The case involves an arbitration dispute between Dalian Professional Football Club and Bernd Schuster, along with FIFA, decided by the Court of Arbitration for Sport (CAS) on 17 September 2021. The dispute arose from the termination of Schuster's employment contract, which the club ended prematurely without just cause. The contract, signed in 2018, included provisions for automatic extension based on the team's performance in the Chinese Super League (CSL). After the club finished 11th in the 2018 season, the contract was automatically extended until December 31, 2020. However, the club terminated the contract on December 26, 2018, leading Schuster to file a claim with FIFA's Players' Status Committee (PSC), seeking compensation for unpaid bonuses and damages for wrongful termination. The PSC ruled partially in favor of Schuster, ordering the club to pay outstanding remuneration and compensation. The club appealed to CAS, challenging FIFA's jurisdiction and the validity of the termination clause.
The CAS panel, composed of three arbitrators, addressed several key issues. First, it examined the admissibility of new evidence submitted after the written submissions had closed, concluding that exceptional circumstances were required for such evidence to be admitted, which were not present in this case. The panel then considered the jurisdictional dispute, finding the arbitration clause in the contract unclear and inoperable, thus affirming FIFA's jurisdiction under Article 22c of the FIFA Regulations on the Status and Transfer of Players (RSTP). The panel also rejected the club's argument that the Chinese Football Association Arbitration Commission (CFAAC) should have handled the dispute, noting the clause's ambiguity and impracticality.
On the merits, the panel determined that the club terminated the contract without just cause, as defined by Swiss law, which requires a material breach making the continuation of the employment relationship unconscionable. The panel upheld the automatic extension of the contract until 2020 and found no evidence of such a breach by Schuster. Regarding compensation, the panel reviewed the contractual penalty clauses under Swiss law, noting that such clauses do not need to be reciprocal to be valid. However, it agreed with the PSC's conclusion that the clause in question lacked balance and reciprocity, rendering it unenforceable. The panel awarded Schuster compensation equivalent to his annual income for the 2019 season, along with an outstanding bonus for the team's 11th-place finish in the CSL, plus 5% annual interest. The club's argument that Schuster failed to mitigate damages by remaining unemployed was dismissed, as the panel found no evidence of bad faith on his part.
The panel also addressed the club's obligation to provide tax certification, confirming that the contract required the club to bear Chinese taxes on Schuster's net remuneration. However, it found no contractual basis for the club to furnish tax certificates, reversing the PSC's order on this point. Lastly, the panel dismissed the club's request for reimbursement of procedural costs from FIFA, stating that such reallocation was not within CAS's jurisdiction.
In summary, the CAS partially upheld the club's appeal by modifying the compensation amount but rejected its other claims, affirming FIFA's jurisdiction and the validity of the contract's automatic extension. The decision underscores the importance of clear contractual terms and adherence to procedural rules in resolving employment disputes in professional sports. The panel's ruling balanced the principles of contract law under Swiss jurisdiction with the specific regulations governing international football disputes.