Basketball Club Ticha v. Aleksandar Andrejevic, Fédération Internationale de Basketball (FIBA)

II. FACTUAL BACKGROUND AND PROCEEDINGS BEFORE FIBA PRIOR TO THE FILING OF THE

STATEMENT OF APPEAL WITH THE COURT OF ARBITRATION FOR SPORT

4. Below is a summary of the main relevant facts and allegations based on the Parties’ written submissions, pleadings and evidence adduced during these proceedings. Additional facts and allegations may be set out, where relevant, in connection with the legal discussion that follows. Although the Sole Arbitrator has considered all the facts, allegations, legal arguments and evidence submitted by the Parties in the present proceedings, this Award refers only to the submissions and evidence considered necessary to explain its reasoning of this Award.

5. On 1 March 2016, the Basketball Arbitral Tribunal rendered an award (the “BAT Award”) against the Old Club, ordering it to pay certain amounts (in excess of € 20,000) to the Player.

6. Apprised on 17 March 2016 by the Player’s representative that the BAT Award had not been honoured, FIBA informed the Old Club of its authority to impose sanctions in the event of non-payment (monetary fine and/or registration ban and/or international competition participation ban), and invited it to make payment or state its position by 18 April 2016.

7. In the absence of payment or response from Old Club, by letter of 26 April 2016, FIBA through its Secretary General imposed a registration ban on Old Club.

8. In July and September 2016, the Player’s representative informed FIBA that New Club had been licensed to participate in the Bulgarian first national league, and of certain information suggesting to him that New Club was a mere continuation of Old Club. The letter indicated that the Bulgarian Basketball Federation did not share this opinion but that the explanation of its view was “vague and incorrect”, and asked FIBA to “help us resolve this issue and set an example for future references”.

9. After having “conducted research[es] of its own into the matter”, on 14 December 2016, FIBA’s Secretary General issued a decision (the “FIBA Decision”) pursuant to the last sentence of Article 3-300 of the FIBA Internal Regulations.

10. Articles 3-300, 3-301 and 3-302 of the FIBA Internal Regulations, contained in the section of Chapter VII (“Basketball Arbitral Tribunal (BAT)”) captioned “Honouring of BAT Awards”, provide as follows (the last sentence of Article 3-300, at issue in this proceeding and added to the rules in 2014, is underscored below):

“300. In the event that a national member federation, club, player, coach or agent participating in a BAT Arbitration (the “first party”) fails to honour a final award, order or any provisional or conservatory measures (collectively, the “decision”) of BAT or CAS, the party seeking the honouring of such decision award (the “second party”) shall have the right to request that FIBA sanction the first party. The sanctions which FIBA may impose are the following:

a. A monetary fine of up to CHF 150,000 (see article 3-303); this fine can be applied more than once; and/or b. Withdrawal of FIBA-license if the first party is a player’s agent or a FIBA-approved coach; and/or c. A ban on international transfers if the first party is a player; and/or d. A ban on participation in international competitions with his national team and/or club if the first party is a player; and/or e. A ban on registration of new players and/or a ban on participation in international club competitions if the first party is a club.

The above sanctions can be applied cumulatively and more than once.

The above sanctions can be extended, in FIBA’s sole discretion, to natural or legal persons which are directly or indirectly linked to the first party, either from a legal or a sporting perspective (e.g. different entity under a similar name etc.).

301. The second party shall send to FIBA with his request for sanctions a copy of the BAT award. The decision on the sanction is taken by the Secretary General. Before taking his decision he shall give the first party an opportunity to state his position and to honour the BAT award. Upon request by FIBA, the national member federation to which the first party is affiliated shall actively and promptly take all necessary measures to ensure that the first party fully honours the BAT award within a time-limit fixed by FIBA. If a national federation fails to comply with the present Article, FIBA may impose disciplinary sanctions on the national federation in accordance with Book 1, Chapter VI.

302. The decision to sanction the first party shall be subject to appeal to the FIBA Appeals’ Panel according to the FIBA Internal Regulations governing Appeals (see Book 1, Chapter VIII)”.

11. The full text of the FIBA Decision (with the operative sentence underscored) provided as follows:

“BC Cherno More PortVarna / BC Cherno More Ticha

By email only

14 December 2016

Dear Sirs,

As you know, the club “BC Cherno More Port Varna” (“Old Club”) has failed to honour the BAT Award 0746115 and, as a result, is subject to a ban on registration of new players inflicted by FIBA since 26 April 2016.

We are informing you that FIBA recently received a letter written by Mr. Aleksandar Andrejevic, claimant in the BAT Award 0746115, inviting FIBA to assess whether or not the sanctions against the Old Club related to the aforementioned BAT award could be extended upon “BC Cherno More Ticha” (“New Club”). Please be advised that Article 3-300 of the FIBA Internal Regulations (“Regulations”) provides as follows:

“The above sanctions can be extended, in FIBA’s sole discretion, to natural or legal persons which are directly or indirectly linked to the first party, either from a legal or a sporting perspective (e.g. different entity under a similar name etc.)”.

The jurisprudence of FIBA and of its judicial bodies indicates various criteria that can be taken into account when deciding to extend a sanction as above.

ln the present case, taking into account - among other considerations – also

a) the fact that the name of the club is virtually the same b) the fact that the external appearance and representation of the club has not changed, giving the impression of continuity of the same team to third parties c) The fact that many players left the Old Club for the New Club d) The fact that the New Club plays in the same arena as the Old Club e) The fact that many sources online, including the official Facebook page of the club are stating that the club has many years of history and that the New Club has been created in 1923

FIBA herewith confirms that the obligations of the losing party under the BAT Award 0746/15 shall apply jointly and severally to: BC Cherno More Port Varna, BC Cherno More Ticha.

The above-mentioned entities are requested to honour the BAT Award 0746115 by no later than Friday 13 January 2017”.

In case the BAT Award is not honoured within this deadline, FIBA reserves the right to impose further sanctions, as provided for in Art. 3-300 of the Regulations.

(…)”.

12. New Club appealed the FIBA Decision to the FIBA Appeals’ Panel, which dismissed the appeal by decision (the “Appealed Decision”) of 27 February 2017. The core reasoning and conclusions of the Appealed Decision are set out below:

“34. In view of the consideration underlying the provision, following an overall assessment of the evidence produced, combined with the fact that it is apparently the general perception of the basketball community that the clubs concerned are effectively one and the same club, the Appeals’ Panel finds that the Respondent has discharged the burden of proof to establish that the Appellant is linked to BK CMPY in such a manner that there are sufficient grounds for extending the sanctions on the latter to the Appellant in accordance with Article 3-300 of the FIBA IR.

35. In this connection, the Appeals’ Panel attaches importance to various factors, including that the Appellant gives the impression of being effectively a continuation of the sporting skills of BK CMPV after this club, due to financial difficulties, did not apply to participate in the national championship run by the NBL. For instance, the Appellant has chosen to play in basically similar jerseys, except for a different emblem, with a wide range of BK CMPV’s previous players on the team. Moreover, it seems that the Appellant has in no way whatsoever made any efforts to try to dissociate itself from BK CMPV in relation to the public perception. Thus, in public databases, the Appellant is apparently listed as a club that has accomplished a wealth of sports achievements before its formal establishment, which gives the general public the impression that, at least from a sporting perspective, it is one and the same club. The Appellant is found not to have made any attempt to change this perception.

36. In the circumstances of the present case, the Appeals’ Panel therefore finds that the Secretary General had sufficient grounds for a decision to extend the sanctions on the Appellant in accordance with Article 3-300 of the FIBA IR in order to protect the principle of pacta sunt servanda in the world of basketball and to protect the liability expectations. Furthermore, the Appeals’ Panel finds that the General Secretary was under no obligation to await the outcome of the bankruptcy proceedings of BK CMPV before extending the sanction”.

III. PROCEEDINGS BEFORE THE COURT OF ARBITRATION FOR SPORT

13. On 28 March 2017, Appellant filed its Statement of Appeal with the CAS, requesting that the matter be decided by a Sole Arbitrator. The Statement of Appeal additionally sought a stay of execution of the Appealed Decision.

14. On 10 April 2017, Appellant filed its Appeal Brief, which included a request for the production of documents.

15. On 10 April 2017, First Respondent agreed to the appointment of a Sole Arbitrator. Second Respondent did not provide his position on Appellant’s request for the appointment of a Sole Arbitrator.

16. On 27 April 2017, within the period established for the filing, First Respondent submitted its response to Appellant’s Request for Provisional Measures.

17. On 10 May 2017, within the period established for the filing, First Respondent submitted its Answer.

18. Second Respondent did not submit, in proper form and time, a response to the Request for Provisional Measures or an answer. By letter of 18 May 2017, he indicated that he had indeed submitted an answer to the CAS by email on 27 April 2017.

19. On 19 May 2017, the President of the CAS Appeals Arbitration Division dismissed the Request for a Stay of the Appealed Decision on grounds of the absence of irreparable harm, and without prejudice to any decision on the merits taken by the Panel, once appointed.

20. Also on 19 May 2017, the Player filed his answer by courier which the CAS subsequently circulated to Appellant and First Respondent.

21. On 23 May 2017, Appellant requested that the Player’s answer be deemed inadmissible as untimely filed.

22. On 29 May 2017, the CAS Secretariat informed the Parties that Clifford J. Hendel, attorney-atlaw, Madrid, Spain, had been appointed as Sole Arbitrator.

23. On 8 June 2017, the CAS Secretariat advised the Parties that the Sole Arbitrator had determined (a) to declare inadmissible the Player’s answer, for having been filed out of the applicable time limit, (b) to consider as moot Appellant’s request for the production of documents in light of the documentation and explanation provided in First Respondent’s Answer, and (c) to hold a hearing.

24. On 23 June 2017, the CAS Court Office, on behalf of the Sole Arbitrator issued an Order of Procedure which was duly accepted and countersigned by each of the Parties.

25. On 5 July 2017, a hearing was held in Lausanne, Switzerland. The Sole Arbitrator was assisted at the hearing by Mr. Daniele Boccucci, counsel to CAS. The following persons, in addition to the translator David Richerataux assisting Second Respondent, attended the hearing:

(i) for Appellant: Mr. Vassil Baichev, Counsel

(ii) for First Respondent: Mr. Andreas Zagklis, Legal Director / General Counsel Mr. Benjamin Shindler, Legal Affairs Manager Mr. Chris Patterson, Member of the Legal Commission (by videoconference, as an observer) Mr. Zoran Radovic, Director of NFs and Sports, witness

(iii) the Second Respondent.

26. At the hearing the Parties made submissions through counsel in support of their respective cases and responded to questions posed by the Sole Arbitrator. At the outset of the hearing, the Parties confirmed their satisfaction with the composition of the Panel, and at the conclusion stated that they had no objection in respect of their right to be heard and to be treated equally in these proceedings.

27. Subsequent to the hearing, at the request of the Parties, the Sole Arbitrator deferred preparation of this Award in order to facilitate settlement discussions during a certain time. Once this time period (as extended) had lapsed, the Award was prepared.

28. Finally, and within the deadline established by the CAS Secretariat by letter of 21 August 2017, the Parties filed their respective statements of costs.

IV. THE POSITIONS OF THE PARTIES

29. The following summary of the Parties’ positions is illustrative only and does not necessarily comprise every contention put forward by the Parties. The Sole Arbitrator has however, carefully considered for the purposes of the legal analysis which follows, all the submissions made by the Parties, whether or not specific reference is made to them below.

A. Appellant

30. Appellant asserts that the Appealed Decision is legally invalid, and subsidiarily, even if it is valid, it is wrong on the merits.

31. Appellant’s argument regarding the invalidity of the Appealed Decision is twofold.

32. First, Appellant argues that the FIBA Decision (as confirmed without discussion of this particular aspect in the Appealed Decision), read literally and focusing on its operative or dispositive text, imposes on New Club a sanction which is not contemplated in the FIBA Internal Regulations.

33. Concretely, Appellant refers to the following language of the FIBA Decision:

“FIBA herewith confirms that the obligations of the losing party under the BAT Award 0746/15 shall apply jointly and severally to BC Cherno More Port Varna, BC Cherno More Ticha.

The above-mentioned entities are requested to honour the BAT Award 0746/15 by no later than Friday, 13 January 2017”.

34. Appellant observes that the FIBA Internal Regulations do “not provide for the possibility of assignment of the obligations of the losing party under a BAT arbitration to a third party but only for the extension of particularly specified sanctions” (i.e., monetary fines and registration and participation bans), and thus “[b]y ordering that the Appellant is jointly and severally liable for the obligations of the losing party under the BAT Award, the FIBA Decision in effect imposed upon the Appellant the obligation to pay the ordered amounts … [which] falls outside the scope of permissible legal actions … under Article 3-300 of the FIBA Regulations”.

35. Accordingly, Appellant asserts that application of the principles of legality and predictability and interpretation of ambiguities against the federation in matters of sanctions requires that the

FIBA Decision and the Appealed Decision confirming it be declared invalid and unenforceable as violative of the principle of legal certainty.

36. Second, Appellant asserts that the failure of FIBA to accord Appellant the opportunity to be heard before the issuance of the FIBA Decision is a procedural error not capable of cure by, and not cured by, the FIBA appeals procedure or the CAS proceeding.

37. Appellant notes that Article 3-300 of the FIBA Internal Regulations does not contemplate a right to be heard for a party against whom sanctions are extended before such extension is ordered. But Article 1-127 of the FIBA Internal Regulations (contained in the first section of Chapter VI (“Sanctions”) captioned “Basic Principles of Sanctions Imposed by FIBA”) provides as a general matter that “The entity/person concerned shall have a right to be heard”.

38. Appellant concludes that “By failing to first hear the position of the Appellant, the Secretary General of FIBA ignored fundamental procedural principles … [in] blatant violation of the universal and fundamental rights and the general equitable principle of natural justice could not have been remedied by the FIBA Appeals’ Panel and by the present CAS procedure and can only be sanctioned through the annulment of the vitiated decision”.

39. As to the merits, Appellant does not question the purpose or validity of Article 3-300 of the FIBA Internal Regulations as a general matter, stating in its Appeal Brief as follows:

“The rationale of the rule of Article 3-300 of the FIBA IR is understandable. FIBA sought to find a mechanism to handle situations where a former club fails bankrupt or goes into winding-up procedure or is simply abandoned following which the club becomes reincarnated in a new entity resuming the activities of the old club. In that scenario, under the disguise of a formally new entity, the old one is attempting to avoid its liabilities towards employees, players, coaches, agents, etc. by breaking the corporate identity. This was maintained by the First Respondent within the FIBA appeals procedure and was noted in para. 27 of the Appealed Decision. This is not the case with the Appellant, however”.

40. Instead, Appellant asserts that the FIBA Decision and the Appealed Decision confirming it are wrong, and that there are no legal or factual links between Old Club and Appellant sufficient to extend any sanction or liability to the latter under Article 3-300.

41. In particular, Appellant asserts that the expression “Cherno More” is not part of New Club’s name and is “added only to provide publicity for the sponsor of the club”, but not with the intent or effect of appropriating for itself or confusing the basketball community as to the brand, goodwill and market recognition of Old Club (BC Cherno More Port Varna).

42. Appellant considers immaterial and irrelevant the facts that New Club plays in the same city and arena as did Old Club, as no other suitable arena exists in Varna, and that several former players of Old Club now play for Appellant (“it is very natural that local players would be recruited for the team …”).

43. Appellant further disputes FIBA’s assertions that the external appearance of New Club (in terms of its jersey and emblem) is quite similar to that of Old Club and that it claims to be or holds

itself out to be the owner or beneficiary of Old Club’s significant and longstanding sporting achievements.

44. Appellant finally rejects the assertion that online basketball sources confuse or blend New Club with Old Club in terms of sporting history and achievements, or that Appellant has any responsibility if such confusion exists.

45. On this basis, Appellant requests that an Award be entered to the effect that:

“a. The CAS has jurisdiction over the dispute and the parties to this arbitration;

b. The appeal of Basketball Club Ticha (Varna, Bulgaria) is upheld;

c. The Decision rendered by the FIBA Appeals’ Panel dated 27 February 2017 is set aside;

d. The Decision of the FIBA Secretary General dated 14 December 2016 confirming “that the obligations of the losing party under the BAT Award 0746/15 shall apply jointly and severally to: BC Cherno More Port Varna, BC Cherno more Ticha” is declared invalid for all purposes as being null and void;

e. The Decision of the FIBA Secretary General dated 14 December 2016, if considered as extension of sanction to Basketball Club Ticha, is declared invalid for all purposes as being null and void;

f. Alternatively to d. and e. above, the Decision of the FIBA Secretary General dated 14 December 2016 “that the obligations of the losing party under the BAT Award 0746/15 shall apply jointly and severally to: BC Cherno More Port Varna, BC Cherno more Tichaˮ, and/or including for extension of sanctions, is set aside as being incorrect and wrong;

g. FIBA is ordered to lift the extended sanction, if such was actually imposed on Basketball Club Ticha (Varna, Bulgaria);

h. The costs of the present arbitration shall be born entirely by the Respondents (in a proportion the Panel deems appropriate);

i. The Respondents (in a proportion the Panel deems appropriate) are ordered to pay a reasonable amount as a contribution towards the costs, legal fees and other expenses sustained by the Appellant in connection with these arbitration proceedings;

j. The Appellant is reimbursed the costs incurred in the FIBA appeals proceedings in the amount of CHF 10,000”.

B. First Respondent

46. First Respondent rejects Appellant’s assertions that its right to be heard was violated because it was not invited to state its position before the FIBA Decision was passed, affirming that any such violation would have been cured during the FIBA Appeals’ Panel proceedings (“full-fledged

adversarial proceedings … in which the Appellant had a full opportunity to make its case, and made extensive use of this opportunity”) and also by the present CAS proceedings.

47. First Respondent also rejects for various reasons the assertion that the FIBA Decision lacked legal validity.

48. Initially, First Respondent asserts that Appellant should be estopped from arguing that the FIBA Decision improperly extended to Appellant the monetary obligations of Old Club under the BAT Award when Appellant’s procedural behavior before the FIBA Appeals’ Panel manifested its understanding that the real effect and intent of the FIBA Decision was to extend the post-BAT Award registration ban (not the monetary obligation under the BAT Award) from Old Club to New Club.

49. Noting Appellant’s having benefited from its prior position (First Respondent agreed to and the FIBA Appeals’ Panel granted an interim stay of execution of the registration ban during the pendency of the proceedings concluded by the Appealed Decision), First Respondent affirms that for Appellant to now characterize the FIBA Decision as ordering something “diametrically opposed to what it submitted earlier” would violate the principle of venire contra factum proprium and defeat legitimately-induced expectations of First Respondent in violation of CAS jurisprudence and Swiss law.

50. In this regard, First Respondent further notes that it “cannot be in the interest of anyone, including Appellant” for this appeal to be upheld on the basis that it extended or purported to extend the monetary obligations rather than the registration ban, since FIBA could “in any event order an extension of the registration ban (again) at any time”.

51. First Respondent additionally asserts that Appellant’s interpretation of the FIBA Decision (that it extends the monetary obligation and not the registration ban) is untenable. Specifically, First Respondent characterizes Appellant’s interpretation as resting on a decontextualized reading of one sentence of the FIBA Decision. Properly read, in its full context, Appellant affirms that “no objective reader could have any doubt that what FIBA did in the FIBA Decision was extending the ban”.

52. First Respondent also posits a possible textual interpretation of the operative sentence of the FIBA Decision which would coincide with its contextual interpretation.

53. Finally, and as a subsidiary argument, First Respondent cites the Swiss legal principle of contract interpretation “falsa demonstratio non nocet” to the effect that even if an objective reader might understand the language differently, the Parties’ intention and understanding was manifest prior to the CAS proceedings and accordingly they should be bound by that common understanding (and not by a hypothetically different objective interpretation).

54. As to the merits, First Respondent stresses as a preliminary matter that under Article 3-300 of the FIBA Internal Regulations, sanctions imposed on one entity can be imposed on another entity on the basis of direct or indirect legal or factual links that justify the extension. For First Respondent, this reveals two important misconceptions in Appellant’s argumentation: (i) that there is a requirement for FIBA to establish not just a sufficient objective link but rather a

subjective intent of the award debtor to avoid its obligations; and (ii) that the essential or principal basis for establishing the requisite link or links between entities involves formal legal criteria rather than the factual links which are at the core of Article 3-300:

“Based on the plain wording of Article 3-300 of the FIBA Internal Regulations, the provision is not limited to legal links, or scenarios of legal succession, or cases in which an arbitration clause could be extended to a third party under Swiss law. Rather, FIBA made use of its autonomy under Swiss law to go a step further and catch cases where factual links exist, because those links are sufficient to create a legitimate liability expectation, the frustration of which would endanger the protection of pacta sunt servanda in the world of basketball”.

55. First Respondent then identifies the series of links – essentially of a factual and “sporting” character, rather than a strictly legal character – which it asserts establish grounds to extend the sanction, i.e.:

- the “striking continuity in terms of localities … [which] creates the impression to the basketball community that we are dealing with one and the same club”;

- the fact that New Club “is doing business, i.e., is appearing publicly in basketball, under almost the same name” or holding itself out as the same or a successor entity, the different corporate names being irrelevant, since the mere corporate name is something “nobody really knows or has an interest in”;

- the “continuity in ‘look and feel’ conveyed to the public by the New Club’s playing in literally the same blue jerseys with white stripes”;

- the continuity in personnel, noting the continuity at coaching and managerial levels and that a higher proportion of players on Old Club’s 2015/2016 roster played with New Club in 2016/2017 than with Old Club in 2014/2015;

- the fact that the relevant basketball and sports databases view Old Club and New Club as one and the same;

- the temporal coincidence between Old Club’s financial difficulties and bankruptcy and New Club’s surfacing and entering (directly, as permitted in Bulgaria, in what First Respondent refers to as a “direct swap”) the first national league.

56. First Respondent concludes that:

“All the above-mentioned factors show very clearly that the present case is precisely the type of scenario for which Article 3-300 of the FIBA Internal Regulations was designed: Old Cherno More got into financial difficulties and moved its basketball operations including players, coaches and managers to New Cherno More, while continuing to use the same headquarters, stadium, jersey colours and virtually the same name, all of which leads to the result that the basketball community is regarding them as one and the same club - which is precisely what New Cherno More sought to achieve, i.e., to carry over all the tangible and intangible assets of Old Cherno More while hoping to avoid the latter’s debts, which have resulted in a bankruptcy proceeding having been

initiated over Old Cherno More. For all of the above reasons, FIBA had every right to apply Article 3-300 of the FIBA Internal Regulations in the case at hand”.

57. First Respondent accordingly requests that CAS grant the following relief:

“I. dismiss all prayers for relief submitted by the Appellant;

II. order the Appellant to pay the entire costs of the present arbitration;

III. order the Appellant to pay the legal fees and expenses of the First Respondent”.

C. Second Respondent

58. As noted above, Second Respondent’s answer was deemed inadmissible. At the hearing, however, he had the opportunity to briefly address the Sole Arbitrator. His remarks reflected his full agreement with First Respondent’s position and requests for relief, and his opinion that the case exemplifies a common practice in Bulgaria professional basketball and requires remedy.