How to use a freezing order against a Swiss based sports organisation to secure a CAS debt award

How can a claimant football club awarded a monetary payment in CAS proceedings from another club enforce that award if the defendant refuses to pay?

Part 1 of this series reviewed a novel case study in which a Swiss freezing order (over match premiums owing to the defendant from UEFA) was used to secure payment of the debt (see full article here¹). But there are also two other methods (detailed below) that will probably be more familiar to readers.

Here in Part 2, the author reviews the three principal enforcement methods, looking at their relative advantages and disadvantages, before building on Part 1 to explore in greater detail the legal and procedural requirements of applying for a Swiss freezing order should a claimant wish to try to secure payment by freezing any monies owing to the defendant from a sports organization registered in Switzerland (e.g. FIFA or UEFA).

The three principal methods of enforcing a CAS award

1. Enforcement through the courts – perhaps the best known way to enforce a CAS award is by means of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), according to Article III of which each contracting state shall recognize and enforce international arbitral awards the same as it does with domestic arbitral awards.²
2. FIFA sanctions – a second method for football related claims is to request FIFA sanction a non-paying club according to Article 64 of the FIFA Disciplinary Code.³ This Article provides for a range of sanctions from a warning to a fine to the deduction of points or even a relegation to a lower division. It has to be noted that such FIFA sanctions may only be requested if the CAS award was the result of an appeal against a prior FIFA decision (“…subsequent CAS appeal decision…”; see Article 64 FIFA Disciplinary Code). However, if the CAS award was the result of an Ordinary Procedure or if the parties decided to appeal a domestic final decision of the national federation directly to CAS, without getting a decision from FIFA first, the FIFA sanctioning system does not apply.
3. Freezing order in Switzerland - The third perhaps lesser-known strategy is to request a Swiss court to freeze any assets (or claims) that the debtor club has against UEFA, FIFA or any other International Federation domiciled in Switzerland. As a court may not only freeze the assets but also the claims a debtor has, this could include claims to: prize money, match-premiums, membership allowances, development contributions, TV rights participation etc. provided that certain legal requirements are met.

Pros and cons of the three enforcement methods

The New York Convention

One main advantage of enforcing an award by means of the New York Convention, which entered into force in 1958, is that there are many years of experience in applying it.

One of the downsides, however, is that, depending on the jurisdiction in which the award is enforced (usually the seat of the debtor), the enforcement process may be lengthy and without any guarantee of a successful outcome. In some jurisdictions, the legal authorities work slowly and it may take a lot of time to enforce an award (possibly up to 5 years in the authors experience). Further, from a practical perspective, the enforcing party may have concerns about judicial favouritism – or worse, corruption – if trying to enforce in a foreign jurisdiction.. In addition, in some jurisdictions, the judges may not be familiar with the institution of the CAS and significant efforts may be needed to convince the court that the composition of the Panel and the procedure were in accordance with the laws of the country where the arbitration took place – Switzerland.⁴

FIFA sanctions

FIFA sanctions have many advantages. First, it is a (often – though there are exceptions) speedy and simple way to force a club to meet its obligations. Secondly, some of the sanctions, like deduction of points, may hurt a club more than a monetary measure. Thirdly, the case can be solved within the "football family" without having to involve a state court. The main disadvantage is that both creditor and debtor have to be subject to the FIFA regulations and that there has to be a prior FIFA decision, otherwise the FIFA sanctions do not apply.⁵

Swiss Freezing Orders

Just as with FIFA sanctions, the freezing order against an International Sports Federations in Switzerland does not directly enforce a CAS award. The primary goal of a freezing order is to freeze assets of a debtor to make sure that he cannot dispose of them as long as the order is upheld. The enforcement of the outstanding sum is often times achieved as a result of the financial restriction imposed on the debtor. If a debtor cannot dispose of financial means which he calculated to receive because they are frozen, he may be willing to agree to pay the outstanding amount, or at the least, to enter into a settlement agreement. Thus, the freezing order often achieves its goal by putting pressure on the debtor, just like the FIFA sanctioning system does.

Another advantage, which may be essential in some jurisdictions, is that the freezing order placed on match premiums in Switzerland anchors jurisdiction for enforcement in Switzerland. As mentioned above, depending on the place of jurisdiction of the debtor, an enforcement via the state courts may be a very lengthy and burdensome proceeding without any guarantee of success. Hence, it may be preferable to take advantage of the well functioning Swiss legal system, and to bring the case before a Swiss state court (according to the author's experience as a Swiss litigator, in Swiss courts most legal proceedings take in average 6-18 months and corruption among judges is very rare).

One of the disadvantages of the freezing order is that the debtor must play (or have played without the money having been paid out yet) in a UEFA or FIFA competition that entitles it to prize money, match premiums or other kind of financial contribution from the international governing body. Another downside is that if the debtor is not willing to pay despite the freezing order, a second court proceeding is required to get at the frozen money by prosecuting the freezing order (see below 'procedural requirements').⁶ Further, if the frozen claims (or assets) are of less value than the outstanding sum, the enforcement of the award is just a partial one.

It also has to be noted that a creditor filing a freezing order against a debtor may be requested by the court to furnish security (i.e. make a payment into court) for potential commercial damages suffered by the debtor or a third party in the event that the freezing order proves unjustified. However, this provides that the debtor can establish the prima facie (on the first appearance) validity that the freezing order is unjustified and that it will result in financial damages for the debtor. A freezing order is unjustified if either the claim is not valid or the prerequisites of the freezing order are not met. If there is a CAS award granting a sum to a club, and that club does not pay within a set time limit, it is very unlikely that the freezing order is unjustified, thus the claimant’s risk of having to pay a security is low.