SFT Judgment 4A_98/2017 of 20 July 2017 – Fédération X. v. Z. Sàrl

The Issue
Does a decision on jurisdiction qualify as an “Interlocutory Award on Jurisdiction” if it does not address all the issues related to jurisdiction and leaves them to be decided with the final award?

The Facts

The limited liability company Z filed an arbitration request based on Art. 26 para. 4 of the Energy Treaty of 17 December 1994 (TCE), against Federation X to recover USD 13 billion for damages arising out of alleged unlawful expropriation of investments made by Federation X. Company Z filed a request for arbitration before the Permanent Court of Arbitration (PCA) under the UNCITRAL Arbitration Rules. As per the arbitration agreement, Geneva, Switzerland was the seat of the arbitration and English  was the language of the procedure.

Federation X objected to jurisdiction by invoking various grounds (among others: it never ratified the TCE and that the loans from Z to another company could be considered as investments in the sense of Art. 1 (6) TCE; the scope of the TCE excluded the fiscal nature of the dispute; Z is a company that does not pursue substantive commercial activities in country Y so that the Federation X could refuse the benefit of the third part of the treaty based on article 17 TCE; the investments were illegal and were therefore not protected by the TCE).

The arbitral tribunal issued an order of procedure in which it first examined some of the arguments on the lack of jurisdiction and eventually rendered an act entitled “Interlocutory Award on Jurisdiction”. Through this decision, it dismissed three of the aforementioned grounds while two of them had to be dealt together with the merits of the case.

The Swiss Federal Tribunal judgment

Meaning of an interlocutory award on jurisdiction

The Federal Tribunal repeated that the admissibility of the appeal depends on the content of the decision and not the name given to it by the arbitral tribunal (4A_98/2017 at 2.1. See also ATF 142 III 284 at 1.1.1; 4A_222/2015, at 3.1.1). Accordingly, an arbitral tribunal renders an interlocutory award on jurisdiction that is appealable before the Swiss Federal Tribunal when it dismisses an objection to jurisdiction, irrespective of the name given to this decision. As a general rule, Article 186 para. 3 PILA provides that the arbitral tribunal can issue an interlocutory decision on jurisdiction. However, the arbitral tribunal might rule otherwise if it sees that the objection to jurisdiction is too closely linked to the facts of the case to be decided separately (4A_98/2017 at 2.2; see also ATF 121 III 495 6d p. 503).

Therefore, the essential characteristic of all appealable decisions rendered by an arbitral tribunal is that they decide on the question of jurisdiction in a final manner (4A_98/2017 at 3.2). In this respect, and even though it is admitted that reasons of procedural economy would justify the arbitral tribunal to rule on its own jurisdiction first (and terminate the procedure in the event of no jurisdiction), this may have the counterpart of delays of many immediate appeals (4A_98/2017 at 3.2.1).

No interlocutory award on jurisdiction if some issues are left to be decided with the final award

In this commercial (i.e., not CAS-related) judgment, the Federal Tribunal gave the admissibility conditions of an appeal based on jurisdiction (Art. 190 (2) (b) PILA) by examining the text of the provision itself: the right to file an appeal to the Federal Tribunal is based on the existence of a decision in which the arbitral tribunal expresses itself on several issues related to jurisdiction, but also declares itself “competent” or “incompetent”.

In this respect, if a tribunal only deals with some of the issues, referring the others to a later stage of the proceedings, it does not render a decision – positive or negative. In the particular case the arbitral tribunal ruled (in a final and binding manner) on three out of the five grounds by the appellant regarding lack of jurisdiction, and left the other two grounds open to be dealt with on the merits of the case.

The Takeaway

It is a general rule under the Swiss PILA that, as soon as the arbitral tribunal issues a binding award on its own jurisdiction, the parties wishing to oppose to it have to file an appeal before the Swiss Federal Tribunal (otherwise they lose their right to do so at a later stage).

This is an interesting judgment to the extent that it analyzes the conditions for an interim award and an interlocutory award on jurisdiction. In this respect, interlocutory awards on jurisdiction do not qualify as such (irrespective of their name) unless they deal with all the issues related to jurisdiction. This is however still very confusing for the parties, who, in case of doubt, should attack the interim / interlocutory award directly. They should do so even at a high risk of having their appeal rejected as inadmissible – because otherwise they risk losing their right to appeal based on the “Einlassung” doctrine (see also a similar case related to CAS jurisdiction, 4A_222/2015, X v. USADA & WADA, of 28 January 2016).

The Issue 

Does the Termination Order for non-timely payment of the CAS advance of costs under Article R64 CAS Code constitute “excessive formalism” and therefore a violation of the procedural public policy under Article 190 (2) (e) Swiss PILA?

The Facts

On August 11, 2016, the World Anti-Doping Agency (WADA) filed a statement of appeal to the CAS against an agreement, entitled “Acceptance of Sanction”, between US gymnast X (the Athlete) and the United States Anti-Doping Agency (USADA) (jointly referred to as the Respondents). After paying the Court Office Fee according to Art. R48 and R64.1 of the CAS Code, the arbitration procedure started with CAS reference 2016 / A / 4743 WADA v. X & USADA. However, after the Respondents denied to pay their share of the advance of costs (CHF 18’000), CAS invited WADA to pay both parties’ shares under the pertinent provisions of Art. R64 CAS Code.

Under this provision and Art. R48 CAS Code, the parties were reminded that the advance of costs must be paid within a certain deadline, failing which the appeal would be considered to be withdrawn and the proceedings would be terminated. After WADA paid it’s half of the fees (i.e., CHF 18’000 of the total CHF 36’000), and following an exchange of correspondence in which WADA’s Counsel brought forward a clerical mistake for the non-payment of the full amount, the CAS Court Office terminated the proceedings. The procedure was officially terminated through a termination order by the CAS Appeals Division President.

WADA subsequently filed an appeal to the Swiss Federal Tribunal alleging a violation of its right to be heard for « excessive formalism » (Art. 190 (2) (d) PILA) and violation of public policy (Art. 190 (2) (e) PILA.

The Federal Tribunal judgment

a) Admissibility of an Appeal against a CAS Procedural Order

The Federal Tribunal reiterated that the appeal is admissible against an award (final, partial, preliminary or interlocutory) (at 2.3). A simple procedural order is in principle not subject to appeal to the extent that it can be modified in the course of the proceedings (4A_600 / 2008 of 20 February 2009, at 2.3). The same applies to an order on provisional measures under Art. 183 PILA (ATF 136 III 200 at 2.3). However, and since the name given to a contested act is not decisive (ATF 142 III 284 recital 1.1.1), a Termination Order would necessarily put an end to the arbitration and qualifies as an award appealable to the Federal Tribunal. Indeed, by failing to pay the advance of costs, Art. R64.2 of the CAS Code applies and the unavoidable consequence is the “withdrawal” of the appeal. Under these circumstances, the appeal was found to be admissible.

b) Violation of the Appellant’s Right to be Heard

The Appellant (WADA) principally invoked a violation of its right to be heard before the CAS proceedings because the CAS failed to examine an essential argument raised by it, namely, whether strict application of the relevant provision was justified in light of the circumstances of the case. Under Art. R64.2 CAS Code, in the event of nonpayment of the full advance of costs within the time limit set by the CAS, the appeal is deemed to be withdrawn and the CAS terminates the arbitration. The Federal Tribunal held that the interpretation and application of this provision by the CAS Division President fell outside the scope of the Federal Tribunal’s review and an incorrect or even arbitrary application of an arbitration rule would not amount to violation of public policy (ATF 126 III 249, at 3b) (4A_692/2016, at 5.2).

c) Violation of Procedural Public Policy – Excessive Formalism

The Federal Tribunal equally dismissed the allegation of excessive formalism of the CAS Division President (at 6). Excessive formalism falls within the violation of (procedural) public policy of Art. 190 (2) (e) PILA and has been examined by the Federal Tribunal on various occasions (4A_690 / 2016 of 9 February 2017 at 4.2; 4A_600 / 2008 of 20 February 2009, at 5). Under Swiss jurisprudence, excessive formalism is a particular aspect of the denial of justice prohibited by Art. 29 (1) Cst. (ATF 142 I 10, at 2.4.2). Formalism is considered to be excessive when the strict application of the rules is not justified by an interest worthy of protection and unsustainably complicates the realization of substantive law or restricts access to courts (at 6.2) (ATF 130 V 177, 5.4.1, p.183, 128 II 139, at 2a, pp. 142, 127 I 31).

The jurisprudence of the Federal Tribunal has shown that the termination of the proceedings for failure to pay an advance of costs does not constitute excessive formalism nor a denial of justice, provided that the parties have been notified of the amount to be paid, the time limit for payment and the consequences of the non-observance of that time-limit (ATF 133 V 402 at 3.3 pp. 405, 104 Ia 105 at 5 pp. 112, 96 I 521 4 pp. 523).

By citing examples from the Swiss jurisprudence, the Federal Tribunal showed that inadmissibility for non- payment of the advance of costs does not lead to excessive formalism even in case of an almost complete partial payment (93%) of the required advance of costs (2D_45 / 2012 of 10 September 2012 at 5.2). There have been similar cases before the CAS (also related to the procedural defect of sending the statement of appeal by fax, 4A_690/2016 at 4.2). The non-payment of the advance of costs in a CAS procedure was also brought before the CAS some years ago and the Federal Tribunal reached the same conclusion (4A_600/2008, at 5.2.2) (4A_692/2016, at 6.2).

The Takeaway

In these proceedings, the Appellant (WADA) unsuccessfully argued that its case was distinguishable from the prior cases where similar situations have been dealt with by teh Swiss Federal Tribunal. The latter reiterated its definition of excessive formalism and brought together numerous examples from cantonal and federal case law in order to conclude and confirm – once again – that termination of the CAS proceedings due to the not timely payment of the advance of costs does not amount to excessive formalism. This is true particularly if a) the amount and the payment deadline were clearly stated at the outset of the procedure and b) the consequences of the non-payment were also clear.

Other factors that weigh against the person / entity alleging excessive formalism in these cases include a) the previous experience /status of the person/ entity (in the present case, WADA, the widely known body regulating doping at world level, had brought numerous similar cases before CAS and was therefore familiar with the payment conditions) and b) the fact that such person / entity benefits from professional legal advice (at 4A_692/2016, at 6.3).

Exclusive nature of a player’s agent contract / diregard of FIFA regulations not sufficient (as such) to establish violation of public policy

SFT 4A_668/2016 of 24 July 2017

The Issue

Before the CAS: Does anyone other than an exclusive representative have standing to enforce an agency contract under FIFA Rules and Swiss law? Exclusive nature of a player’s agent contract. Before the SFT: Disregard of FIFA regulations not sufficient (as such) to establish violation of substantive public policy

The Facts

FIFA Player X wished to go on a loan to another team. His exclusive representative, B contacted the “Sub-Agent” Z who had links to various clubs, including Club C. All three (X, B, and Z) signed a contract in December 2014 (“the First Contract”), according to which B assigned Z as a “Sub-Agent” for a specific duration in order to negotiate the conditions for the loan of the player to the Club C. Both B and Z would jointly receive 10% of the total income of the player for the entire duration of the contract.

After B was paid for his services, Player X accepted to go on a loan to Club C. Shortly afterwards, Player X signed a second agreement with Z in 2015 (Agreement for payment of player’s agent commission, “the Second Contract”), whereby Player X committed to pay Z, a first payment of 37’500 euros (the first payment would be paid by the Club C on behalf of the Player) and a second payment of the same amount four months later, failing which a penalty clause was foreseen (10% of the unpaid fee). The Second Contract also included an arbitral clause in favour of the Court of Arbitration for Sport (CAS) in Lausanne.

The Court of Arbitration for Sport Proceedings

The second payment of 37’500 euros to Z remained unpaid and Z filed an appeal against the Player based on the Second Contract to the CAS. The Sole Arbitrator who was appointed in this case wished to hold a hearing but Player X objected to it for financial reasons. The CAS Secretariat confirmed the holding of a hearing and that Player X could attend via conference call.

In summary, the Arbitrator applied the 2008 FIFA Players’ Agents Regulations and Swiss law, subsidiarily,  since the FIFA Regulations for Working with Intermediaries were not yet applicable (ratione temporis). The main question was the validity of the Second Contract and its compatibility with the First Contract between the Player, his exclusive representative B and the sub-agent Z. The Arbitrator applied Swiss law (principle of contractual freedom, Art. 19 CO). Accordingly, he found that the parties were free to negotiate the modalities of the calculation of the commission in a second contract and the Player was personally liable for the payment of the second part to the Sub-Agent Z.

As a consequence, the Sole Arbitrator upheld the claim and ordered X to pay 37’500 euros, in addition to the penalty of 3’750 euros and 5% interest.

The appeal to the Swiss Federal Tribunal

I. Violation of the parties’ right to be heard (Art. 190 para. 2 d PILA)

Player X subsequently filed a motion to set aside the CAS Award to the Swiss Federal Tribunal, in which he alleged a violation of the equality of the parties by the arbitrator: he claimed that his lawyer ceased his mandate just 2 days before the hearing and it was convened that his exclusive representative would assist the hearing. However, representative B had a personal interest in the outcome of this case, which opposed to the Player’s (B had an interest in Player X losing the case so that Player X would be solely liable for the payment to Z). The Swiss Federal Tribunal (SFT) found that the allegations made by Player X were neither supported by additional evidence nor were they consistent with the facts confirmed by the arbitrator in the arbitral award: these facts bind the SFT (at 3.2.2).

Nothing from the file could establish that the Panel did not respect the equality of the parties or that it deprived the Appellant of the possibility to express itself. Player X’s lawyer was still in charge of the case when he renounced his right to participate—even through a video conference—in the hearing or to ask for legal aid (see also SFT 4A_690/2016 of 9 February 2017; at 5.1). Moreover, Player X waited until the final award was rendered in order to attack the latter before the SFT invoking grounds of procedural fairness.

II. Violation of substantive public policy (Art. 190 para. 2 e PILA)

Player X also alleged a violation of substantive public policy, by not applying the FIFA Regulations for Working with Intermediaries and by ignoring the exclusive nature of the first contract between the parties (which, he alleged, would not allow the conclusion of the second parallel contract under Art. 20 Swiss Code of Obligations (CO). Here again, the SFT held that the simple fact of disregarding a provision of the FIFA Regulations does not qualify as a violation of substantive public policy.

More specifically, the SFT drew an analogy to a violation of Article 27 CO from the Matuzalem case (ATF 138 III; 322 at 4.3.2), which alone does not violate public policy, unless it is of a certain gravity and the violation concerns a fundamental right: a contractual restriction of the economic freedom is not considered as excessive (under Art. 27 CO) unless the other party is deprived of its economic freedom to a point that its economic existence is endangered. In this respect, a commission agreement obliging a player of a good reputation to pay the specific amount for services rendered by an agent was not excessive in the sense of Article 190 para. 2 e PILA.

Most importantly, however, the SFT reiterated that the application by the Panel of the applicable rules and the case law on the interpretation of contracts is outside of its scope of review (at 4.2).

Player X further alleged a violation of public policy for disregard of the strict prohibition of the double mandate, which consists in prohibiting an agent to intervene for both the club and the player (at 4.3.1-2). Also, according to the Player, the Panel reversed the burden of proof by failing to ask Z to prove that the basis for the payment of the first part by the Club was the authorization by the Player (under Article 19 para. 4 of the FIFA Players’ Agents Regulations) and not a contractual relationship between Z and Club C. The SFT held that this was not proven by the appellant, and the reversal of the burden of proof could not qualify as violating public policy under article 190 para. 2 lit. e PILA.

The Takeaway

This was a low-value dispute between a professional football player and his (second) agent, about the validity of a second agreement for the payment of a sub-agent’s commission prior to the adoption of the FIFA Regulations on working with Intermediaries. The grounds invoked before the SFT were the violation of the equality of the parties during the CAS proceedings and the violation of public policy, among others for disregarding the exclusive nature of the parties’ agent agreement and therefore violation of Article 20 Swiss CO.

The SFT swiftly dismissed all claims. This is not a groundbreaking judgment but it gave an opportunity to the SFT to reiterate some of its basic principles that had already highlighted in some of its previous CAS-related judgments (e.g., Matuzalem, ATF 138 III 322 at 4.3.2; Kovago 4A_730/2012 at 3.3.2; Diakhaté, 4A_690/2016 at 5.1; Mutu, 4A_458/2009 at 4.4.3.2):

(1) Violation of procedural fairness must be invoked in a timely manner; (2) all procedural violations must be sufficiently substantiated; (3) the facts confirmed in the arbitral award bind the SFT; (4) a person invoking financial difficulties may request legal aid from the CAS Legal Aid Fund; (5) the reversal of the burden of proof does not violate (procedural) public policy; (6) the sole fact of disregarding the FIFA Regulations does not, as such, violate (substantive) public policy; and (7) contractual restrictions of economic freedom must be excessive in order to violate public policy.

SFT Judgment 4A_384/2017 – X. v. Federation A. & International Athletics Federation (IAAF) (doping)

Athlete X. v. Federation A. & International Association of Athletics Federation (IAAF) (doping) – The Issue

The Facts

The first-instance decision to suspend Athlete X

The case involved an international-level middle-distance runner (the Athlete) whose subsequent antidoping controls showed the highly likely use of a prohibited substance or method. Following a provisional suspension in April 2016, the Athlete was suspended for four years. The decision with grounds (that was part of the minutes of the meeting of the Federation’s Disciplinary Commission) was communicated to the Athlete in June 2016.

The Athlete’s Email to the CAS and the Statement of Appeal

In August 2016, the Athlete sent an email to his Federation, to the IAAF, to the World Anti-Doping Agency (WADA) and to the Court of Arbitration for Sport (CAS) whereby he “contested the decision” and “lodged an appeal against the decision”, attaching a letter with explanations. After not receiving an answer to his email and the attached explanations, the Athlete subsequently addressed, in January 2017, a new collective email sent to the same recipients. Shortly afterwards, the CAS Secretariat sent a message to the Athlete holding that it could not initiate an arbitration procedure based on this document, which did not fulfil the conditions for an appeal to the CAS.

Finally, on March 21, 2017, the Athlete filed a statement of appeal to the CAS along with a request for provisional measures, following which the CAS initiated the arbitration procedure. All other parties involved requested the termination of the procedure since the appeal was clearly filed late, in accordance with Art. R49 of the CAS Code (which provides for the time limits to file an appeal with the CAS).

The Termination Order issued by the CAS Division President

Following the above, the President of the Appeals Division of the CAS, based on its power to decide of Art. R49, issued a termination order holding that the appeal was inadmissible. In summary, the President concluded that, under Rule 42.15 of the IAAF Rules, the deadline for appeal to the CAS was 45 days from the day after the reception of the decision under appeal. In the present case, the time limit to appeal had started to run on July 1, 2016, which made the appeal filed on March 21, 2017 more than seven months late and therefore inadmissible.

The Athlete subsequently filed an appeal to the Swiss Federal Tribunal, requesting the annulment of the termination order and the granting of legal aid for the setting aside proceedings.

Appeal to the Swiss Federal Tribunal against an “award” – CAS Termination Order as a “challengeable” decision to the Federal Tribunal

The Federal Tribunal proceeded to a detailed analysis as to what constitutes a challengeable decision to the Swiss Federal Tribunal. Even though Art. 77 (1) (a) LTF (Federal Tribunal Law) refers to an “award” (final, partial, preliminary or interlocutory), it is possible to file an appeal to the Federal Tribunal against an order, to the extent that such order cannot be modified or repealed during the procedure.

Furthermore, the challengeable act does not need to derive from the Panel but can also be issued by the President of an arbitral Division of CAS, as was the case here.   

More specifically, the Termination Order in this case was not a simple procedural order possible to be modified at a later stage of the proceedings but a decision on inadmissibility based on Art. R49 of the CAS Code. Additionally, the Athlete was affected by the decision under appeal, having an interest which is personal, current and worthy of protection (Art. 76 (1) LTF).

The Federal Tribunal Judgment

Violation of the principle “ne infra petita”

In his first argument, the Athlete alleged that the President omitted to express herself on one of his claims (Art. 190 (2) c Swiss Private International Law Act, PILA). More specifically, the CAS Division President dealt with the admissibility of the case only without addressing the other claims that the Athlete raised (that is, the disregard of the ADAMS Rules in the contested decision). The Federal Tribunal dismissed this argument holding that Art. 190 (2) (c) PILA does not include a plea that the arbitral tribunal omitted to decide on an important question for the outcome of the dispute (at 3.2).

Incompatibility of the CAS Award with substantive public policy

Non- respect of the Athlete’s private life & protection of his personal data

The second argument of the Athlete related to the violation of substantive public policy (at 4.2.1). The Athlete contended that the CAS Division President violated his right of respect of his private life and the protection of his personal data. It allegedly did so by validating the use of a private electronic messaging system for the notification of his disciplinary decision. ¹ 

Again, the Federal Tribunal dismissed this argument for lack of sufficient reasoning but also because it is not possible to invoke a direct violation of the rules included in the European Convention of Human Rights (ECHR) or the Swiss Federal Constitution. This is so even if it is possible to invoke the principles deriving from these rules for a violation of Art. 190 (2) (e) PILA.

Violation of a party’s defense rights and its right to a fair trial

In his third argument, the Athlete asserted violation of his fundamental defense rights and his right to a fair trial: the CAS Division President declared his appeal late without having established in a legally acceptable manner the exact moment of reception of the disciplinary decision by the Athlete (at 4.2.2). The Federal Tribunal also dismissed this argument since the Division President had fixed the moment of reception of the decision under appeal on June 30, 2016 and this was binding upon the Federal Tribunal.

A “double degree of jurisdiction” does not emanate from the procedural public policy

Another argument that the Athlete raised was that, by declaring his appeal inadmissible, the CAS violated his “right to a second level of jurisdiction and the right to a fair trial”. This is an argument that parties have repeatedly brought before the Federal Tribunal and the latter has dismissed. In fact, and in accordance with persistent jurisprudence of the Federal Court, the right to a double degree of jurisdiction does not emanate from the procedural public policy in the meaning of Art. 190 (2) (e) PILA. What is more, the Appellant’s alleged good faith could not remedy the non-respect of the time limit to appeal (at 4.2.3).

“Leçon de vie”: importance of the strict respect of the provisions on the time limits to appeal

Ultimately, the Federal Tribunal stressed the importance of the procedural conditions for the legal remedies. The latter are necessary in order to ensure that the proceedings are conducted according to the principle of equal treatment. In this respect, and in order to preserve legal certainty, it is important to ensure a strict respect of the provisions related to the time limits to appeal.

Request for legal aid for the setting aside proceedings before the Swiss Federal Tribunal

The Athlete equally requested legal aid for the setting aside proceedings before the Federal Tribunal (based on Art. 64 (1) LTF). The Federal Tribunal reiterated the cumulative criteria of this provision. One of these criteria is that the appeal does not lack chances of success. The Federal Tribunal dismissed the request because the appeal did not meet this criterion.

The Takeaway

This is not a revolutionary judgment. However, it is a good review of the conditions to appeal to the Federal Tribunal against a decision that does not fall within the strict definition of an “award” within the meaning of Art. 77 (1) LTF. In this respect, a termination order – to the extent that it cannot be modified at a later stage, qualifies as an award for the purposes of the setting aside proceedings. It is also irrelevant that the drafter of the termination order was not an arbitral tribunal but the President of an arbitral division (or even the Secretary General). Interestingly, and even if the powers of the CAS Division Presidents (and the Secretary General) are normally limited to decisions related to jurisdiction based on the CAS Code (e.g. right to terminate the proceedings when the appeal is “on its face, late” according to Art. R49 CAS Code), the “award” can be attacked also on other grounds listed in Art. 190 (2) PILA.

Another point to retain is that the good faith of a person filing an appeal late (pursuant to the applicable procedural rules) is not sufficient to remedy the non-respect of the time limit to appeal the decision, whose respect is essential in order to establish legal certainty and protect the equality of the parties. Finally, this judgment clarified that it is possible to grant legal aid for setting aside proceedings in international arbitration, including sports arbitration. However, the requesting party must meet the cumulative conditions (including that the appeal does not lack chances of success), which is a high burden to meet in view of the – statistically – low chances of success of a motion to set aside an arbitral award before the Swiss Federal Tribunal.

SFT Judgment 4A_318/2017 – Football Club A v. Player B – Erroneous judgment on Jurisdiction / violation of public policy (inadmissible); violation of the parties’ right to be heard (unfounded)

The Issue

Before the CAS: contract of employment between a football club and a player – outstanding salaries

Before the SFT: Right to be heard: arguments disregarded by the Panel must have been “regularly” raised during the procedure; violation of public policy (pacta sunt servanda, dismissed)

The Swiss Federal Tribunal Proceedings – Appeal of Football Club A. against the CAS Award rendered on April 24, 2017

The case involved a contract of employment between professional football player B. and football Club A., effective as of September 1, 2012 and until the end of the sporting season 2014/2015. By a tripartite contract shortly after the signing of the first contract, the Player was on a loan by the Club to another club until the end of the season 2012/2013. In the end of that period, specifically on August 6, 2013, the Player unilaterally terminated his contract of employment with A. He subsequently filed a claim against the Club to obtain the payment of outstanding salaries and compensation.

On February 18, 2016, the Dispute Resolution Chamber (DRC) of the International Federation for Football Association (FIFA), partially upheld the claim. The Club appealed against this decision to the Court of Arbitration for Sport on June 27, 2016 and indicated that its statement of appeal should be considered as its appeal brief. The hearing took place in Lausanne on January 23, 2017 and the Panel rendered its final award on April 24, 2017, confirming the FIFA decision but reducing the amount of outstanding salaries for the Player.

On June 13, 2017, the Club filed an appeal to the Swiss Federal Tribunal alleging a violation of its right to be heard (Art. 190 (2) (d) PILA).

A) The plea of the violation of the Football Club’s right to be heard

General conditions 

The Federal Tribunal first reiterated the meaning and scope of right to be heard within Art. 190 (2) (d) PILA (at 3.1). Accordingly, each party has the right to state its views, submit its legal arguments and introduce relevant evidence and participate in the hearings of the tribunal. There is a violation of this right when the arbitral tribunal fails to take into consideration some statements, arguments, evidence and offers of evidence submitted that is important for the decision.

Therefore, the party alleging such violation bears the burden to prove that such oversight prevented it from being heard on an important issue. The task is twofold: first, it must establish that the panel failed to examine facts, evidence or law regularly raised. Second, it must show that the disregarded elements could influence the outcome of the case based on the reasons of the appeal (ibid, at 4.1.3).

Time limits to adduce new arguments in case of application of Art. R51 of the CAS Code

In the particular case, the Club supported that it highlighted the particularities of a particular law related to the type of contract signed between the parties. Under such law, the amounts due to the Respondent as remuneration for his services “were gross and taxable”, and did not include a 20% for taxes as it is customary in country ZZZ. The Federal Tribunal could not find this argument in the award and proceeded to the listening of the hearing’s recording.

First, it found that the award did not contain a part relative to this submission and this binds the Federal Tribunal. Second, the Panel decided to apply the FIFA Rules and subsidiarily Swiss law (probably based on Art. R45 CAS Code). Third, even if the Football Club had presented this argument at the hearing, it had submitted such argument late (according to Art. R51 and R56 (1) of the CAS Code) (at 3.3).

In this respect, the CAS case law has clarified that, if the appellant renounces to file an appeal brief in the meaning of Art. R51 of the Code after having filed a statement of appeal according to Art. R48 of the Code, the prohibition formulated in Art. R56 (1) of the Code starts from the filing of that submission.

Therefore, the Federal Tribunal dismissed the plea of the violation of the Football Club’s right to be heard because the Club failed to submit such argument in a timely manner.

B ) The plea of violation of public policy raised by the Football Club A

The Football Club argued that the CAS violated the principle of contractual fidelity (at 4.1). There is a violation of this principle only if the arbitral tribunal refuses to apply a contractual clause whilst admitting that it binds the parties or, conversely, if it orders them to comply with a clause of which it considers does not bind them. What is important to retain is that both the interpretation of the contract and the legal consequences arising from the contract fall outside the scope of this principle.

In this regard, the Football Club supported that the CAS refused to apply the contractual clause “that provided the payment of gross amount, taxable under the customs and traditions of the country of zzz”. The Federal Tribunal swiftly dismissed this plea finding that the Club did not raise this argument in the award under appeal (which binds the Federal Tribunal). Most importantly, it found that the argument of the Club clearly fell outside the scope of the principle of contractual fidelity: the CAS did not refuse to deduct taxes that it had previously recognized that they applied.

The Takeaway

This is not a particularly interesting judgment as the Federal Tribunal swiftly dismissed both pleas raised: more specifically, it dismissed the violation of the Football Club’s right to be heard and the violation of (substantive) public policy and the principle “pacta sunt servanda”. The most important element to retain from this case is the condition for the valid plea of violation of the parties’ right to be heard: the elements / arguments that were disregarded should have been raised “regularly”, according to the procedural rules of the arbitral institution (in this case the CAS Procedural Rules).

The Federal Tribunal also confirmed the CAS practice and the doctrinal view (Mavromati / Reeb, the Court of Arbitration for Sport: Commentary, Cases and Materials, 2015, that Art. R51 CAS Code 2015, n° 3 ad art. R56 of the Code, p. 496) as to the time limits to file additional evidence: in cases where the appellant makes use of the possibility of Art. R51 and declares that the statement of appeal will also be its appeal brief, the deadline of Art. R56 (as to the rule of non-submission of additional arguments after the filing of the appeal brief) starts to run from the filing of the statement of appeal.