Labour Disputes
Texto da decisão
REF FPSD-4986
Decision of the
Dispute Resolution Chamber
passed on 23 June 2022
regarding an employment-related dispute concerning the player Stephan El Shaarawy
COMPOSITION:
Clifford J. Hendel (USA & France), Deputy Chairperson
Gonzalo de Medinilla (Spain), member
Mario Flores Chemor (Mexico), member
CLAIMANT:
Stephan El Shaarawy, Italy
Represented by MCA Sports Law LLP
RESPONDENT:
Shanghai Shenhua FC, China PR
Represented by Muñoz & Arias Sports Lawyers
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I.
Facts of the case
1.
On 8 July 2019, the Italian player, Stephan El Shaarawy (hereinafter: Claimant or player) and the
Chinese club, Shanghai Shenhua FC (hereinafter: club or Respondent) concluded an employment
contract (hereinafter: contract) as well as an annex, both valid as from 1 July 2019 until 30 June
2022.
2.
According to the contract and the annex, the Respondent undertook to pay the Claimant, inter
alia, the following monies:
- EUR 6,000,000 as annual remuneration, net of tax, payable in 12 instalments of EUR 500,000
- EUR 6,000,000 net of tax, payable before 31 July 2019
- EUR 4,000,000 net of tax, payable before 31 January 2020
- EUR 3,000,000 net of tax, payable before 31 July 2020
- EUR 3,000,000 net of tax, payable before 31 January 202
- EUR 3,000,000 net of tax, payable before 31 July 2021
- EUR 3,000,000 net of tax, payable before 31 January 2022.
3.
On 18 January 2021, the parties concluded an agreement in order to terminate the contract and
the annex (hereinafter: termination agreement), which established:
“Art. 2
a. The Club shall pay and the Player shall receive a gross amount equal to EUR
9,281,604.00/- (Nine Million Two Hundred Eighty-one Thousand Six Hundred Four Euro
Only), in one lump sum by no later than 30 March 2021 (the “Termination Fee”).
b. In the event that – at the time of payment of the Termination Fee – any taxes shall be
applicable in China in relation to the Termination Fee (the “Termination Fee Taxes”), said
Termination Fee Taxes shall be fully paid by the Club. Only to the extent said Termination
Fee Taxes have been actually paid by the Club, the Termination Fee Taxes may be deducted
from the Termination Fee, upon the Club providing to the Player the respective tax certificate
attesting complete payment of the Termination Fee Taxes by no later than 30 March 2021.
c. The Company and/or the Club shall pay the applicable taxes in China in relation to the first
installment of EUR 6,000,000.00 (Six Million Euro Only) paid on 08.10.2019, which remain
outstanding up to date, and shall provide to the Player the respective tax certificate
attesting complete payment of the due taxes by no later than 28 February 2021 (the
“Outstanding Taxes”); in this respect, the Club shall also take on itself the obligation to
ensure that the Company complies with such payment. In the event that the Outstanding
Taxes will be provided to the Player later than the 28 February but in any case within the 30
March 2021, the Club shall pay and the Player shall receive a gross amount equal to EUR
1.000.000.00/-(One Million Euro) in one lump sum by no later than 30 March 2021 (the
“Penalty Fee”).
d. The Club shall also provide the Player with the Tax Certificate issued by the competent
Chinese Authority attesting the payment of all the due taxes on the Player’s salaries paid in
the Year 2020 by no later than 28 February 2021.
e. The Termination Fee, the Termination Fee Taxes and the Outstanding Taxes shall apply
cumulatively and shall be collectively referred to as the “Settlement Obligations”.
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Art. 6.
In the event the Club and/or the Company do not comply, in full or in part, with any of the
Settlement Obligations as specified under this Termination Agreement, the following will
apply cumulatively:
i. A gross amount of EUR 55,650,000.00/- (Fifty-five Million Six Hundred Fifty Thousand Euro
Only) as liquidated damages shall be immediately due and payable by the Club to the Player.
The Parties expressly agree that any amount paid under the present Termination Agreement
shall be deducted from the agreed penalty, reducing the amount accordingly.
ii. An interest rate of five percent (5%) per year shall apply on the due amounts as per Clause
2 above until the date of their effective payment and payable by the Club to the Player.
iii. In the event of the Player being subject to any additional tax obligations as a result of the
Club’s and/or the Company’s non-compliance with any of the Settlement Obligations, the
Club shall be liable to reimburse, indemnify and hold harmless the Player for all such
amounts that the Player will be liable to pay to any tax or similar authority as a result of this
Termination Agreement.
The Parties expressly declare, agree and acknowledge that the present damages clause is
legitimate, fair, proportioned and it shall not constitute prejudice to any other rights or
remedies available to the Player.”
4.
On 26 February 2021, the Respondent sent an email to the Claimant, allegedly containing the tax
certificate resulting from art. 2 lit.c of the settlement agreement.
5.
On 2 March 2021, the player sent a letter to the Club wherein he requested the delivery of the
the tax certificate resulting from art. 2 lit.c of the settlement agreement and also the Players’ 2020
Income Tax Certificate.
6.
On 3 March 2021, the club replied to the player insisting that the relevant tax certificate was
already sent on 26 February 2021, while enclosing it again and requesting the player to
acknowledge receipt.
7.
On 10 March 2021, the player sent a letter to the club maintaining that he had not received such
email on 26 February 2021. He requested proof of delivery before 28 February 2021, otherwise
he would be entitled to the penalty established in art. 2 lit. c of the settlement agreement.
8.
On 18 March 2021, the club sent a letter to the player submitting the alleged proof of delivery
and denying being liable for the penalty.
9.
On 30 March 2021, the club informed the player that it initiated the payment of the termination
fee and enclosed a declaration concerning the tax certificate regarding the deductions.
10. On 31 March 2021, the Respondent remitted a payment of EUR 5,000,000 to the Claimant.
11. On 7 April 2021, the player contested having received the relevant tax certificate concerning the
termination fee.
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12. On 11 April 2021, the club sent a letter to the Player, clarifying that by proceeding with the
payment of the Net Termination Fee overseas, it had to automatically calculate, register and
withhold the Termination Fee Taxes.
13. On 30 April 2021, the Player sent a letter to the Club, whereby he granted a time limit to deliver
the tax certificate in respect of the Termination Fee Taxes by no later than 10 May 2021.
14. On 11 May 2021, the Club sent a letter to the Player, in which it explains that the former was
subject to a renaming thereby, due to administrative issues, the Chinese Tax Authorities had still
not processed the payment of the Net Termination Fee.
15. On 16 August 2021, the Player sent a letter to the Club, whilst acknowledging receipt of the letter
sent by the latter on 11 May 2021, whereby he granted a time limit for the Club to deliver the tax
certificate in respect of the Termination Fee Taxes until 27 August 2021.
16. On 27 August 2021, the Club sent a letter to the Player, wherein it explained that the Chinese Tax
Authorities informed the former that in view of the nature of the Net Termination Fee, an
overseas considerable payment in consideration for the early termination of an employment
relationship, said payment should be declared by the Club in its annual tax declaration
corresponding to the 2021 tax year, reason of which the Club explained that it could only facilitate
the respective tax certificate corresponding to the Termination Fee Taxes throughout the year of
2022.
17. On 4 September 2021, the Player sent a letter to the Club, by means of which he declared that he
did not acknowledge the procedure to issue the tax certificate in respect of the Termination Fee
Taxes by the Chinese Tax Authorities.
II. Proceedings before FIFA
18. On 31 January 2022, the Claimant filed the claim at hand before FIFA. A brief summary of the
position of the parties is detailed in continuation.
a. Position of the Claimant
19. In his claim, the Claimant requested payment of EUR 51,071,439 gross plus 5% interest p.a. as of
31 March 2021 or alternatively as “from the date the club was put in default”.
20. In this context, the player argued that the club breached the terms of the termination agreement,
as follows:
a) The termination fee and the termination fee taxes (resulting from Art. 2 lit. a) and b)
remained unpaid on 30 March 2021, respectively the Respondent did not submit any
documents showing that the applicable taxes were paid;
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b) The Respondent failed to submit any documents regarding the outstanding taxes (Art.
2 lit. c of the termination agreement) by 28 February 2021.
21. The player held that due to the club’s breaches, the Respondent is liable to pay the following
amounts, in accordance with the termination agreement:
- EUR 4,281,604 as remaining amount of the termination fee;
- EUR 1,000,000 as gross penalty fee (art. 2 lit. c of the termination agreement);
- EUR 45,789,835.00 gross as remaining part of the penalty established in art. 6.
b. Position of the Respondent
22. In its reply, the Respondent rejected the claim and maintained that it complied with the
termination agreement.
23. Alternatively, the Respondent held that penalty should be reduced to a maximum of EUR
833,333.33.
24. The Respondent summarized the obligations arising from the termination agreement as follows:
25. In this context, the club held having remitted the net termination fee of EUR 5,000,000 and 2 out
of the three tax certificates, whereby the “tax certificate concerning the Termination Fee Taxes
has not been delivered due to the fact that it has not been issued by the Chinese Tax Authorities,
a situation that fully escapes the control of the Respondent”.
26. The club submitted the missing tax certificate, dated 26 April 2022, which shows that the amount
of RMB 26,612,604.40 (approx. EUR 4,100,000) were paid to the Chinese tax authorities.
27. Regarding the “Instalment tax certificate”, the club held having submitted it on 26 February 2021
to the player.
28. Alternatively, in case the Chamber concludes that the termination agreement was breached, the
club argued that the penalties established are disproportionate and have to be reduced, in the
club’s opinion to a maximum of EUR 833,333.33, which corresponds to the “value” of the missing
tax certificate (€5.000.000,00 x €1.000.000,00 / €6.000.000,00= €833.333,33).
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29. The penalty established in art. 6 shall be reduced substantially, as it corresponds to 969.45% of
the withheld tax amount.
III. Considerations of the Dispute Resolution Chamber
a. Competence and applicable legal framework
30. First of all, the Dispute Resolution Chamber (hereinafter also referred to as Chamber or DRC)
analysed whether it was competent to deal with the case at hand. In this respect, it took note that
the present matter was presented to FIFA on 31 January 2022 and submitted for decision on 23
June 2022. Taking into account the wording of art. 34 of the June 2022 edition of the Procedural
Rules Governing the Football Tribunal (hereinafter: the Procedural Rules), the aforementioned
edition of the Procedural Rules is applicable to the matter at hand.
31. Subsequently, the members of the Chamber referred to art. 2 par. 1 of the Procedural Rules and
observed that in accordance with art. 23 par. 1 in combination with art. 22 lit. b) of the Regulations
on the Status and Transfer of Players (March 2022 edition), the Dispute Resolution Chamber is
competent to deal with the matter at stake, which concerns an employment-related dispute with
an international dimension between an Italian player and a Chinese club.
32. Subsequently, the Chamber analysed which regulations should be applicable as to the substance
of the matter. In this respect, it confirmed that, in accordance with art. 26 par. 1 and 2 of the
Regulations on the Status and Transfer of Players (March 2022 edition), and considering that the
present claim was lodged on 31 January 2022, the August 2021 edition of said regulations
(hereinafter: the Regulations) is applicable to the matter at hand as to the substance.
b. Burden of proof
33. The Chamber recalled the basic principle of burden of proof, as stipulated in art. 13 par. 5 of the
Procedural Rules, according to which a party claiming a right on the basis of an alleged fact shall
carry the respective burden of proof. Likewise, the Chamber stressed the wording of art. 13 par.
4 of the Procedural Rules, pursuant to which it may consider evidence not filed by the parties,
including without limitation the evidence generated by or within the Transfer Matching System
(TMS).
c. Merits of the dispute
34. Its competence and the applicable regulations having been established, the Chamber entered into
the merits of the dispute. In this respect, the Chamber started by acknowledging all the abovementioned facts as well as the arguments and the documentation on file. However, the Chamber
emphasised that in the following considerations it will refer only to the facts, arguments and
documentary evidence, which it considered pertinent for the assessment of the matter at hand.
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i. Main legal discussion and considerations
35. The foregoing having been established, the Chamber moved to the substance of the matter, and
took note of the fact that the main question of the dispute is if the player is entitled to the claimed
payment resulting from the termination agreement or not.
36. The Chamber therefore concluded that its task was to decide if the club complied with the
termination agreement or if there was a penalty, as established, to be applied.
37. In this framework, the DRC started to analyse the content of the termination agreement and held
that the club had, inter alia, to comply with the following conditions:
a) Remit the net termination fee until 30 March 2021 (based on the gross fee agreed upon):
Taking into account the documentation on file, the Chamber established that the payment
of EUR 5,000,000 was initiated on 30 March 2021, but only remitted on 31 March 2021.
b) Provide the tax certificate regarding the net termination fee until 30 March 2021:
The members of the Chamber noted that such tax certificate was requested, but only
issued by tax authorities on 26 April 2022.
c) Provide the tax certificate regarding previous payments until 28 February 2021:
The Chamber took notice that it was disputed between the parties if the tax certificate
dated 24 February 2021 was delivered in alleged email 26 February 2021.
38. On account of the above, the DRC concluded that the club failed to comply with the conditions
set in the termination agreement and pointed out that most importantly, the payment of EUR
5,000,000 was not remitted on time.
ii. Consequences
39. Having stated the above, the members of the Chamber established that no amounts remained
outstanding. Nevertheless, the consequences of the club’s non-compliance with the termination
agreement have to be addressed.
40. The Chamber turned its attention to art. 6 of the termination agreement, which foresees a
“liquidated damage”-clause with a total payment of EUR 55,650,000 gross to be awarded to the
player. The DRC further noted that, for not providing the relevant tax certificate, a payment of
EUR 1,000,000 gross would be due to the player (Art. 2 lit. c termination agreement).
41. In this regard, the DRC recalled the jurisprudence of the Football Tribunal that penalty clauses, in
principle, may be freely entered into by the contractual parties and may be considered acceptable,
in the event that the pertinent written clause meets certain criteria such as proportionality and
reasonableness. Accordingly, it shall be added that in order to determine as to whether a penalty
clause is to be considered acceptable, the specific circumstances of the relevant case brought
before the deciding body shall also be taken into consideration.
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42. Analysing the relevant clauses in the matter at hand, the Chamber clearly established that the
penalty cannot be considered proportional or reasonable if the total penalty is compared to the
total amount due to the player (under EUR 10,000,000 gross) in the relevant agreement.
43. The DRC acknowledged that the value of the tax certificates are difficult to establish, but would
like to emphasize that the total amount of approx. EUR 56,000,000 is not proportional or
reasonable. Therefore, it is in the Chamber’s discretion to reduce the penalty.
44. In doing so, the DRC took into account that the outstanding amount was paid (even though late)
and that the requested certificates are all on file. Therefore, the Chamber decided to reduce the,
to EUR 1,000,000 net. Such amount is approx. 20% of the initially outstanding amount, which was
remitted late.
45. In accordance with the long-standing jurisprudence of the Football Tribunal, no Interest shall be
granted on penalties.
iii. Compliance with monetary decisions
46. Finally, taking into account the applicable Regulations, the Chamber referred to art. 24 par. 1 and
2 of the Regulations, which stipulate that, with its decision, the pertinent FIFA deciding body shall
also rule on the consequences deriving from the failure of the concerned party to pay the relevant
amounts of outstanding remuneration and/or compensation in due time.
47. In this regard, the DRC highlighted that, against clubs, the consequence of the failure to pay the
relevant amounts in due time shall consist of a ban from registering any new players, either
nationally or internationally, up until the due amounts are paid. The overall maximum duration of
the registration ban shall be of up to three entire and consecutive registration periods.
48. Therefore, bearing in mind the above, the DRC decided that the Respondent must pay the full
amount due (including all applicable interest) to the Claimant within 45 days of notification of the
decision, failing which, at the request of the Claimant, a ban from registering any new players,
either nationally or internationally, for the maximum duration of three entire and consecutive
registration periods shall become immediately effective on the Respondent in accordance with
art. 24 par. 2, 4, and 7 of the Regulations.
49. The Respondent shall make full payment (including all applicable interest) to the bank account
provided by the Claimant in the Bank Account Registration Form, which is attached to the present
decision.
50. The DRC recalled that the above-mentioned ban will be lifted immediately and prior to its
complete serving upon payment of the due amounts, in accordance with art. 24 par. 8 of the
Regulations.
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d. Costs
51. The Chamber referred to art. 25 par. 1 of the Procedural Rules, according to which “Procedures
are free of charge where at least one of the parties is a player, coach, football agent, or match
agent”. Accordingly, the Chamber decided that no procedural costs were to be imposed on the
parties.
52. Likewise and for the sake of completeness, the Chamber recalled the contents of art. 25 par. 8 of
the Procedural Rules, and decided that no procedural compensation shall be awarded in these
proceedings.
53. Lastly, the DRC concluded its deliberations by rejecting any other requests for relief made by any
of the parties.
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IV. Decision of the Dispute Resolution Chamber
1.
The claim of the Claimant, Stephan El Shaarawy , is partially accepted.
2.
The Respondent, Shanghai Shenhua FC, has to pay to the Claimant EUR 1,000,000 as
contractual penalty.
3.
Any further claims of the Claimant are rejected.
4.
Full payment (including all applicable interest) shall be made to the bank account indicated in the
enclosed Bank Account Registration Form.
5.
Pursuant to art. 24 of the Regulations on the Status and Transfer of Players if full payment
(including all applicable interest) is not made within 45 days of notification of this decision, the
following consequences shall apply:
1. The Respondent shall be banned from registering any new players, either nationally or
internationally, up until the due amount is paid. The maximum duration the ban shall be of
three entire and consecutive registration periods.
2. The present matter shall be submitted, upon request, to the FIFA Disciplinary Committee in
the event that full payment (including all applicable interest) is still not made by the end of
the three entire and consecutive registration periods.
6. The consequences shall only be enforced at the request of the Claimant in accordance with article
24 par. 7 and 8 and art. 25 of the Regulations on the Status and Transfer of Players.
7. This decision is rendered without costs.
For the Football Tribunal:
Emilio García Silvero
Chief Legal & Compliance Officer
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NOTE RELATED TO THE APPEAL PROCEDURE:
According to article 57 par. 1 of the FIFA Statutes, this decision may be appealed against before the
Court of Arbitration for Sport (CAS) within 21 days of receipt of the notification of this decision.
NOTE RELATED TO THE PUBLICATION:
FIFA may publish this decision. For reasons of confidentiality, FIFA may decide, at the request of a party
within five days of the notification of the motivated decision, to publish an anonymised or a redacted
version (cf. article 17 of the Procedural Rules).
CONTACT INFORMATION
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