5 Talking Points: CAS: Arsenal FC v FIFA, CAS 2020/A/7417

The present decision was an outcome of the appeal lodged by Arsenal against the FIFA Appeal Committee (AC) decision, which upheld an order of the FIFA Disciplinary Committee (DC). By the said decision, Arsenal FC was held to be in contravention of Article 18bis FIFA RSTP (Regulations) by agreeing on variable sell-on clauses in two separate transfer agreements.

The Court of Arbitration for Sports (CAS) heard both the parties and overturned the FIFA AC decision, thereby laying down that Arsenal FC did not acquire any influence or ownership over the two clubs with which they had agreed on sell-on clauses. A copy of the decision is available here.

Here we talk about 5 key highlights from the decision: -

1) FIFA argued that sell on clauses violate article 18bis of the Regulations which was rejected by CAS

On 2 August 2018, Arsenal had signed an agreement with Greek professional football club FC PAOK for the permanent transfer of Chuba Akpom. In that agreement, a clause concerning the future transfer of the player stipulated that if PAOK transferred the player to a club within the UK then it shall pay a future transfer compensation of 40% of the transfer fee and in case of a club outside the UK, 30% of the transfer fee.

On 15 August 2018, Arsenal signed another agreement with Italian professional football club Frosinone Calcio S.R.L. for the transfer of Joel Campbell. In this case, as well, a similar clause was agreed whereby it was stipulated for a transfer within the UK, a future transfer compensation was to be paid at 30% of the transfer fee and for a club outside the UK, a future transfer fee was to be paid at 25% of the transfer fee.

FIFA argued that by retaining a higher percentage of future transfer fees in case the players were transferred to any club in England, Arsenal could affect the independence of the buying clubs. FIFA argued that the mere ability to influence is enough to contravene the provisions prohibiting third-party ownership/influence. It was immaterial whether the influence materialised or not.

Since the clubs had decided on a higher sell-on fee for transfers to England, this constituted a material ability on behalf of Arsenal to influence the transfer activities of the buying clubs. On this point, it is trite understanding that any kind of sell-on clause would affect the onward selling agreements of the buying club. Any deal, subject to sell-on clauses would be amenable to further commercial considerations vis-à-vis the payment of future fees to the previous selling club. Essentially, FIFA challenged the validity of these sell-on clauses as a whole.

2) Among other grounds, Arsenal FC staked its claim on another count of ‘legitimate expectations’ and ‘estoppel’ against FIFA

Arsenal based its legitimate expectations on the fact that previously such sell on clauses have not been sanctioned by FIFA in case of either Arsenal FC or other football clubs. Further, no FIFA circular or jurisprudence would suggest that sell on clauses were in breach of the Regulations.

They contended that without any notice, FIFA could not sanction a club for agreeing on sell-on clauses. Consequently, with time, this practice has become part of the customary law of FIFA. This will result in FIFA breaching its customary law. The legality of the same has been therefore validly established and at this stage, FIFA is estopped from sanctioning Arsenal in any way.

This aspect is worth pondering as Arsenal relied on the equitable defence of estoppel in this case of an alleged breach of disciplinary measures. It is usually a case of strict liability while discussing disciplinary breaches but Arsenal defended its position by claiming to estop the Respondent from enforcing the same owing to acquiescence on its part.

3) CAS Panel interpreted the purpose of Article 18bis in light of its legislative intent

CAS laid down that the statute has to be interpreted in the light of its legislative intent.

As per article 2(g) of the FIFA Statutes, one of the objectives of FIFA is:

g) to promote integrity, ethics and fair play with a view to preventing all methods or practices, such as corruption, doping or match manipulation, which might jeopardise the integrity of matches, competitions, players, officials and member associations or give rise to abuse of association football.

Consequently, the Panel kept in mind the overriding objective of promoting the integrity of football and accordingly construed the purpose of Article 18bis. The Panel delved upon the FIFA TPI/TPO Manual to elicit the context and the purpose behind enacting Article 18bis.

It was observed- “.....the Panel wishes to stress that any unsubstantial possible influence on another club must not be considered as a violation of the prohibition set out in the said rule.”

Since the rule was disciplinary or punitive in nature, the Panel followed its jurisprudence and interpreted the provision restrictively. As a result, it was held that any unsubstantial possible influence on another club must not be considered as a violation of the prohibition in Article 18bis.

4) Freedom of contract under Swiss Law and prohibition under Article 18bis

The Panel observed that the concept of contractual freedom is found inter alia in Article 19 of the Swiss Code of Obligation which allows the terms of a contract to be freely determined within the limits of the law. Interestingly, there is a scope of the waiver of this freedom in the Swiss Civil Code but not in violation of law or public morals.

CAS has confirmed the applicability of the above two principles (CAS 2015/A/4042) and stated that excessive self-commitment is contrary to contractual freedom. However, as per Swiss law, FIFA as a private body, governed by Swiss law, is entitled to make its regulations but those are subject to Swiss law. Thus, the restrictions under Article 18bis must be following the concept of contractual freedom under Swiss Law.

5) Prohibition under Article 18bis must have an interest worthy of a safeguard

As previously discussed, the Panel interpreted the prohibition in a restrictive manner. It was observed that the same conflicts with Swiss law of contractual freedom. Consequently, it was held that an unsubstantial possible influence on another club must not be considered as a violation of the prohibition.

It noted- “......In the Panel’s view, for a potential influence to be covered by the prohibition set out in Article 18bis of the Regulation, first of all, it has to concern an interest worth protecting the integrity of the competition as a whole.”

Thus, a standard sell-on clause was not deemed to impose prohibited influence on a player’s new club, even though the said clause might restrict the financial freedom of the new club. It was an observation that granted legal sanctity to sell on clauses vis-a-vis third party influences from the top Court of sports law disputes.

With this decision, CAS clarified the position regarding sell-on clauses and prohibited influence under article 18bis of FIFA RSTP. With FIFA regularly updating its jurisprudence, this ruling from the top Court shall definitively settle the legal position in this case.