Thursday, 2 August 2012

Mutu v Chelsea – Three Years After the “Remarkable” CAS Decision

This is a special guest post by Romanian attorney Smaranda Miron, LL.M, who practices at
Freshfields Bruckhaus Deringer LLP in Frankfurt, Germany, on the Court of Arbitration for Sport ordering Romanian football player Adrian Mutu to pay 17 million to Chelsea.

Mutu v Chelsea – Three Years After the “Remarkable” CAS Decision

It was back in July 2003 when Roman Abramovich commenced the £140,000,000 takeover of Chelsea FC plc and then proceeded to create a star-studded team, with one aim: bringing the Stamford Bridge club among the world’s football elite.

In August 2003, Romanian football player Adrian Mutu was transferred from AC Parma to Chelsea for €22,500,000 the highest amount ever paid for the transfer of a Romanian athlete. Mutu’s arrival at Chelsea was highly acclaimed: compared by some with Gianfranco Zola, the “brilliant” Mutu received Chelsea's flattering number°7 jersey. At that time, Romania’s “golden team” of football players was retiring and, as they stepped out of the field, they pointed at Mutu as being the new leader capable of securing future victories.

Under his almost five years contract with Chelsea, Mutu was to be paid an annual gross salary of £2,350,000 a once only signing fee of £330,000, the usual bonuses and incentives Chelsea paid to its players, as well as a special goal bonus. Mutu's agent was to receive €500,000. Things started relatively good for the Romanian striker, though for some reason he failed be as prolific as he had been in Parma. Up until 1°October 2004, he appeared in 27 games and found the net 6 times.

But on 1 October 2004, Mutu's dream began to collapse: a targeted drug test was held on him by the English Football Association. On 11 October 2004, Mutu was found positive for cocaine. A few weeks later, on 28 October 2004, Chelsea terminated Mutu's contract with immediate effect. He also received a seven-months worldwide ban. What followed was an endless battle, both in the media and in the courts, between Mutu and Chelsea: after almost eight years and numerous proceedings in England, Switzerland and the US, they are still waiting: Chelsea for its money, and Mutu for an almost impossible reversal of unfavourable rulings.

The Court of Arbitration for Sport (CAS) in Lausanne has dealt with no less than three matters between Mutu and Chelsea. Mutu lost every single one of them.

The first CAS award was rendered in 2005. Previously, the Football Association Premier League ruled that Mutu’s admitted use of cocaine constituted a unilateral breach of contract without just cause. He appealed the decision before CAS, and his appeal was dismissed.

As a result, in 2006, Chelsea requested the FIFA Dispute Resolution Chamber (DRC) to impose the adequate sporting sanctions on Mutu and/or to order him to pay compensation for breach of contract. The DRC declined jurisdiction, and Chelsea brought the case before CAS. In this second CAS award, the club’s appeal was upheld, CAS said that the DRC wrongly declined jurisdiction and soon afterwards Chelsea re-applied for compensation before the DRC.

On 13 August 2008, the DRC decided that Mutu was to pay Chelsea € 17,173,990 for breach of his employment contract, which comprised the unamortised portions of the transfer fee paid by Chelsea to Parma, the sign-on fee and the agent's fee. What is more, the DRC noted that, due to specificity of sport, additional punitive measures can be imposed on athletes, so that compensation can sometimes be even higher than normally calculated under the applicable rules. At that time, it was the highest fine ever imposed by FIFA.

Mutu then filed a third case before CAS, and asked them to annul the DRC decision.

The CAS Panel considered that the quantification of damages by the DRC (based on unamortised acquisition costs) was consistent with the applicable provisions, namely English law and the 2001 FIFA on the Status and Transfer of Players. However, the Panel revised the calculations made by the DRC and took into account additional items of acquisition costs: a solidarity contribution, a transfer levy and the club agents’ fees. It reached an amount of €19,113,688 and £371,444, higher than the one put forward by the DRC. But in order not to go ultra petita, the CAS Panel could only confirm the damages awarded by the DRC.

Furthermore, all Mutu’s arguments were rejected:

He argued that he had been discriminated on the basis of nationality (which is forbidden in the European internal market), since the legal framework applicable to English football players transferred at a domestic level was different than the one applicable to foreign players performing in England. The CAS Panel disagreed and said that it was not the nationality of the player that triggered the application of one set of rules or the other, but whether the player was moving between clubs belonging to different national football associations or not.

Contrary to Mutu’s submissions, the Panel considered that English Football Association’s competence to rule on the measure of damages and the fashion in which the damages were calculated were not in breach of European legislation prohibiting anti-competitive practices.

Mutu’s argument that such a way of calculating compensation would act as a deterrent to players wishing to perform in other countries and would thus be in breach of the European rules on freedom of movement was also unsuccessful. The Panel stated that the obligation to pay compensation can never be seen as an impairment of the freedom of movement.

Mutu challenged the third CAS award before the Swiss Federal Tribunal (Schweizerische Bundesgericht), but the review system before the Swiss Federal Tribunal was of little comfort for the player. Mutu argued that the method of calculating damages by the DRC (upheld by CAS) was breaching the Swiss public policy. On 14 June 2010, the Swiss Federal Tribunal dismissed Mutu’s case as unfounded.

On 8 November 2010, Chelsea filed a petition before the US District Court Southern District of Florida (Miami Division) and requested them to recognize and enforce the third CAS award against Mutu under the New York Convention. According to Chelsea, Mutu was owning various residential property in Florida, including property in Miami-Dade county. In his defence, Mutu argued that the enforcement of the CAS award would have been contrary to public policy because it relied on a contractual penalty clause. He asked the court to deny recognition and enforcement of the CAS award under article 5(2)(b) of the New York Convention.

On 13 February 2012 the US court issued recognizing and enforcing the CAS award. It ruled that, even if one were to find the relevant provision of the 2001 Regulations for the Status and Transfer of Players as being a penalty clause, the CAS award was properly and independently decided pursuant to English law. However, the review of the US court was limited; as the judge put it, even if an award was unsupported, foolish and poorly reasoned, as long as it does not violate public policy (i.e., basic notions of morality and justice), it cannot be subject to court interference.

On 19 March 2012 Mutu appealed the Southern District of Florida order before the US Court of Appeals, 11th Circuit. A decision is pending.

While waiting for the 11th Circuit decision, a few issues still linger:

Athletes are not machines. Nor are – or can – they be perfect. Football players remain people, and no matter how talented and disciplined they are, things can go awry at any time. When Mutu was taking cocaine, he was also going through a highly publicised divorce and had regular conflicts with coach Mourinho. Mutu had never offered any guarantee that the transfer sum paid by Chelsea was indeed worth paying. He was not involved in the negotiations and had one way only to influence the amount at stake: the better he played, the higher the transfer sum would have been. Therefore, when a contract between two rich almighty clubs is concluded, should the player bear all the risks?

Is the legal framework applicable to football players truly running against European law, as Mutu argued before CAS? The CAS Panel said no. However, at no point of the dispute could Mutu have had his case heard before a national court of a Member State which, in turn, could have referred the case to the Court of Justice of the European Union for a preliminary ruling and shed light on this matter. Shouldn’t football players, European citizens rendering services in a Member State of the European Union, be given some kind of remedy before the European courts in addition to the CAS system?

By all means, this is an atypical anti-doping case: cocaine is everything but a sports performance enhancing substance. In addition, Mutu was not cocaine addicted. He needed no medical support to recover from use of cocaine and, once he returned to Italy, he continued his series of startling performances. For Fiorentina, he scored 54 goals in 112 appearances and was named the player of the season in Il Calcio in 2006/2007. Anyway, he still has to pay an incredible amount to Chelsea, amount that –as press reports say– will most likely plunge him into bankruptcy. Needless to say, he never made this money from football. Indeed, FIFA and CAS had taught him and the whole sports world a tough lesson. It remains to be seen how much was achieved with that. It is beyond contestation that anti-drug messages are positive. But one can only wonder if payment of roughly €17,000,000 and endangering an athlete’s career is not too big a price to pay for a message which, at the end of the day, each of us can also read on street billboards.

Note: all the opinions and errors in the article are Smaranda Miron's and the article does not express the views of Miron's firm.

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