The Sole Arbitrator also takes into consideration that the second installment is due since a year and a half, and, therefore, well before the pandemic effects could have an influence on the relations between the Parties.

72. Further, the Appellant did not bring forward any other reasoning to convince the Sole Arbitrator to consider the penalty fee as being excessive and to reduce it. The Respondent did not have any duty to negotiate a reduction of the transfer fee with the Appellant; it is the Appellant’s main duty to pay the transfer fee as agreed in the Transfer Agreement based on the principle “pacta sunt servanda”.

73. Regarding the default interest rate of 5% granted by the Appealed Decision and the Appellant’s argument according to which such interest rate is higher than any interest rate applied by banks, the Sole Arbitrator points out to Article 104 CO, which states:

“1 A debtor in default on payment of a pecuniary debt must pay default interest of 5% per annum even where a lower rate of interest was stipulated by contract. Where the contract envisages a rate of interest higher than 5%, whether directly or by agreement of a periodic bank commission, such higher rate of interest may also be applied while the debtor remains in default. In business dealings, where the normal bank discount rate at the place of payment is higher than 5%, default interest may be calculated at the higher rate”.

74. Further, the Swiss Federal Tribunal in SFT 130 III 312 and WEBER in the Bernese Commentary (“Berner Kommentar”) state that the legislator did already take into consideration that the due

default interest is possibly higher than the market interest during the period of default and, by doing so, the legislator showed the penalty effect of the default interest. However, the setting of the default interest at a rate of 5% in Article 104 CO cannot be lowered by any proofs and neither by a judge. As a consequence, the Sole Arbitrator is of the opinion that the penalty amount of EUR 350,000 cannot be reduced based on the default interest of 5% granted on the overdue second installment of EUR 3,500,000. Therefore, the Sole Arbitrator rejects the Appellant’s request for a reduction of the penalty amount.

75. As a last point, the Sole Arbitrator holds that the Appellant did not oppose to the ban from registering any new players, either nationally or internationally, up until the due amount is paid, based on Article 24bis RSTP. As the Appellant already paid the first installment to the Respondent, it has all bank details of the Respondent to pay the overdue second installment plus interests, the additional payment of EUR 250,000 based on Article 2.3 lit. b respectively the penalty amount of EUR 350,000 based on Article 2.2 lit. d of the Transfer Agreement.

76. Based on the above, the Sole Arbitrator dismisses the Appeal and confirms the Appealed Decision in full.