The case involves a legal dispute between Esteghlal Football Club and professional football player Pero Pejic regarding the termination of an employment contract and subsequent claims for unpaid salaries and damages. The parties signed an employment contract on August 2, 2015, valid until the end of the 2016-2017 football season. On June 9, 2016, Pejic terminated the contract, citing Article 6.7, which allowed termination if the club failed to pay due amounts within 45 days of the due date. Pejic sought payment of USD 424,512, covering unpaid salaries for the 2015-16 and 2016-17 seasons, plus taxes. The club contested the termination, arguing the contract remained valid and offered partial payment for the 2015-16 season, citing financial embargo issues. Pejic subsequently signed with another club, FC Kukesi, on July 30, 2016.
The dispute was brought before FIFA’s Dispute Resolution Chamber (DRC), which ruled in favor of Pejic, ordering the club to pay outstanding remuneration of USD 109,512 plus 5% annual interest and compensation for breach of contract amounting to USD 255,000 plus interest. The DRC found the club had failed to pay over 40% of Pejic's salaries without valid reason, justifying the termination under Article 14 of the FIFA Regulations on the Status and Transfer of Players (RSTP) and the employment contract terms. The club appealed to the Court of Arbitration for Sport (CAS), requesting a sole arbitrator, and Mr. Bernhard Welten was appointed. The CAS proceedings involved multiple exchanges, including submissions and a hearing on November 6, 2017, which Pejic did not attend.
The CAS panel addressed several legal issues, ruling that the contractual clause allowing termination after 45 days of unpaid salaries took precedence over general FIFA and CAS jurisprudence, which typically allows a three-month delay. The panel found the clause valid under Swiss law, as it reflected the parties' agreement and complied with Article 102 of the Swiss Code of Obligations, permitting termination without prior warning for severe breaches. The panel also classified the clause as a liquidated damages or penalty clause, even though it did not specify an exact amount, as the amount could be easily calculated. The panel emphasized that Swiss law does not require penalty clauses to be reciprocal to be valid, though a judge can reduce a penalty if deemed excessive under Article 163 of the Swiss Code of Obligations.
The CAS upheld Pejic’s right to terminate the contract based on the agreed 45-day clause, recognizing the penalty clause as valid and outlining conditions for potential reductions under Swiss law. The club’s arguments, including financial embargo issues and Pejic’s alleged misconduct, were dismissed due to lack of evidence. The panel confirmed the DRC’s decision, including the compensation amount and interest, though it noted interest should have started from the termination date (June 10, 2016) rather than the claim filing date (July 7, 2016). However, this could not be altered as Pejic did not appeal the ruling. The club’s appeal was rejected, and Pejic’s counterclaim was deemed inadmissible. The case underscores the importance of contractual specificity and the balance between party autonomy and judicial oversight in ensuring fairness in employment disputes within sports.