No violation of public policy if erroneous application of material law - appeal rejected

Case information
January 6, 2010
4A_260/2009
Interest to foreign readers: 
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Of some interest
Topics: 
Violation of public policy
Decisions of Lausanne Court of Arbitration for Sport
Original language: 
French
Published: 
28 ASA Bull 272 (2010)

Parties

Appellant: 
Respondent: 

Counsel

Appellant: 
Introductory note: 

A football club (Le Sportif de Toluca Football Clubs SA) and a player (Christian Gimenez) entered into an employment contract on August 1st, 2007. The contract was terminated in the summer of 2008 and the player sued. The national federation involved partially granted the player’s claim for lost salary and in an award of April 24, 2009 the CAS, to which both parties had appealed, ordered the club to pay a substantial amount. The CAS was composed of Jose Juan Pintó Sala, Francisco González Cossio and Racardo de Buen Rodriguez.

An appeal was made to the Federal Tribunal and the ground for appeal was public policy.

The following are worth pointing out in the opinion:

 (i)    The Federal Tribunal repeated its definition of material public policy, which is well known to international practitioners by now. See section 3.1 of the opinion in this respect.

 (ii)    As it did in other cases, the Federal Tribunal reiterated that the rule pacta sunt servanda or the rules of good faith are not violated by a possibly incorrect ?choice among the rules of law which could apply. See section 3.2.2 of the award in this respect.

Translation: 

4A_260/20091

Judgement of January 6, 2010

 

 

First Civil Law Court

 

 

Federal Judge Klett (mrs), Presiding,

Federal Judge CORBOZ,

Federal Judge Kolly,

Clerk of the Court: Carruzzo.

 

X.________,

Appellant,

Represented by Mr Jorge Ibarrola

 

v.

 

Y.________,

Respondent,

Represented by Mr Lucien W. Valloni and Mr Thilo Pachmann

 

Facts:

 

A.

On August 1, 2007, X _______, a football club, and Y ________, a professional football player, concluded an Employment Contract for a duration of three years.   

In May 2008, the club ceased paying the player’s salary. On July 28, 2008 they notified him of the termination of his Employment Contract.

 

On August 27, 2008 Y ________ submitted a pecuniary claim against X _______ to the [name omitted] Football Federation’s Dispute Resolution Commission, which was partially granted.

 

B.

Both the player and the club appealed the decision of October 2, 2008 given by this sports tribunal, the first seeking his submissions in full, the second seeking to be completely released from the claim. 

 

In an award of April 24, 2009, written in Spanish, the Court of Arbitration for Sport (CAS), partially granting the appeal of the player and rejecting that of the club, ordered in particular X _______ to pay Y _______ an amount of USD 1'516'666.64, representing the salaries due to the player as per May 1, 2008 and which he would have received if the Employment Contract had been performed to term (July 31, 2010), as well as USD 12'500 as a contribution to the football player’s accommodation costs.

 

In interpreting clause 11 of the Employment Contract, the CAS held that the dispute should be resolved according to the specific regulations of the Fédération Internationale de Football Association (FIFA) and the law [country omitted]. It decided that the disputed termination was unjustified. The player was accordingly awarded compensation calculated using the criteria stated in Art. 17 (1) of the FIFA Regulations on the Status and Transfer of Players (hereafter “FIFA Regulations”).

 

C.

On May 25, 2009, X _______ (hereafter “the Appellant”) filed a Civil Law Appeal with the Federal Tribunal seeking the annulment of the award of April 24, 2009.

 

By decision of September 8, 2009, the Presiding Judge of the First Civil Law Court granting Y’s _______ (hereafter “the Respondent”) ad hoc request, ordered the Appellant to produce a French translation of the award under appeal, and of the Employment Contract in question, which were filed on November 3, 2009. However, she rejected a request by the Respondent that the appeal proceedings before the Federal Tribunal be conducted in German.

 

The Respondent submits that the appeal should be rejected insofar as the matter is capable of appeal. The CAS also proposes that the appeal be rejected.

 

Reasons:

 

1.

According to Art. 54 (1) LTF2, the Federal Tribunal issues its decision in one of the official languages3, as a rule in the language of the decision under appeal. When the decision was issued in another language (here Spanish), the Federal Tribunal uses the official language chosen by the parties. In front of the Arbitral Tribunal, they opted for Spanish, whilst in the Federal proceedings they used French (for the Appellant) and German (for the Respondent). According to its practice, referred to in the aforementioned decision of the Presiding Judge, the Federal Tribunal will adopt the language of the appeal and issue its decision in French.

 

2.

In international arbitration, a Civil Law Appeal is allowed against the decisions of arbitral tribunals under the conditions set forth at Art. 190 to 192 PILA4 (Art. 77 (1) LTF). As far as the object of appeal, the standing to appeal, the time limit to appeal, the submissions made by the Appellant or even the grounds raised are concerned, they do not pose any problems concerning the pre-condition for allowing the appeal. There is therefore no reason not to accept this appeal.

 

3.

In a sole ground for appeal, based on Art. 190 (2) (e) PILA the Appellant claims that CAS issued an award which is inconsistent with public policy. More precisely, it claims that the principles of pacta sunt servanda and the rules of good faith have been violated.

 

3.1 A material examination of an international arbitral award by the Federal Tribunal is limited to the question of incompatibility of the award with public policy (ATF 121 III 331 at 3a).

 

An award is inconsistent with public policy if it disregards the essential and broadly recognized values which, according to Swiss concepts, should be the basis of any legal order (ATF 132 III 389 at 2.2.3). An award is contrary to material public policy when it violates some fundamental principles of material law to such an extent that it is no longer consistent with the determining legal order and value system; among such principles are in particular contractual trust and compliance with the rules of good faith. For an award to be contrary to material public policy, a narrower concept than arbitrariness, it is not sufficient for the legal rule  to have been clearly violated (Decision 4P_71/2002 of October 22, 2002 at 3.2 and cases quoted).

 

The principle of pacta sunt servanda, in the restrictive meaning it has according to case law based on Art. 190 (2) (e) PILA, is violated only if the arbitral tribunal refuses to apply a contractual clause whilst admitting that it binds the parties or, conversely, if it imposes on them to comply with a clause which it considers as not binding. In other words, the arbitral tribunal must have applied or refused to apply a contractual provision in a way that contradicts its own interpretation as to the existence or the contents of the legal instrument in dispute. However, the process of interpretation itself and the legal consequences logically derived from it are not governed by the principle of contractual trust and they are not capable of appeal for violation of public policy. The Federal Tribunal has repeatedly emphasized that almost the entire realm of contractual breaches is excluded from the area protected by the principle of pacta sunt servanda (Decision 4A_370/2007 of February 21, 2008 at 5.5). Such exclusion also refers to the interpretation made by an arbitral tribunal concerning statutory provisions of a private law organisation (Decision 4A_370/2007, quoted above, at 5.6).

 

The rules of good faith must be understood within the meaning they have according to case law with regard to Art. 2 CC5 (Decision 4A_600/2008 of February 20, 2009 at 4.1).

 

 

3.2

3.2.1 The Appellant argues, in substance, that the award under appeal contains an indomitable contradiction due to the fact that the CAS, after having appropriately assumed that the compensation for breach of contract should be calculated in accordance with the law of [name omitted] and FIFA Regulations, did not take this law into account, which is nevertheless applicable by virtue of the Regulations, when it established the amount of the compensation due to the Respondent.  The award would also violate both the principles of pacta sunt servanda and the rules of good faith. 

 

3.2.2 As clearly emerges from the summary of its argument, the Appellant evidently disregards these principles as under the disguise of an alleged violation of public policy, it seeks to obtain a review of the application of material law, which is not admissible.

 

Specifically, it is not for this Court to determine whether the CAS has chosen in the correct manner, amongst the rules of law applicable to the pertinent clause of the Employment Contract, the rule that applied in the case to calculate the compensation due to the Respondent, nor to examine the application of the rule of law it upheld, namely Art. 17 (1) of the FIFA Regulations.

 

Moreover, at n. 96 to 98 of its award the CAS set forth the reasons why it applied these rules of law, rather than the employment law of [name omitted]. As to the “law of the country concerned” mentioned, among others, in Art. 17 (1) of the FIFA Regulations, it took into consideration and indicated, at n. 100 (h) of the award under appeal, “that the national legislation of [name omitted] does not forbid that compensation for termination of the Employment Contract to be collected by the Employee is higher than that set by the Federal Act on Employment6” (French translation provided by the Appellant). It is therefore simplistic and incorrect to argue as the Appellant does at n. 7 of his brief, that the CAS refused to apply the provisions of [name omitted] law to the dispute between the parties, whilst admitting that they were bound by the rules of law. There is indeed no internal contradiction between the reasons given in the award as to the rules of law applicable when calculating the compensation awarded to the Respondent and the solution adopted by the CAS in the award.

 

The Appellant does not claim, finally, that it would be contrary to public policy as defined above, to allocate to a professional football player whose contract has been terminated prematurely and in an unjustified manner, the amount which he would have earned, should the employment relationship have been extinguished at the expiration of the agreed term.

 

Consequently, the alleged material violation of public policy, whether relating to the principle of pacta sunt servanda or the compliance with the rules of good faith, is not substantiated.

 

4.

The Appellant does not succeed and shall pay the judicial costs relating to the Federal proceedings (Art. 66 (1) LTF) and pay the Respondent’s costs (Art. 68 (1) and (2) LTF).

 

Therefore, the Federal Tribunal pronounces:

 

1.   The appeal is rejected.

2.   The judicial costs of CHF 13’000.- shall be borne by the Appellant.

3.   The Appellant shall pay to the Respondent an amount of CHF 15’000.- for the federal judicial proceedings.

4.   This judgment shall be notified to the representatives of the parties and to the Court of Arbitration for Sport (CAS).

 

Lausanne, January 6, 2010

 

 

In the name of the First Civil Law Court of the Swiss Federal Tribunal

 

 

The Presiding Judge (Mrs):                               The Clerk:

 

 

Klett                                                             Carruzzo

 

 
  • 1. Translator’s note: Quote as X._________ v. Y. __________, 4A_260/2009. The original of the decision is in French. The text is available on the website of the Federal Tribunal www.bger.ch.
  • 2. Translator’s note:       LTF is the French abbreviation for the Federal Statute of June 17, 2005 organising the Federal Tribunal, RS 173.110.
  • 3. Translator’s note:       The official languages of Switzerland are German, French and Italian.
  • 4. Translator’s note:       PILA is the most commonly used English abbreviation for the Federal Statute on International Private Law of December 18, 1987, RS 291.
  • 5. Translator’s note:       CC is the French abbreviation for the Swiss Civil Code of December 10, 1907, RS 210.
  • 6. Translator’s note:       in French : loi fédérale sur le travail. RS.822.11