Football Dispute Resolution: A Cautionary Tale

This article was first published in Sport Business International in November 2009.

Introduction

Football player Adrian Mutu has been playing for his current Italian club Fiorentina against the leading lights of European football. This included a starring role against Liverpool in his team’s recent Champions League victory. Off the field however, he is embroiled in one of the most interesting and controversial football cases in recent years. Few people would have imagined that as a consequence of taking cocaine and being sacked by Chelsea, Mutu would have to foot a €17.1m bill for breach of contract.

The Case Facts

In August 2003, Mutu transferred from Italian club Parma to Chelsea for €22.5m. He tested positive for cocaine in October 2004, prompting Chelsea to terminate his contract. He was subsequently banned from football for seven months. Following appeals by Mutu, to the Court of Arbitration for Sport (CAS), it decided that Mutu had committed a breach of his contract without just cause. Chelsea then asked FIFA's Dispute Resolution Chamber (DRC) to set a compensationary amount in line with FIFA’s regulations. The DRC initially refused to do this but after further compulsion from the CAS, the DRC ultimately ordered Mutu to pay Chelsea €17.1m.  Mutu appealed to CAS challenging the DRC decision. In July 2009, CAS upheld the DRC decision ruling against Mutu. A further appeal to the Swiss Federal Court is possible and as recently as 6 October Mutu’s agent confirmed that the Swiss Court had ordered a temporary suspension of the CAS order for payment until November.

The Merits and Consequences

Many have argued that the compensation Mutu must now pay to Chelsea is a wholly disproportionate penalty for Mutu taking non-performance enhancing drugs. Chelsea argue they were merely seeking compensation for the costs incurred but wasted (the transfer fee and associated transaction costs) because of Mutu’s breach of contract. Thus they were perfectly entitled to sack him and then claim compensation. The CAS agreed with Chelsea. It gave little weight to Mutu’s argument that Chelsea should have sold, not sacked him. CAS felt Chelsea were not under any such obligation.

The ruling serves as a very real warning to players and clubs. Whilst the Webster case appeared to give players the ability to buy out the remaining years of a contract for a small fee, Matuzalem illustrated that the price a footballer may have to pay (jointly with the club he transferred to, to buy out his contract) will be considerable (€11.8m in his case).  It means that a player’s actions can have severe financial implications. Likewise, the Mutu example illustrates the consequences for a player of having to pay back three fifths of his transfer fee.

Another current case concerns Chelsea player Gael Kakuta. It also demonstrates the sanctions that can be imposed on a club (e.g. a transfer ban). A DRC ruling has banned Chelsea from purchasing  players until January 2011. The CAS appeal is likely to be heard in the coming months. Whilst Chelsea have been the beneficiaries of the Mutu decision, it is apparent that clubs like Chelsea will be penalised with substantial sanctions should FIFA rules be broken.

This form of high stakes football dispute resolution illustrates the uneasy relationship between player and club. The millions that footballers earn, and are transferred for, mean the consequences for breaching such lucrative contracts can be astronomical. Apportioning who gets how much, is what the DRC, and ultimately the CAS, are left to decide.

For further information, please contact Daniel Geey.