Basketball Premier League in Court: Compensation for Sports Contestant's Training
2.12.2019
Sport rivalry has moved to court. This is all due to a petition that “POLONIA” Municipal Sports Club in Warsaw with its registered office in Warsaw has filed against ARKA S.A. Gdynia Basketball Club from Gdynia seated in Gdynia. The defendant was also an Arka contestant, who previously played for the Warsaw club. The case pertained to the amount of compensation for his training which was due for the Warsaw club for transferring the contestant to the Gdynia club.
On 22 November 2019, the Regional Court for Warsaw Śródmieście in Warsaw, composed of Milena Dutkowska, Judge of the Regional Court, dismissed the petition of Polonia for payment of such compensation for the benefit of the club - file case No. VI C 2366/18. The decision is subject to appeal.
Brief Discussion of Judgement with Commentary
The Warsaw club asked for joint and several award of a sum of money from the defendants as a supplement for the compensation for training the contestant. The contestant declared to the petitioner that he would no longer play in the premier league, but in a lower basketball league. The petitioning club, guided by this declaration, issued the so-called “letter of clearance” to the contestant, thanks to which the contestant had the “free” status and was thus authorised to transfer to another club without any liabilities.
In line with the sport competition regulations of the Polish Basketball Association (hereinafter: “SCR PBA”), a club who trained a contestant is authorised to receive a compensation for training the contestant, due from the contestant or the club accepting the contestant. The SCR PBA determined the maximum amount of such compensation, which differs with respect to the championship class in which the transferred contestant is going to play.
The duelling clubs determined a certain amount of compensation during negotiations, and such compensation was settled by Arka. During the disputable season, the contestant played in a lower league. However, as a reward for good sport results, the coach of the first team allowed the contestant to play in the last match of the basketball premier league. The contestant played for slightly more than four minutes in the first team of Asseco Arka Gdynia. This met with Polonia’s reaction, which felt mislead in wrong faith about the championship class and the amount of compensation which it received from Arka. Polonia took legal action for payment of the compensation in an amount which ˗ in its opinion ˗ it would have received from Arka if it knew that the contestant would play in the premier league. During the trial, the club from Warsaw claimed that it did not conduct business activity and thus the compensation for training contestants was a significant source of income for it.
Standpoint of the Regional Court Delivered in Oral Justification
Whilst dismissing the petition of Polonia, the Regional Court indicated that it should have abrogated the legal effects of its statement of will in which it agreed for a lower rate of the compensation, in particular if it felt misled. Such statement was missing in the case. Furthermore, the contestant played in the basketball premier league only for about four minutes, upon the approval of the coach who rewarded him in this manner for good results accomplished in a lower class, in which the contestant played regularly during the season. Seeking an increase of the compensation from the contestant of the Gdynia club in these circumstances might also be, according to the court, examined in the context of abuse of the subjective right by Polonia under Art. 5 of the Polish Civil Code. In line with the above-mentioned provision, exercise of one's right which would be contradictory with the socio-economic intended use of such right or the principles of social co-existence is forbidden. Such action or failure to act by the authorised party is not considered exercise of the right and is not subject to protection.
The Regional Court also pointed out that the SCR PBA constitutes a contract (agreement) concluded between the clubs. As part of such agreement, they can independently decide about the amount of compensation for training the contestants (for their transfer to a new club). The rates foreseen in the SCR PBA are the maximum, yet not fixed, rates. Therefore, the SCR PBA does not object to lower benefits. At the same time, the Regional Court expressed its distress by lack of participation of the contestants in formation of the SCR by the PBA, especially in a situation when the regulations pertain to their rights and obligations and thus property-type liabilities.
According to the Regional Court, the financial compensation benefit for training a contestant is not remuneration under an agreement on provision of services within the meaning of Art. 750 of the Polish Civil Code. If it was assumed that such agreement was in place, the claims for payment of compensation would expire at the lapse of two years in line with Art. 751 of the Polish Civil Code. Such provision (according to the Court) cannot be applied even per analogiam to the SCR PBA.
In line with the aforementioned provision, the following claims expire after the lapse of two years:
1) claims for remuneration for the performed activities and reimbursement of the incurred expenses due to persons who are performing specific activities permanently or within the scope of operation of an enterprise; the same applies to claims under advance payments granted to such persons;
2) claims on account of costs of living, care and education, if they are due to persons professionally involved in such activities or persons running enterprises assigned for such purpose.
The Regional Court also failed to acknowledge tort liability of the club from Gdynia or the contestant for a forbidden deed (misleading and bad faith) and decided that Polonia did not evidence the damage or the fault on the defendants’ side. Eventually, even though (according to the Regional Court) it is also possible to defend another stance, the financial compensation for training a contestant is realised on the basis of an innominate agreement concluded between the clubs within the meaning of Art. 353(1) of the Polish Civil Code. Claims under this title expire upon general principles.
In line with the above-listed provision of Art. 353(1) of the Polish Civil Code, the parties concluding the agreement may determine the legal relationship at their discretion, provided its content or goal are not contradictory with the nature of the relationship, the Act or the principles of social co-existence.
Commentary
The court’s judgement is interesting at least due to two causes. The first issue refers, in general terms, to the right of sport clubs to a common court instead an arbitration court with the first option preferred by the Regional Court in this case. The second issue with respect to which the judgement of the Regional Court is interesting, is related to the legal nature of the compensation for training a contestant with respect to the legal nature of sport competition regulations.
Arbitration Court or Common Court?
As far as the first issue is concerned, i.e. the arbitration clause, it is difficult to agree with the decisions made in this case. Both clubs were bound by the following arbitration clause during the dispute, contained in the SCR PBA:
“Civil disputes pertaining to property and non-property rights which may be the object of a court agreement ˗ excluding disputes under an employment relationship ˗ and including, in particular, disputes in which clubs, contestants, coaches, activists of the PBA are parties, related to competitions organised by the PBA, are settled by the Basketball Arbitration Court operating by the PBA or the Basketball Arbitral Tribunal in Geneva”.
Dismissing the complaint of the representative of the defendant club with respect to no rejection of the petition by the Regional Court, the District Court in Warsaw, in its decision of 25 September 2019 (XXVII Cz 1115/19 unpublished), noted:
“In compliance with Art. 1162 § 1 of the Polish Code of Civil Procedure, the arbitration clause should be prepared in writing; therefore, the legislator introduced the requirement of a written form for the arbitration clause. The clause may be prepared in a single document or in separate documents containing handwritten signatures of parties (so-called arbitration clause via referral). (…)” – emphasis added by the author of this text.
It seems that the argument of the District Court about “handwritten signatures” is completely misguided and the petition should have been dismissed in reference to the defendant club pursuant to Art. 1165 § 1 of the Polish Code of Civil Procedure in compliance with which:
§ 1. If a petition is filed to a court pertaining to a dispute covered by the arbitration clause, the court dismisses the petition or a request for initiation of non-litigious proceedings, if the defendant or a participant in the non-litigious proceedings raised the claim of the arbitration clause prior to becoming involved in the dispute as to the essence of the case.
On the other hand, in line with Art. 1162 Par. 1 and 2 of the Polish Code of Civil Procedure, referred to by the District Court:
§ 1. The arbitration clause should be prepared in writing.
§ 2. The requirement pertaining to the form of arbitration clause is also fulfilled when the clause was included in letters exchanged by the parties or declarations filed via means of distance communication which allow for saving their content. Reference in the agreement to a document containing a provision on submission of a dispute for examination by an arbitration court fulfils the requirements pertaining to the form of the arbitration clause, if such agreement was prepared in writing and such reference is that it forms a part of the agreement.
It seems that the form of the arbitration clause has not been reduced in the Polish Code of Civil Procedure to the possibility of the parties putting their handwritten signatures on a document containing such clause. The requirement of the written form is fulfilled, according to the legislator, also in case of willingness of submission to arbitration, expressed by the parties of the dispute via means of distance communication or when the provision was included in another document issued on the basis of the agreement concluded in writing, e.g. in regulations, general terms, etc.
It seems that in the case of sport clubs, both of the above requirements described in Art. 1162 of the Polish Code of Civil Procedure are, in principle, always fulfilled. This results, at least, from the factual presumption of the conclusion that may be drawn from other facts, e.g. membership of a sport club in a sport association, the fact of the club’s participation in sport competitions organised on the basis of sport competition regulations, etc.
It is worth noting that sport clubs (members of sport associations) are bound by the articles of association of an association and the regulations adopted on its basis. A legal relationship that expresses their willingness of submission to such regulations, e.g. pertaining to the arbitration clause, is the membership in a sport association “under which” the clubs, without doubt (their managers) sign their names or (at least) express their willingness to join such association via means of distance communication. Members of a sport club accept (on a voluntary basis), the rights and obligations resulting from membership in a sport club; they also have a right to leave such association at any time. With respect to issues not regulated in the Act on Sport of 25 June 2010, the provisions of the Law on Associations of 7 April 1989 are applied to the Polish sport associations [1], where Art. 6(2) stipulates that nobody can be forced to participate in an association and nobody’s right to leave an association can be limited.
It follows from membership in a sport association that the regulations adopted by such association are multi-lateral agreements, concluded in execution of the right to freedom of association in a sport association. The sole articles of association of a sport association constitute an agreement. The Supreme Court in a judgement of 9 April 2015 in case II CSK 392/14 [2] took the stance that the view that the articles of association constitute a civil law agreement is dominant in judicial decisions.
The above may lead to a conclusion that the arbitration clause by referral in the case of a sport club fulfils the written form requirement by referring to the membership in a sport association and the documents resulting from it. Inclusion of the clause in the sports competition regulations is sufficient and (if the clause is not defectively constructed) a separate agreement or signing another document on submission of a potential dispute for examination by an arbitration clause is not necessary.
Legal Nature of Sport Competition Regulations
The second important issue to which the discussed judgement of the Regional Court refers to is the nature of the legal compensation for training a contestant. In contrast to issues related to the arbitration clause, I believe that the Regional Court correctly specified such nature, determining the compensation an element of an innominate agreement which (seemingly) has the form of sports competition regulations. Treating such regulations as an innominate agreement seems to correspond, in particular, with the Act on Sport of 25 June 2010 [3]. The regulations are the sports and organisational rules to which the Act refers. In my opinion, this is a specific conglomerate of benefits and mutual relations of sports clubs, resulting from their membership in a sport association, performed under the “organisational umbrella” of such association and on the basis of legal and organisational rules determined by the association (in principle autonomously), specific for the entire sports discipline.
The purpose of establishment of a sport association, which is composed of sports clubs (Art. 6(1)) is to organise and to carry out competitions in a given discipline (Art. 7(1)). A sport club is required to participate in such competitions. When agreeing for such participation, the club accepts, on voluntary principle, the rules of a sports competition determined by the sports association. The Act on Sport vests the sports associations with significant autonomy within the scope of forming such rules. Their determination is a right and not an obligation of a sports association. Article 13 of the Act on Sport determines the exclusive right of a sport association to determine and to implement sports, organisational and disciplinary rules for sport competitions organised by the association, with the exception of disciplinary rules pertaining to doping in sport.
A sport association may determine the regulations of a sport competition (in principle) at its own discretion and autonomously, being limited by the sports discipline (nature) to which the regulations should be adjusted. The freedom invoked here may also be applied by clubs in their mutual relations, undertaken in the area of sports rivalry, provided such regulations permit it. An example in this case is the negotiation-based mode of determining the amount of compensation for training contestants. In the analysed case, the SCR PBA authorised the parties of the dispute to such negotiations in observance of the guidelines with respect to the maximum rate of such remuneration.
Author: Janusz Piotr Kolczyński, Attorney-at-law, Managing Partner at C.R.O.P.A. the TMT, IP and Sports Law Firm
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[1] Uniform text of 4 April 2019 (Polish Journal of Laws [Dz.U.] of 2019 item 713).
[2] LEX No. 1729688.
[3] Uniform text of 7 June 2018 (Polish Journal of Laws [Dz.U.] of 2018 item 1263 as amended).
