A dispute recently arose concerning football player Jean-Kevin Augustin who at the time of the dispute was a player of RB Leipzig and loaned out to Leeds United Football Club (Leeds). The dispute concerned whether Leeds was obliged to purchase the registration rights of the player in question from RB Leipzig based on a “purchase obligation” that was included as part of the terms and conditions that were stipulated in the loan agreement which was entered into between Leeds and RB Leipzig back in January 2020. In accordance with the loan agreement, such “purchase obligation” meant that Leeds would have to purchase the player in question permanently if Leeds obtained promotion to the English Premier League prior to 1st July 2020. It so transpired that the 2019/2020 football season was interrupted abruptly on 13th March 2020 owing to the unprecedented COVID-19 pandemic. Upon the resumption of the season, Leeds United ended up winning promotion as champions of the Championship league on the 22nd July 2022, 22 days after the date stipulated in the loan agreement.
It so transpired that in April 2020, Leeds United enquired via e-mail with the player’s agent on the possibility of extending the duration of the loan agreement to cover the extended playing period of the 2019/2020 once same was to resume and to check whether same would be acceptable by RB Leipzig. Subsequently, in June 2020, Leeds United alleged that they had informed both the player and the player’s agent that their request made in April 2020 was being withdrawn owing to the player’s off-form and thus they were not willing to extend the duration of the loan agreement. RB Leipzig replied back to Leeds in June 2020, stating that they were willing to extend the duration of the loan agreement but were not willing to re-negotiate the instalments due to RB Leipzig. At the same time, owing to the COVID-19 disruptions, in June 2020 FIFA announced temporary amendments to the FIFA Regulations on the Status and Transfer of Players.
Soon after the resumption of the Championship league in mid-June 2022, Leeds informed RB Leipzig that it was under no obligation to purchase the player since in their view the purchase obligation in the loan agreement is voided as a result of not being able to effect the transfer by 1 July 2020. On 13 July 2020, RB Leipzig proceeded to insert a FIFA TMS instruction to complete the permanent transfer of the player to Leeds. Leeds did not enter the necessary counter-instruction to complete the permanent transfer of the Player.
Following Leeds’s refusal to honour the terms of the loan agreement, RB Leipzig instituted proceedings in front of the FIFA Players’ Status Committee (the Committee) to request Leeds to pay RB Leipzig the full purchase obligation. During the proceedings in front of the Committee, the Committee stressed that it must take into account all the specific circumstances of the present matter as well as the structure of the loan agreement signed between the parties. Ultimately, the Committee had to establish what the true intention of the parties was when they agreed upon the terms of the loan agreement. In the view of the Committee, there was no dispute to the fact that Leeds indeed was promoted to the Premier League at the end of the 2019/2020 season, which promotion occurred at a later stage than traditionally occurs owing to the unprecedented COVID-19 disruption. As a result, the Committee was of the firm opinion that it is reasonable and logical to conclude that the original intention of the parties was to transfer the player on loan until the end of the sporting season 2019/2020 (originally fixed on 30 June 2020) and that such transfer would have acquired a permanent status simply in case of promotion of Leeds to the English Premier League, regardless of the effective date of achievement. The Committee also reiterated that as established by FIFA as well, the COVID-19 outbreak was not a force majeure situation in any specific country or territory. As a result, the Committee upheld RB Leipzig’s claim to be paid a transfer fee of €21 million by Leeds in accordance with the purchase obligation in the loan agreement.
Leeds subsequently lodged an appeal from the Committee’s decision to the CAS, with the CAS analysing in significant detail the facts pertaining to the case together with what triggers a case of force majeure. In conclusion, the CAS panel opined that there was no room for the application of the concepts of force majeure or rebus sic stantibus and thus concluded that the purchase obligation was indeed triggered, a result of which meant that Leeds has to pay to RB Leipzig EUR 6,740,174 as the first instalment of the transfer fee, plus 5% interest per annum as from 1 October 2020 until the date of effective payment. Leeds appeal was thus dismissed and the appealed decision was confirmed in full.
Dr Robert Dingli is a Senior Associate at Dingli & Dingli Law Firm and specializes in sports law. This article was published in the latest edition of the Sunday Times of Malta. Link : https://sportsdesk.com.mt/2023/01/15/the-obligation-to-pay-in-leeds-vs-rb-leipzig-case/