CONTRACTS

MESSI’S CONTRACTUAL CONTROVERSY – ANALYSIS OF THE BUY-OUT CLAUSE AND EVERYTHING THAT FOLLOWED

(Photo by Alberto Estevez / via Getty Images)

[From the Editors’ Desk]

It is quite difficult to imagine Barcelona without Messi and vice-versa. The two decade long marriage was on the verge of a controversial divorce recently, following Messi’s announcement that he wants to leave, which sent shockwaves around the world of football and beyond. Messi’s contract, especially the buy-out clause within, has been subject to controversial debate recently and shall be analysed in this blog post. Before moving forward with the analysis, it is imperative to understand what a buy-out clause is. 

A buy-out clause, sometimes synonymously a release clause, is a clause in a footballer’s contract with the club which indicates a transfer asking price that, if met in a bid, must be accepted by the club. Such clauses permit a player or another club to pay a stipulated sum in the contract and effectively terminate the agreement, irrespective of its stipulated duration. The fee is usually set considerably higher than a player’s perceived market value in order to act as a deterrent to potential bidders, but can sometimes be relatively low in order to encourage bidders. Buyout clauses have been mandatory aspects of footballers’ contracts in Spain since 1985. Many changes in the law surrounding these clauses have been witnessed in the past few years, including tax concerns and etc.  

Apart from arguments regarding the legality of buy-out clauses causing disruption of contract laws, from a moral lens too there have been arguments that buy-out clauses challenge the very integrity of sport and the rationale underpinning sporting player contracts, in the way they foster player disloyalty, promote competition monopoly, undermine the purpose of longer-term player contracts and over-commercialise sport. Notwithstanding the criticism, these buy-out clauses are quite common now. There are certain benefits of these clauses too, the major one being conferring the selling club with both, security as well as flexibility. 

After a devastating defeat from Bayern Munich in the Champions League Quarter-Final this year, Barcelona’s all time star Lionel Messi told the club that he wants to leave. Messi’s Contract with Barcelona will be running till May 2021. However, he officially approached the club and showed his willingness to trigger the unique buy-out clause in his contract, which would have allowed him to leave peacefully without having to pay any money to the club. Messi’s unique buy-out clause allows him to unilaterally rescind his contract after the end of each season which could let him leave free of cost. Technically and in normal circumstances, the football season ends on 31st May every year, that also being the timeline before which Messi had to inform the club to activate his buy-out clause and leave without paying. This clause in Messi’s contract is a part of his 4 year contract which was signed in 2017 and the release is priced at 700 Million Euros. So if the unique condition of informing the club before the end of the season is not satisfied, the buyer would have to pay the aforementioned release amount. Now, Messi claimed that he has satisfied the condition of formally informing them before the end of the season, as the season got suspended because of exceptional and extraordinary circumstances because of the outbreak of COVID-19. The season, in these unprecedented circumstances, ended in August 2020 and not in May 2020, unlike normal circumstances. Why Messi wants to leave is yet another question which mostly has to do with his growing resentment towards the club’s management, especially President Joseph Bartomeu. He has been unhappy with several key decisions, inter alia, the decision to let go of key players such as Neymar Jr., pay cuts, Club’s social media team undermining Messi to praise the president. However, to Messi’s intimation of leaving by triggering his unique buy-out clause, the Club first responded that they would have to look in the legal aspects and subsequently denied the player’s request by citing the technical ground of him not informing before May 2020. 

Furthermore, La Liga came out in support of Barcelona and released an official statement on their website on 30.08.2020. The statement translates as follows –

“In relation to the different interpretations (some of them contradictory to each other) published in recent days in different media, related to the contractual situation of the player Lionel Andrés Messi with FC Barcelona, ​​LaLiga considers it convenient to clarify that, once the player’s contract with his club: The contract is currently in force and has a “termination clause” applicable to the event that Lionel Andrés Messi decides to urge the early unilateral termination of the contract, carried out in accordance with article 16 of Royal Decree 1006/1985, of June 26, by which regulates the special employment relationship of professional athletes. In compliance with the applicable regulations, and following the corresponding procedure in these cases, LaLiga will not carry out the prior visa procedure for the player to be removed from the federation if they have not previously paid the amount of said clause.”

Messi was put in an extremely difficult spot because if he would have just walked away by not paying heed to these statements by the Club and La Liga, there was a FIFA Ban looming over him, which could have gotten him banned for months to come. The other option was to move the court to invoke his unique clause, which was more of an ethical choice for the player, considering his attachment with the club. 

Nick De Marco QC, a leading sports lawyer who has represented sport’s governing bodies, players, clubs and agents since 2002, said that world football’s governing body is likely to be asked to settle any dispute in the first instance. This is what De Marco said – 

“If it ended up anywhere, it would be most likely in the FIFA Dispute Resolution Chamber because Messi, being Argentinian, the FIFA rules would apply, and FIFA has its own set of laws and rules. So, it’s unlikely to be Spanish law or English law or Swiss law but it would be the FIFA rules that apply, and they have a commission that can determine these things. Ultimately, either party can then appeal to the Court of Arbitration for Sport. That’s how these sorts of issues are normally dealt with. One possibility, and it’s certainly not one I’m advising anybody, is a player simply just walks out and says, ‘I’m entitled to walk out, so I’m walking out’. The risk with that strategy is, although FIFA will normally allow the registration to move with the player, if the club then brings a claim and succeeds, not only is the player liable to [pay] damages but also is likely to be banned under FIFA rules for a period of months and the new club signing him have a transfer embargo. It’s such a high-risk strategy that, unless you were sure that the player was in the right, it’s not a risk one would take.”

In response to La Liga’s official statement, Jorge Messi, Lionel Messi’s agent and father gave a response and mentioned Messi’s unique clause, which is 8.2.3.6 of his Contract. As per Jorge, the timeline mentioned in the clause regarding the unilateral decision to exit, mentions ‘End of Season 2019-20’ instead of May 2020. Here is a copy of his official statement – 

Here is the translation of this statement –

“Mr. Jorge Horacio Messi, as representative of the professional soccer player, Mr. Lionel Andres Messi, in response to the informative note published on August 30, 2020 by the National Professional Football League, in relation to the player’s contractual situation, and apart from its obvious partiality for the role that such institution represents, in defense of the interests of its associates (football clubs), I must state that: We do not know which contract is the one they have analyzed,, and what are the basis on which they conclude that it would have been an applicable termination clause in case the player decides to urge the unilateral termination of the same, with effect from of the end of the 2019/2020 sports season. This is due to an obvious error on your part. Thus, as literally stated in clause 8.2.3.6 of the contract signed between the club and the player, ‘this compensation will not apply on termination of the contract by unilateral decision, effective from the end of the season 2019-2020’. Without prejudice to other rights that are included in the contract and that you omit, it is obvious that the compensation of 700 million euros, provided for in the previous clause 8.2.3.5, does not apply at all.

It is evident that the clause does not mention May 2020 as the date; Messi’s claim is sustainable. Moreover, La Liga has supported the club without any basis. The unforeseen Covid-19 pandemic has severely impacted contractual performance across the globe. Parties would believe that desperate times call for desperate measures. Maybe, or maybe not. As the legal cliché goes, “it depends”, in case of contractual performance, it will depend on a factual and legal analysis of the underlying contracts. If Messi would have gone to court, the court might have analysed the situation to be in his favour, however due to ethical and moral concerns, the player decided not to trigger legal action. Here is what the player had to say after all this- 

“When I communicated my wish to leave to my wife and children, it was a brutal drama.The whole family began crying, my children did not want to leave Barcelona, nor did they want to change schools. But I looked further afield and I want to compete at the highest level, win titles, compete in the Champions League. You can win or lose in it, because it is very difficult, but you have to compete. At least compete for it and let us not fall apart in Rome, Liverpool, Lisbon. All that led me to think about that decision that I wanted to carry out. I thought and was sure that I was free to leave, the president always said that at the end of the season I could decide if I stayed or not, Now they cling to the fact that I did not say it before June 10, when it turns out that on June 10 we were competing for La Liga in the middle of this awful coronavirus and this disease altered all the season. And this is the reason why I am going to continue in the club. Now I am going to continue in the club because the president told me that the only way to leave was to pay the €700 million (£624m/$823m) clause, and that this is impossible. There was another way and it was to go to trial, I would never go to court against Barca because it is the club that I love, which gave me everything since I arrived. It is the club of my life, I have made my life here. Barca gave me everything and I gave it everything. I know that it never crossed my mind to take Barca to court.”

Messi’s words are really moving and a cause for relief for every Barcelona fan. However, one cannot ignore the actions of the Club and La Liga, which were extremely unagreeable from a legal perspective as well as from the perspective of the spirit of sport. 

*For any query, feedback or discussion, the Editors could be contacted at [editor@sportslawandpolicylawreviewreporter.com]

PREFERRED CITATION – Ria Mishra & Aakash Batra, Messi’s Contractual Controversy – Analysis of the Buy-out clause and everything that followed, SLPRR, <https://sportslawandpolicyreviewreporter.com/2020/09/15/messis-contractual-controversy-analysis-of-the-buy-out-clause-and-everything-that-followed/> 15th September 2020.

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