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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
Dispute for Goals
Pedro Fida
General Information
The 29-year-old Brazilian soccer player Francesco is a worldwide star, having won several titles nationally and internationally, including the “World Best Footballer” award four years ago, due to his excellent performance on the pitch as a striker. Nowadays, Francesco plays for the renowned Premier League English football club Bromworth FC (the “Club”) to which he was transferred two years ago.
Following Francesco’s transfer, an employment contract (the “Contract”) was signed between Francesco and the Club for the duration of five soccer seasons, ending 18 months from today.
According to the Contract, it was agreed:
During his first season, the Club paid Francesco a salary of only £1.6 million instead of £2.5 million, and none of the £500,000 related to his image rights. Furthermore, the Club did not pay the amounts totalling £255,000 due by Francesco to the Brazilian tax authorities. Francesco requested payment of the remaining amounts in writing at the end of the season.
Despite several notifications sent by Francesco, the Club did not pay the remaining amounts. However, following Francesco’s fourth notification, the Club eventually paid a further amount (£400,000) for salary, not being all that was due. For this reason, Francesco sent to the Club two further notifications (regarding unpaid salary of £500,000, image rights amounting to £500,000 and taxes amounting to £255,000 = £1,255,000 in total).
The Club eventually agreed to settle with Francesco the outstanding amounts, recognizing its debt amounting to £1,255,000 and agreeing to a payment schedule of seven equal monthly instalments. This was recorded in a settlement agreement.
One year before signing with Bromworth FC, Francesco had an operation on his right knee. By the time he joined the Club he had fully recovered and had been medically certified fit to play. However, half way into his second season, he suffered a new injury to the same knee, which affected his play, and he was not fielded at all during the several weeks that took him to recover, during which time he paid his own medical costs.
Following the Club’s short recess Francesco returned from a holiday in Brazil and remained several weeks without playing. After recovering from his injury, he played a Premier League game in which he was shown a red card and sent off. Subsequently, the Club fined Francesco for this incident the amount of £100,000, payable within 30 days, after a decision rendered by the Club’s executive committee, headed by the Club’s President Mou. After that incident, the Club’s manager did not field Francesco again before his second season at the club ended and Francesco did not pay the fine.
In the meantime, Francesco sent other notifications to the Club claiming the monthly instalment amounts due from his first season — previously agreed to be settled but still unpaid. The Club, however, never answered the notifications nor paid the amounts due.
When the Club’s manager announced the composition of its first team bound for the next pre-season training camp during the summer recess, Francesco was not included in this list. On the day the team departed to the USA, Francesco was left in London with only one other player
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of the first team squad, an assistant coach (a member of the second team coaches) and the warehouse keeper of the Club. Not even a translator was provided to Francesco, who still had difficulties communicating in English. The assistant coach suggested that Francesco train with the Club’s second team, but Francesco refused. No medical staff was left in London.
When the first team returned from the USA, Mou informed Francesco that he was not included in the Club’s main tactical scheme for next season, being Francesco’s third at the Club, and instructed Francesco to train separately from the other first team players during part of the team’s daily training sessions. This decision came as a surprise to Francesco, who also learned from the media that the Club had acquired another player to play in Francesco’s usual position. Despite Mou’s decision Francesco played five games for the first team during the first weeks of his third season, and eventually trained with the first team.
During the second and third seasons Francesco was fielded in total in less than 25% of the games with the first team and the Club paid only 50% of Francesco’s salary on a monthly basis, less £100,000 set off by the Club during the third season with respect to the unpaid fine, i.e. a total of £2.4 million for two seasons. In addition, although the Club paid the total amount in connection with image rights and taxes, the entire settlement amount concerning the first season remained unpaid.
Francesco sent a final notification to the Club, this time claiming:
Two days after receiving Francesco’s notification, the Club notified Francesco that it intended to terminate the Contract for just cause upon the expiration of the following 30 days, due to Francesco’s bad performance in the games he played since his start at the Club; the fact that he played less than 25% of the Premier League matches since his arrival at the Club; as well as his knee injury, which had not completely healed and impeded his play. In light of these circumstances, the Club considered itself (i) not liable to pay any further amounts to Francesco and (ii) not liable to retain him for the remaining months of the Contract, i.e. two seasons. The settlement amount of £1,255,000 remains unpaid and, on its face, the Contract term is not due to expire until after five seasons.
It is also important to consider the Financial Fair Play Regulations issued by the Union of European Football Associations (UEFA), which stipulate, among other principles, that a club must comply with its financial obligations, especially those related to its employees, i.e. players’ salary, in order to be able to compete on a European level in certain competitions, such as the UEFA Champions League, which guarantees significant revenues and potential sponsors to the participating clubs.
The Contract and the settlement agreement each contain a dispute resolution clause which provides that all disputes arising out of, or in connection with, either of the documents shall be firstly settled through mediation and in accordance with ICC Mediation Rules. Should the mediation be unsuccessful the parties may start arbitration proceedings.
The parties have agreed that Francesco’s Agent, on behalf of Francesco, and Mou, on behalf of the Club, will meet in a neutral place in order to discuss their understanding of the situation and, hopefully, reach an agreement. Francesco’s Agent and Mou, with their lawyers, will both attend the mediation with authority to settle. Francesco’s agent is the Requesting Party.
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Confidential Information for Francesco’s Agent
Requesting Party
Following the termination notice, Francesco could not understand the reasons for such an abrupt dismissal. Francesco might have never expressed how important playing for the Club was for him, but this is something that really matters and he still feels that he owes something to the Club’s fans and that he deserves another chance. Further, after he was employed he had understood that the Club counted on him to overcome the bad sporting situation of the previous season, in which the Club was almost relegated.
Sometimes it might be difficult for people to understand, but what motivates Francesco now professionally is definitely not money. He is approaching the end of his career and what he wants is to play soccer above all, preferably in a top European team.
Following Francesco’s holiday in Brazil, he was still hoping to be able to convince the Club that he could be fielded again and succeed with the first team. Further, Francesco felt betrayed when he was informed that he would not join the pre-season training camp. In this regard, he was left alone, without any of the Club’s first team staff, doctor or translator and felt offended when invited to train with the second team, considering his vast experience and especially having won the award “World Best Footballer”.
Francesco was feeling undervalued and frustrated with the Club’s attitude towards him. The Club never apologized and instead adopted an aggressive attitude against him from the moment Francesco injured his knee. In this respect, both Francesco’s Agent and Francesco consider that the fine he was ordered to pay was abusive and arbitrary. Furthermore, Francesco fiercely disagreed with the manager’s decision to oblige him to train separately from the other players during part of the team’s daily training sessions.
The first settlement agreement reached between Francesco and the Club acknowledged that the Club recognized its debt towards him. Therefore, Francesco’s Agent now must consider whether or not to accept any offer lower than the already agreed amount. Francesco’s Agent considers that he must also recover part of the 50% of salary plus interest due from the Club related to Francesco’s second and third seasons.
If Francesco was to bring this matter to arbitration, both Agent and player are confident of obtaining an award of a significant financial sum against the Club, if your lawyers are able to prove that the breach of contract occurred without just cause — which means that the Club would also be liable to pay the amounts due under the remaining period of the Contract, i.e. two seasons. However, you are not sure whether a solution before an arbitral tribunal could satisfy all of Francesco’s interests, especially because your lawyers cannot guarantee that any dismissal by the Club would indeed be without just cause. In order to avoid this uncertainty, you and Francesco are confident that a negotiated solution through mediation could have more chances of success and would be cheaper and faster if an agreement is finally reached.
Francesco is, however, not comfortable entering into another settlement agreement with the Club which could again be breached by the Club. If a settlement is reached, you will demand appropriate guarantees from the Club concerning its obligations, i.e. a bank guarantee on which Francesco can call in the event of default in payment by the Club. This would assure the payments and fulfilment of the obligations towards Francesco, especially because in conversations with Francesco’s tax advisor, you were told that the Club is not in a very good financial situation.
In view of these uncertainties and Francesco’s professional situation, you started looking for options in other clubs for Francesco and have recently received an offer from a top Italian club to pay Francesco 50% of his current salary and 50% of his image rights (plus tax reimbursements) for a one-year contract. In any event, you will need to have Francesco’s consent for a possible transfer. You are willing to seek an amicable solution to the present conflict and are anxious to put all your efforts into discussing with Mou the possibilities and options Francesco might have, especially because the transfer window for the next season has not closed yet (there are six days remaining) and Francesco can still be transferred to another club.
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Confidential Information for Mou
Responding Party
At the time of signing the Contract, the Club was running the risk of being relegated from the English Premier League to the English Football Championship League and, therefore, it hoped that Francesco could save the Club from this fate. As things turned out, the Club was not relegated, but the “golden player” did not play well and did not perform as the fans and the Club had initially expected. The Club’s executive committee and fans are now disappointed with Francesco’s performance. The Club also realized during the second season that the financial obligations towards Francesco were too generous and that the Club would not have enough funds to pay all that was due under the full five-year Contract.
In view of the Club’s lack of interest in Francesco, it actually exchanged one of its midfielders for a player from another club to play in Francesco’s usual position.
Further, the Club is currently not in a good financial situation and might enter into bankruptcy within the next couple of years if it cannot restructure and generate significant revenue. This situation, however, has not yet become public knowledge, although rumours exist. The Club still has full control over its assets and can sign agreements, purchase and sell players and manage the Club’s day-to-day activities.
In view of the UEFA Financial Fair Play Regulations, the Club’s executive committee is putting significant pressure on Mou to settle this case and to obtain at least a new payment timetable that satisfies both parties. Without a new settlement agreement the Club could see its chance to participate in the UEFA Champions League fade away, which would mean a significant loss of revenues and potential sponsors.
The Club recognizes that the arguments for terminating Francesco’s Contract are not fully correct under the current football regulations and applicable law and the Club’s executive committee is aware of this. In order to avoid excessive legal argument before an arbitral tribunal regarding the termination of the Contract with or without just cause — which might not lead to a successful result — a negotiated settlement agreement seems to be a faster, cheaper and, thus, a more attractive option than arbitration. The Club recognizes it still owes a significant amount of money to Francesco, including the entire settlement amount that remains unpaid and half of Francesco’s salary for his second season and a proportion of his third season. However, since Francesco played less than 25% of the games during the second season and less than 25% of the third season so far, the Club’s executive committee wants Mou to reduce these amounts by whatever means possible. Mou also knows that the fine of £100,000 was completely arbitrary and was based only on the wishes of the Club’s executive committee rather than the football regulations.
Before giving notice of its intent to terminate the Contract with Francesco, the Club received an offer from the top Spanish club Real Barza FC to transfer Francesco on a loan basis for the period of two years, with an option clause to definitely transfer him to Real Barza FC at the end of the loan which was to be exercised by Real Barza FC. Under this arrangement, Francesco would earn 60% of his present net salary and image rights at the Club (plus tax reimbursement). As a consideration, the Club would be exempted from paying any salary to Francesco during the loan period and no transfer fee from Real Barza FC to the Club would be negotiated for the loan. Francesco has not been informed of this offer, but Mou, however, rejected it on behalf of the Club months ago because he thought terminating the Contract prematurely would be an easier and more financially viable solution. In any event, a possible transfer or loan agreement involving Francesco to a different club requires his express consent. The transfer window for the next season has not yet closed (there are six days remaining) and the Club contacted Real Barza FC before this mediation session and was informed that it is still interested in Francesco and is prepared to repeat its earlier offer.
Mou, however, does not know how to disclose this information to Francesco’s Agent and the mediation session could be helpful in this respect. Mou is now willing to make all efforts, on behalf of the Club’s executive committee, to solve the present dispute and try to find a reasonable solution for both parties.
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Colin J Wall
Case Analysis
This role-play involves what amounts to a divorce, whereby the relationship between the parties has deteriorated to such an extent that the best solution is for each party to go its separate ways. The question is on what terms?
This role-play might also stretch the mediator’s ability to act impartially, as reading the General Information the mediator is likely to conclude that the Club has treated Francesco poorly. While the Club has been disappointed with Francesco’s performance, caused in part by injury, and regrets entering into an employment contract that seems too favourable towards the aging footballer, it has shown Francesco little or no respect. It did not honour the first settlement agreement with Francesco, it fined Francesco an apparently arbitrary £100,000 for being sent off, snubbed Francesco when the first team went to train in the USA, left Francesco in London without a translator, obliged Francesco to train with the second team, refused to pay medical bills and has held substantial sums of money seemingly due to Francesco under his employment contract. It further appears that a driving force behind the willingness to mediate these disputes now is the fear that if the Club does not honour its financial obligations towards Francesco, it might be banned from participating in lucrative European football competitions because of the Financial Fair Play Regulations. In contrast, Francesco has shown a very high degree of patience by sending request after request for the Club to honour its obligations.
It is important for the mediator to focus on the problem and on the parties’ needs and in real mediations that is not always easy to do as mediators do, as human beings, form likes and dislikes. The mediator has to be judgemental in the mediation process as to when to use what technique so as to move the mediation towards settlement but must not be judgemental in respect of the party representatives and the problem.
In this case there are good options for the parties, as Francesco’s interests are not driven by money alone, notwithstanding the considerable sums in dispute, but to end his distinguished career by playing soccer for a top European team. What Francesco craves is to stop feeling undervalued and frustrated by putting this dispute behind him and to play high-level soccer once more. Fortunately, there are good transfer opportunities at both an Italian and a Spanish football club. The Club is facing financial difficulties and its President Mou is under instructions from the Club’s executive committee to reduce Francesco’s unpaid salary to reflect better the contribution the player has made to the Club, given he has only played in 25% of the games. By remaining neutral and uncovering the parties’ real needs, the mediator should be able to assist the parties in achieving a settlement that is satisfactory to both parties.
As an aside, this role-play raises indirectly the subject of what to do when a party such as Francesco is not competent enough to conduct the mediation in the common language used in the mediation, in this case English. Fortunately, this is not a matter that arises in this case as Francesco has authorized his agent to act on his behalf. In international mediations this is a topic which is hotly debated and which requires careful consideration.
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Greg Bond
Commentary for Training
The Value of Mediation Confidentiality
Mou and Francesco’s agent each have a transfer (or loan) offer up their sleeves that can meet everyone’s interests, if properly worked out and coupled with an agreement on outstanding payments. The parties are mediating because this transfer offer is less easy to make in the light of unsettled scores and Francesco’s grievances, which the Club recognizes to be partially justified. Transfer negotiations in the world of football take place amid great secrecy, and, as the negotiation between Mou and Francesco’s agent is highly likely to be a transfer negotiation, the forum of mediation can reinforce the need for confidentiality.
There is no time to waste if this dispute is to be solved both amicably and in everyone’s interests. There are six days before the transfer window closes. While neither Mou nor Francesco’s agent will feel comfortable putting the transfer offer on the table before their lawyers have staked out differing claims for and against payment of outstanding monies, it will be clear to everyone that continuing conflict on these matters is in no one’s interest. Perhaps neither Mou nor Francesco’s agent have as much to lose as they might fear if they openly raise with each other the transfer options each has already explored. If the other side is interested in resolving this dispute through transfer of the player, then the offer will fall on fruitful ground. If not, then the discussion can return to the disputed payments. There might be a need for caucus to discuss the best way of raising these offers, but most probably there is no risk in raising them in joint session. Trainers and students can try either or both methods, and see what the effect is.
If these offers are made, then they have the potential to help the parties move swiftly towards resolution. Francesco’s agent will not want to openly concede to Mou that the money is not his principal’s primary interest, but knowing this gives the agent the freedom to talk about other options as well as about money, perhaps ways of helping Francesco leave the Club that ensure that both player and club save face. There must be some publicity measures than can help here. Confidentiality is one of the keys to this process. If the two sides can agree on a transfer, then Francesco’s consent is needed, and the best of the two offers (if both are raised) must be considered, while the Italian or Spanish club making the offer will have to finally commit and will most probably make this commitment subject to Francesco passing a medical examination.
Things move very fast in the world of football, with many transfers completed at the last moment before the transfer window deadline. The two sides would have to leave this mediation with a provisional agreement, then Francesco’s agent would need to negotiate a final deal with Francesco and either of the two clubs interested in him. Until the moment that deal is made, confidentiality will remain paramount. It may also be wise for the parties to agree to be able to meet again in a couple of days’ time with the same mediator, so as to be sure that any acceptance of a transfer by Francesco is firmly linked to a finalized settlement agreement on the other outstanding financial issues. Whatever they agree, if they are working on the basis that the best solution is for Francesco to agree to a transfer, then the fact that they have worked this out under the protection of a signed agreement to mediate guaranteeing confidentiality can only be beneficial to the process.
This role-play offers students an opportunity to reflect on the value of confidentiality in mediation, and also to be wary of settling prematurely. Settlement authority in this case is subject to Francesco’s approval.
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1 Francesco had only been paid at a 50% salary level during the third season and so was still owed £520,833.33 at the time of the final notification and it was anticipated that he would still be paid at a 50% rate for the remainder of the third season, giving an anticipated further shortfall of £729,166.67, totalling £1,250,000.