Switzerland: Challenge Against CAS Award Dismissed Despite Sole Arbitrator Admitting To Mistakes In Factual Findings (Swiss Supreme Court)

In decision 4A_578/2017, the Swiss Supreme Court dismissed a request by a Romanian football player to set aside an award issued by the Court of Arbitration for Sport based on the argument that his right to be heard was violated.

Speedread

In a French-Language decision, the Swiss Supreme Court rejected a challenge to set aside a Court of Arbitration for Sport (CAS) award for an alleged violation of the right to be heard.

Although the CAS sole arbitrator admitted to having made a clear mistake in the factual findings of the award, the court dismissed the request to set aside the award. It held that, although the right to be heard is a formal procedural right, the petitioner must be able to demonstrate that the violation of the right to be heard had a material impact on the outcome of the case. (Decision 4A_578/2017 (20 July 2018).)

Background

Article 190(2)(b) of the Private International Law Act (PILA) provides that an award will be set aside if the principle of equal treatment of the parties or the right of the parties to be heard was violated.

Facts

In 2015, a Romanian footballer (Player) signed an employment contract with an Israeli football club (Club). The contract was governed by FIFA's Regulations on the Status and Transfer of Players (RSTP) and provided for an annual salary and various bonuses.

Over the following year, the Club only partially met its obligation to pay the Player's salary and bonuses. On 1 November 2016, and following various attempts to amicably settle the Player's outstanding payment claims, the Player's counsel sent a letter of formal notice to the Club requesting that it pay the balance of EUR 86,000 owed to the Player within seven days. The notice further stated that the contract would be immediately terminated for cause if no payment was received within the given deadline.

By fax of 9 November 2016, the Club replied that it had informed the Player both orally and by text message that a cheque corresponding to the outstanding balance had been available for pick up since 8 November 2016.

Five hours later, the Club sent a further letter by fax to the Player's counsel explaining that the Player had refused to collect the cheque and that it would, therefore, deposit the amount directly into the Player's bank account the next morning. Furthermore, the Club explained that it had complied with the deadline for payment set by the Player's counsel since the cheque was ready for pick up on 8 November 2016. In support of its allegation, the Club attached a copy of the cheque to its letter.

On the evening of the same day, the Club received a "Declaration of Termination with just cause" in which the Player declared that no payment had been received within the set deadline, and that he therefore terminated the contract and intended to claim penalties for late payment.

The following morning, the Player's bank account was credited with four payments by the Club, totalling EUR 140,119. Soon afterwards, the Player returned to Romania and did not attend subsequent team practice sessions.

The Player subsequently filed a request for arbitration with the Court of Arbitration for Sport (CAS) requesting that:

• The validity of the termination be confirmed.
• The Club be ordered to pay penalties for late payment in the amount of EUR 18,600.
• The Club be ordered to pay damages for breach of the employment contract in the amount of EUR 800,000.

In its reply, the Club made two counterclaims requesting that:

• The Player be ordered to reimburse the EUR 54,119 corresponding to the difference between what the Player was owed and what was credited to his account by the Club on 10 November 2016.
• The Player be ordered to pay damages in the amount of EUR 620,000 corresponding to the transfer amount the Club had paid to acquire the Player.

Following a hearing, the Club agreed to withdraw its counterclaims. According to the Player, the parties also agreed on that occasion that the cheque that was copied in the Club's second fax of 8 November 2016 was for the amount of EUR 66,941, which was less than the amount that was due to the Player at the time.

The sole arbitrator rendered his award on 11 September 2017. He partially admitted the Player's claims and ordered the Club to pay the penalties for late payment. However, he rejected both the Player's claims regarding the validity of the termination and the alleged breach of the employment contract.

In the factual findings of the award, the sole arbitrator held that on 8 November 2016, the Club had sent proof that a cheque for the amount of EUR 86,000 had been "ready for the Player and that the latter had failed to collect the same". Furthermore, the arbitrator found that on 10 November 2016, the check had been deposited by the Club into the Player's bank account.

In the legal analysis, the arbitrator came to the conclusion that in the circumstances of the case, the Club's two-day delay in effecting payment did not justify a termination for cause. The arbitrator found that the Player had, in fact, acted in bad faith when he refused to accept the cheque and terminated the contract.

The Player challenged the award before the Swiss Supreme Court, arguing that his right to be heard, enshrined in Article 190(2)(d) of the PILA, had been violated because the sole arbitrator had not examined the arguments that the Player had put forward.

In support of his allegations, the Player argued that the sole arbitrator had made two errors in the factual findings of the award: he erroneously reported the amount of the cheque copied by the Club in its fax of 8 November 2016 and wrongly held that the Club had deposited the cheque into the Player's account the next day, when in fact the Club had made four bank transfers to the Player's account.

The Player further argued that these mistakes had a direct impact on the outcome of the case because the sole arbitrator mistakenly considered that the payment was ready on 8 November 2016 and that the Player had refused to accept the cheque when in fact the cheque issued by the Club was not equivalent to the outstanding balance.

Both the Club and the CAS filed replies to the challenge before the Swiss Supreme Court.

In a statement provided to the Swiss Supreme Court, the sole arbitrator acknowledged that he had made mistakes in his factual findings, partly attributing them to a "typographical error". However, the sole arbitrator argued that the amount of the cheque had not influenced his decision that the Player had acted in bad faith. Rather, the sole arbitrator held that the Player had acted in bad faith by refusing to pick up the cheque, terminating the contract just two days after the deadline set for payment and leaving Israel immediately afterwards.

Decision

The Swiss Supreme Court rejected the challenge, dismissing the alleged violation of the right to be heard invoked by the Player.

By way of a preliminary comment, the Swiss Supreme Court restated its well-established case law that the parties' right to be heard under Article 190(2)(d) PILA imposes on tribunals a minimum duty to examine and address all relevant issues that are material to the outcome of the case.

The Swiss Supreme Court further confirmed that, although the right to be heard is a formal procedural right, it is not an end in itself. If a violation of the right to be heard had no material impact on the outcome of the case, the challenged decision should not be annulled.

In the court's view, the petitioner in this case had not specifically argued that the amount of the cheque or the bank transfers made to the Player's account had been material to the outcome of the case. In this regard, the Supreme Court noted that the Player's submissions in the underlying arbitration did not even mention the bank transfers and the cheque, let alone its amount.

Accordingly, the Swiss Supreme Court held that the petitioner had failed to demonstrate how he was prevented from pleading his case during the arbitration proceedings notwithstanding the sole arbitrator's wrong factual findings and dismissed the challenge.

Comment

In this decision, the Swiss Supreme Court confirmed that the right to be heard is not a purely formal right with respect to the appreciation of evidence by the tribunal. Rather, a potential (formal) violation of the right to be heard will remain without consequence if it has no potential influence on the tribunal's decision.

What is particularly noteworthy in the present case is that the sole arbitrator expressly admitted to making a mistake in the factual findings of the award. The court held that even in case of such an express admission of a mistake, the petitioner must demonstrate that this mistake had a material impact on the outcome of the case, regardless of the formal nature of the right to be heard.

Case

Decision 4A_578/2017 (20 July 2018).

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