Initial considerations from the latest Adrian Mutu compensation ruling

FIFA’s Dispute Resolution Chamber (“DRC”) has recently held that Juventus and Livorno are jointly and severally liable to pay Chelsea £14.5m plus interest in compensation following Adrian Mutu’s breach of contract without just cause back in 2004.

Readers will recall that Chelsea terminated Mutu's contract in October 2004 after he tested positive for cocaine. Chelsea treated Mutu's actions as a repudiatory breach of contract and claimed compensation in an attempt to recover part of the £15.8m it initially spent in acquiring the player from Parma. The procedural history has been long and protracted as the case has come before the Court of Arbitration of Sport ("CAS") on three separate occasions. CAS initially held that Mutu breached his contract with Chelsea without just cause in December 2005 (CAS 2005/A/876 Mutu v Chelsea Football Club) and so Chelsea applied to FIFA's DRC for a compensation award. The DRC initially decided that it did not have jurisdiction to make a compensation award however CAS annulled that decision in May 2007 (CAS 2006/A/1192 Chelsea Football Club Limited v Adrian Mutu). The case was referred back to the DRC and in May 2008 they ordered Mutu to compensate Chelsea in the sum of £14.5m. Mutu subsequently appealed the decision to CAS who upheld the DRC's decision in July 2009 (CAS 2008/A/1644 Adrian Mutu v Chelsea Football Club Limited).

Mutu was banned by the Football Association for seven months in November 2004, which was extended by FIFA's Disciplinary Committee to have worldwide effect. Despite being banned, Mutu signed a five year contract with Juventus in January 2005 however they were unable to register Mutu directly due to restrictions on the number of non-EU players that Serie A clubs can sign from abroad each season. Juventus had already signed their permitted number of non-EU players from abroad at the time Mutu signed with Juventus; Mutu was classified as a non-EU player because Romania did not join the EU until 2007. However, there is no restriction imposed on the number of non-EU players signed from other Italian clubs so, in order to register Mutu, Juventus agreed with Livorno that Mutu would initially be registered with them and then subsequently transferred to Juventus thus making the transfer domestic and mean that the quota restriction did not apply. Mutu eventually made his debut for Juventus in May 2005 once his ban came to an end. Chelsea struggled to enforce the compensation award in their favour against Mutu hence why they sought an award against Juventus and Livorno.

Basis

The decision by the DRC to rule that Juventus and Livorno are jointly and severally liable for the compensation payment has surprised some who feel the sanction is severe. However, Article 17.2 (formerly Article 22) of FIFA's Regulations on the Status and Transfer of Players confirms that if a player is required to pay compensation for terminating a contract without just cause, the player and "his new club shall be jointly and severally liable for its payment" and the decision is in line with previous DRC decisions and CAS jurisprudence where the player's new club has been found jointly and severally liable for the compensation payment "regardless of any involvement or inducement of the player to breach his contract" (See Paragraph 189 of CAS 2010/A/2147 Udinese Calcio S.p.A. v. Morgan de Sanctis & Sevilla FC SAD). Juventus, and to a certain extent, Livorno should, therefore, have been aware of the potential risk of being jointly liable for any compensation payment at the time they came to the arrangement regarding the registration of Mutu and exercised caution, particularly as Chelsea had indicated their intention to seek compensation for Mutu's breach of contract. Mutu's agent, Ioan Becali, clearly agrees after he declared following the decision that "Juventus are to blame".

Considerations

Article 17.2 was no doubt the basis of the DRC's ruling however the written decision is eagerly awaited in order to see how the DRC addressed certain issues. An obvious prejudice that Juventus and Livorno suffered was that they were not parties to the previous CAS litigation and so were unable to challenge the compensation award along with Mutu. The DRC, however, must have taken the view that this did not affect Juventus' and Livorno's joint and several liability under Article 17.2. Another interesting issue is the timing of Mutu's transfer to Juventus. Juventus signed Mutu within three months of Chelsea terminating Mutu's contract and whilst the player was still under a worldwide ban, presumably to beat other clubs to his signature. Mutu's agent claimed following the decision that "Juventus should have waited for the seven month ban to expire as discussions were only allowed to begin after that period." This suggests that the DRC found that if Juventus had waited until the ban had expired, then they would not have found Juventus and Livorno jointly and severally liable as the risk for a new club could not have gone on indefinitely. Also, it is noteworthy that both Juventus and Livorno were considered to be Mutu's new club as a result of the convenient arrangement between the clubs. However, despite technically being the first club to register Mutu following his departure from Chelsea, Livorno will undoubtedly feel aggrieved with the decision as Mutu never actually played a game for them and so they gained very little from assisting Juventus save for the promise of having young players on loan from Juventus in the future.

It will be fascinating to see how the DRC dealt with these issues and the parties' respective arguments once the decision is published. In the meantime, the case will now proceed to CAS for the fourth time as both Juventus and Livorno have, unsurprisingly, filed separate appeals. It will, therefore, also be intriguing to see if CAS departs from the DRC's decision.