The case involves a dispute between professional football player Marko Livaja and FC Rubin Kazan regarding unpaid compensation during Livaja's loan period to FC Empoli in 2015. Livaja, a Croatian player, had signed an employment contract with Rubin Kazan in 2014, which included an annex detailing his remuneration. During his loan to Empoli, the parties signed a suspension agreement specifying an unconditional compensation of €500,000 and a conditional compensation of €300,000, both to be paid net of taxes. Livaja claimed Rubin Kazan failed to make full payments as agreed, leading to financial difficulties. He sent a formal notice in February 2016 demanding overdue payments and later filed a claim with the Football Union of Russia’s Dispute Resolution Chamber (FUR DRC), arguing that both compensations were net amounts totaling €800,000 after tax deductions. He also contended that as a Russian tax resident in 2015, his income tax should have been 13%, but due to delayed payments, it increased to 30%, which the club should bear.
The FUR DRC ruled that only the conditional compensation was net, dismissing Livaja’s broader claim and calculating the club’s remaining debt at €5,306.36. Livaja appealed to the Court of Arbitration for Sport (CAS), seeking additional compensation for tax differences and legal costs. The CAS proceedings focused on interpreting the suspension agreement under Russian law, particularly whether the unconditional compensation was also net. The Sole Arbitrator emphasized that contractual interpretation begins with the literal wording of the agreement, and if unclear, an objective interpretation based on the parties' mutual intent and good faith applies. The arbitrator concluded that only conditional compensation was explicitly agreed as net, while unconditional compensation was gross. However, the arbitrator found Livaja’s evidence credible regarding his tax residency in 2015, ruling that the applicable tax rate should have been 13% instead of 30%. Due to the club’s payment delays, which caused the higher tax rate in 2016, the club was ordered to bear the additional tax burden of €68,000 plus interest.
The appeal was partially upheld, confirming the FUR DRC’s interpretation of unconditional compensation as gross but correcting the taxation rate for 2015. All other claims were dismissed, and FC Rubin Kazan was ordered to pay Livaja €68,000 plus applicable interest. The case highlights the complexities of contractual disputes in sports, particularly regarding financial and tax-related obligations, and underscores the importance of clear contractual language and adherence to payment deadlines.