Tiran Gunawardena

fallout from the defamation saga: part 2

Tiran Gunawardena
fallout from the defamation saga: part 2

Fallout from the defamation saga: Part 2

The sports team at Mills & Reeve has successfully acted for numerous footballers and clubs in breach of contract cases. In Part 1 of this two-part series, we explained where a dispute between Reevaldo and Paddington would be heard and what issues would be involved in such a dispute. In Part 2, we outline what the potential consequences would be of Reevaldo terminating his contract with Paddington and how this could impact his chances for signing for another club.

As always, don't miss the footnotes --> 1 <-- which contain links to useful documents as well as additional insights.

What are the potential consequences of Reevaldo terminating his contract with Paddington?

(a) Domestically

If Reevaldo chose to terminate his contract, he would need to give Paddington 14 days’ written notice, and the club may well object to it, meaning the matter would go to a hearing in front of the Premier League.2 Any damages for breach of contract, if Reevaldo could establish such a breach, would be assessed in order to put him in the position as if the breach had never occurred – effectively compensation for lost income over the remainder of the contract.

Whether Reevaldo pursues a constructive unfair dismissal claim or a breach of contract claim, he has a duty to mitigate his losses. As it’s likely he’ll get offers from other clubs should he leave Paddington, it could be that he suffers no actual loss and bringing a claim is therefore relatively pointless from a financial perspective. However, being able to establish that a breach of contract (on Paddington’s part) did in fact take place could be important to Reevaldo from the perspective of being entitled to treat the contract as having ended and releasing him from the obligations under it.

Moreover, Reevaldo wouldn’t be able to simply join another team in England after leaving Paddington. He would need to resolve the breach of contract dispute with Paddington before any new club could register him.

Reevaldo would also need to be conscious that, if he did walk out on Paddington and subsequently failed to establish a breach of contract on their part, they could potentially pursue him for breach of contract. Given that Reevaldo walking out would effectively amount to a repudiatory breach (in the absence of Reevaldo establishing a breach on Paddington’s part in the first instance), Paddington would be able to treat the contract as ‘at an end’ and sue Reevaldo for reasonably foreseeable damages. Reevaldo would not be entitled to any future wages or monies due under the contract as at the date of his repudiatory breach (i.e. his walk-out).3

(b) Internationally

If FIFA (and then the CAS) conclude that Reevaldo had ‘just cause’ to terminate his contract, then under Article 14 of the FIFA Regulations on the Status and Transfer of Players (“RSTP”)9, he would not face any further consequences.

However, should FIFA find that Reevaldo terminated his Paddington contract without just cause in violation of Article 17 of the FIFA RSTP, not only would Reevaldo and his new club be jointly and severally liable to pay Paddington compensation, but they could also face disciplinary sanctions as well.4 Reevaldo could face a four to six month ban on playing and his new club could face a two-window ban on registering new players (effectively, a “transfer ban”) if it was found to have induced the breach.5

One of the ‘advantages’ of Reevaldo moving internationally is that he could file a claim at FIFA and simply leave the club (on the basis that he had just cause to terminate the contract). His new club could then file a request for a provisional International Transfer Certificate (ITC) with FIFA to register Reevaldo until his dispute with Paddington is resolved.

What issues do new clubs need to consider when signing a player under these circumstances?

Any new club wishing to sign Reevaldo after he terminates his contract with Paddington will be keenly aware that Paddington would likely join the new club in any claim against Reevaldo. Depending on the length of time between terminating his contract with Paddington and signing with a new club, Paddington would likely claim that Reevaldo’s new club induced him to breach his contract with Paddington, and could therefore face sporting sanctions. The new club would be jointly and severally liable to pay damages in any event.

As noted above, if this case was heard at FIFA and Reevaldo is found to have terminated his Paddington contract without just cause, his new club is automatically presumed to have induced Reevaldo to commit that breach - but that is rebuttable.

In reality, it would prove to be very difficult for Reevaldo to find a new club willing to take on such risks.

What happens with Reevaldo?

Unfortunately, Reevaldo’s Paddington career is over. However, given the risks, costs, legal complexities and uncertainty involved in a lengthy contentious dispute such as this, while both parties felt that they had valid legal arguments justifying their actions, Paddington, Reevaldo and Reevaldo’s agent Jaco Moreno have reached an amicable resolution.

For Reevaldo in particular, the risk of being left in the footballing wilderness as no new club would sign him from fear of the consequences outlined above was too significant to consider unilaterally terminating his contract.

Paddington will let Reevaldo leave if he can find a club willing to pay Paddington a transfer fee of £20 million. There is already a “good-faith” release clause of £20 million in the contract between Paddington and Reevaldo6, but a good-faith release clause does not place Paddington under any obligation to sell Reevaldo. Rather, it only obliges Paddington to enter into a good-faith discussion with the bidding club if the trigger is activated. Furthermore, the existing clause only applies to clubs outside the Premier League, and Paddington will now accept a £20 million bid from a Premier League club.

As part of this arrangement, Moreno will once again act for Reevaldo in his contract negotiations with his new club and act for both Paddington and the buying club in transfer negotiations.7

Reevaldo has agreed not to speak negatively about the club in public or attempt to terminate his contract. Additionally, Paddington have agreed to pay Reevaldo’s signing-on bonus in full. Premier League rules dictate that signing-on bonuses must be distributed in equal annual instalments over the length of the player’s contract.8 However, when a player hands in a written transfer request, the player forfeits the outstanding balance of his signing bonus. To date, Reevaldo has only been paid £200,000 of his £1 million signing-on bonus, but as a part of their negotiated settlement, Paddington has agreed to pay him the remaining £800,000.

As the January 2018 transfer window is now open, Reevaldo is able to move to another club, and a whole host of Premier League clubs have already publically indicated their interest in signing him. Over the next few months, we’ll have new articles discussing the ins and outs of his transfer from Paddington, his contract negotiations, his image rights deal, where his agent fits into all of this, and more.

  1. Pretty cool, right?

  2. Pursuant to Article 11.1 of the Premier League contract.

  3. If Paddington could demonstrate that they have suffered loss as a result of Reevaldo terminating his contract (such as revenue, shirt sales, sponsorship etc.) and could demonstrate that this was a direct loss of Reevaldo walking out on the club, they would be entitled to damages to take account of this. In practice however, it would be very difficult to prove that Reevaldo was the causative element of such loss, as there may be many other factors which hold weight.

  4. As there is a presumption that any club signing a professional who has terminated his contract in the ‘protected period’ without just cause has induced the professional to commit a breach (Article 17(4) of the FIFA Regulations on the Status and Transfer of Players).

  5. Note that while a “transfer ban” prevents a club from registering new players, it does not prevent a club from selling its current players to other clubs.

  6. The clause stated “If a club, which is not a Premier League club, offers the sum of no less than £20 million for the permanent transfer of the Player, the Club agrees to discuss in good faith the possible transfer of the Player.” See our previous Reevaldo post about his contract negotiations with Paddington.

  7. If you want to know more about agents/intermediaries, you can read our previous Reevaldo post on the relationship between a player and his agent.

  8. For Premier League contracts lasting for more than one year, any signing-on fee must be paid in equal annual instalments (see Premier League Rule T.17.

  9. It is important to note that this is pursuant to the current version of the FIFA RSTP, applicable as at January 2018. In November 2017, FIFA and FIFPro announced a landmark agreement which will likely see significant changes made to the FIFA RSTP, however a revised version of the FIFA RSTP had not been released at the time of publishing this article.