Thursday, 28 October 2010

Could Rooney Have Walked Out?


A week on from the will he wont he “saga” involving Wayne Rooney’s contract and we are still unclear as to what finally persuaded Rooney to sign the contract on last Friday. An interesting question that was posed during the whole furore was whether Rooney could have simply walked out of Manchester United and terminated his contract.

The simple answer to that question is yes. Rooney could have walked out of Manchester United and terminated his contract, although this option would only be possible during the summer.

Article 17

Article 17 of the FIFA Regulations on the Status and Transfer of Players permits players to terminate their contract and leave their club after a protected period of service is obtained. Any player wishing to utilise this rule must provide their club with a notice of termination within 15 days of the last official match of the season. Once this notice is served, the player would then be free to leave the club. The protected period is three years into their contract for player’s under 28 years of age and 2 years for player’s over 28 years of age. Rooney’s previous contract was signed in November 2006 and was due to expire in the summer of 2012. Rooney was therefore outside the protected period as he was over 3 years into his contract. It should be noted that it is possible for players to leave during the protected period but, in such cases, sporting sanctions will be imposed by FIFA leading to possible extensive playing bans being served. Such a consequence is therefore clearly undesirable for a player to contemplate. Rooney, having signed a new contract, is now back within the protected period.

Article 17 states that in “all such cases, the party in breach shall pay compensation” The amount of compensation shall be calculated using criteria such as “the remuneration and other benefits due to the player under the existing contract and/or the new contract, the time remaining on the existing contract up to a maximum of five years, the fees and expenses paid or incurred by the former club.”

Article 17 has been dubbed the “Webster Rule” following the case of Heart of Midlothian v Andrew Webster and Wigan Athletic FC involving the Scottish and Hearts defender Andy Webster who became the first player to invoke Article 17. In 2006, Webster was involved in a dispute with the then owner of Hearts Vladimir Romanov and, as a result, was excluded from the squad for the remainder of the season. A frustrated Webster, who had one year remaining on his contract, chose to terminate his contract with Hearts and sign for Wigan.

Hearts, who were obviously outraged by Webster’s actions, appealed to FIFA and the case was heard by FIFA’s Dispute Resolution Chamber (DRC). The case centred on the amount of compensation that was owed to Hearts. The DRC, after taking into account the objective criteria laid down in Article 17, decided to award Hearts £625,000 compensation. Wigan and Webster, who were “jointly and severally” liable for the compensation payment under Article 17 decided to appeal the DRC ruling. Hearts also chose to appeal the ruling as they valued the player at around £5 million and so believed that they would recover far more than £625,000 from a transfer fee.

The case was then transferred to the Court of Arbitration for Sport (CAS) who had to decide whether £625,000 was a sufficient amount of compensation for Hearts to receive. CAS ordered that the compensation payment should be reduced significantly to £125,000. In reaching its decision, CAS ruled what mattered, when assessing the amount of compensation payable, was the remaining value of the contract. In other words, the salary the player would receive under the remaining years of the contract and not other factors such as the player’s value or the costs of replacing the player.

The potential effect of the Webster ruling was obviously profound as stand offs, such as the one between Rooney and Manchester United, have become more common. It was predicted that the ruling would lead to a number of players terminating their contracts and moving to different clubs. The ruling was criticised by many clubs and authorities such as FIFA with Sepp Blatter describing it as a “pyrrhic victory for those players and their agents who toy with the idea of rescinding contracts before they have been fulfilled”. 

Post Webster

Despite the ruling being heralded as the “New Bosman”, there have only been a cluster of cases that have followed Webster.

In the case of FC Shakhtar Donetsk v Francelino da Silva Matuzalem, Brazilian player Matuzalem chose to invoke Article 17 and walk out on his club Shakhtar Donetsk in 2007 to join Real Zaragoza in Spain. As like Hearts in the Webster case, Shakhtar initially appealed to FIFA where the DRC awarded them 6.8 million Euros. Shakhtar, like Hearts, were unhappy with this award and so appealed to CAS. CAS subsequently awarded Shakhtar 12 million Euros and, in contrast to Webster, took into account the value of the player and the ability to find a replacement in addition to the remaining value of the player’s contract.

Matuzalem overturned the decision in Webster due to the fact that CAS chose to take into account further criteria in assessing compensation. The effect of the Matuzalem ruling meant that invoking Article 17 was significantly more expensive for players and clubs than previously thought. The ruling was therefore likely to discourage players from terminating their contracts although it still remained unclear as to whether CAS will continue to adopt this approach. 

Matuzalem has been followed by two further cases.

Firstly, in the case of FC Sion v Essam El-Hadary, Egyptian goalkeeper Essam El-Hadary signed a three-year contract in January 2007 with Egyptian club Al-Ahly. In February 2008 discussions regarding the players transfer took place between Al-Ahly and Swiss club FC Sion. The clubs failed to reach agreement but FC Sion and the player did agree personal terms. As a result of the failed negotiations between the clubs, El-Hadary, who wanted to move to Europe, chose to terminate his contract with Al Ahly and join Swiss club FC Sion. Al Ahly complained to FIFA and the DRC ordered El-Hadary, together with FC Sion, to pay 900,000 Euros compensation. Further, because El-Hadary terminated his contract within the protected period, sporting sanctions were imposed on both the player and the club FC Sion in accordance with Article 17(3). A playing ban of four months was imposed on El-Hadary and FC Sion were prohibited from signing players for two transfer windows.

El-Hadary appealed the decision to CAS who decided to reduce the compensation payable to $796,500 although it upheld the DRC’s decision in respect of sporting sanctions. More importantly, CAS ruled that compensation should be assessed on the basis of “positive interest” i.e. the damages awarded should put the Claimant back to the position he would have been if the breach had not occurred. CAS therefore concentrated on calculating the player’s value together with how much it would have cost Al-Ahly to replace the player in order to fully compensate them. Hypothetically, FC Sion confirmed that they would be willing to pay $600,000 for the player, prior to him walking out of Al-Ahly, and that they would have paid the player $488,500 in wages until the end of his contract with Al-Ahly. CAS therefore calculated that Al Ahly would have had to spend $1,088,500 in order to replace the player and then deducted $292,000 from this figure, which represented the player’s wages remaining on his contract that Al Ahly no longer had to pay. The final total of $796,500 was therefore reached. This approach taken from CAS in FC Sion v Essam El-Hadary therefore accords with their approach taken in Matuzalem.

A further case involving Article 17 is that of Fenerbache Spor Kulubu v Stephen Appiah. Ghanaian footballer Stephen Appiah chose to terminate his contract with Fenerbache in 2008 against his clubs wishes. Fenerbache appealed to FIFA where the DRC ordered Appiah to pay 2.3 million Euros compensation to Fenerbache. Unsurprisingly, the player appealed to CAS who decided that damages should be assessed in the same way as in FC Sion v Essam El-Hadary. CAS therefore decided to overturn the DRC’s decision and award Fenerbache zero compensation. The reason for the dramatic decrease in the award was that Appiah argued the wages, that Fenerbache would have had to pay Appiah during the remainder of his contract, were in excess of the amount Fenerbache lost as a result of his breach i.e. the player’s value and cost of replacing him. The key to this decision was the fact that the player was injured at the time he terminated his contract meaning his value diminished as a result. 


It is apparent that these recent cases represent a clear departure from the Webster ruling due to CAS’s broader approach in calculating compensation. The cases are also significant in attempting to establish the likelihood of further player’s invoking Article 17. The trend now adopted by CAS is for compensation to be assessed in relation to the actual loss suffered by the complainant which, in turn, allows for clubs to seek recovery of a wide range of losses including cost of replacement and commercial value rather than just the residual value of the player’s contract as decided in Webster.   

Will we see a high profile case of a footballer such as Wayne Rooney invoking Article 17 and walking out of their clubs?

It certainly appears unlikely at this stage. The value of players, such as Rooney, to their clubs are likely to far outweigh the benefit they will gain from removing the player from their wage bill. This is especially considering the fact that the commercial and marketing value of player’s have increased rapidly over recent years. Further, the members of the European Clubs Association (ECA), which represent 197 of Europe’s top clubs, have apparently collectively agreed not to enforce Article 17 which signals a further nail in the Webster coffin.

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