0350 Labovic vs. BC Krasnye Krylia Samara

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ARBITRAL AWARD

(BAT 0350/12)

by the

BASKETBALL ARBITRAL TRIBUNAL (BAT)

Mr. Raj Parker

in the arbitration proceedings between

Mr. Dragan Labovic represented by Mr. Obrad Fimic, Zlota 11/2, 00-019 Warsaw, Poland

– Claimant –

vs.

BC Krasnye Krylia Samara

Sovetskoy Armii Str. 253A-340, Samara 443011, Russia

– Respondent –

1. The Parties

1.1 The Claimant

1. Mr. Dragan Labovic (hereinafter the “Claimant”) is a professional basketball player from
Serbia.

1.2 The Respondent

2. BC Krasnye Krylia Samara (hereinafter the “Respondent”), is a basketball club based in Samara, Russia.

2. The Arbitrator

3. On 20 December 2012, the President of the Basketball Arbitral Tribunal (the “BAT”) Prof. Richard H. McLaren appointed Mr. Raj Parker as arbitrator (hereinafter the “Arbitrator”) pursuant to Article 8.1 of the Arbitration Rules of the BAT (hereinafter the “BAT Rules”). Neither of the parties has raised any objections to the appointment of the Arbitrator or to his declaration of independence.

3. Facts and Proceedings

3.1 Summary of the Dispute

4. On 9 August 2011, the Claimant and the Respondent entered into an agreement under

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which the Claimant was to play for the Respondent during the 2011-2012 season (the
“Agreement”).
5. Clause 2 (SALARY COMPENSATION) of the Agreement provides that the Respondent will pay the Claimant a salary of USD 350,000.00 for the 2011-2012 season. Such amount was to be paid in ten monthly instalments of USD 35,000.00 on the 15th day of each month from and including 15 September 2011 until and including 15 June 2012.
6. Clause 3 (PLAYER’S BENEFITS) of the Agreement, at sub-clause H. (BONUSES), provides (among other things) that the Claimant shall be paid a bonus of USD
40,000.00 if the Respondent wins the Russian Cup (hereinafter the “Russian Cup
Bonus”).

3.2 The Proceedings before the BAT

7. On 4 December 2012, the Claimant filed a Request for Arbitration in accordance with the BAT Rules (which the BAT received on 7 December 2012) and paid the non- reimbursable handling fee of EUR 2,000.00.
8. On 27 December 2012, the BAT informed the parties that the Arbitrator had been appointed and fixed the Advance on Costs at EUR 4,500.00 to be paid by the Claimant and EUR 4,500.00 to be paid by the Respondent, in each case by no later than 10
January 2013. The BAT also informed the parties that the Respondent’s Answer to the
Request for Arbitration should be filed by no later than 17 January 2013.
9. On 9 January 2013, the Claimant paid his share of the Advance on Costs.
10. The Respondent did not pay its share of the Advance on Costs, did not submit an
Answer to the Request for Arbitration, nor did it make any other contact with the BAT

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before either applicable deadline.
11. On 25 January 2013, the Arbitrator issued a Procedural Order setting a time limit for the Claimant to pay the Respondent’s share of the Advance on Costs in accordance with Article 9.3 of the BAT Rules by no later than 5 February 2013, and also giving the Respondent a final opportunity to file an Answer to the Request for Arbitration by no later than 5 February 2013.
12. The Claimant paid the Respondent’s share of the Advance on Costs on 29 January
2013. The Respondent did not file an Answer within the set deadline.
13. On 15 February 2013, the Arbitrator issued a Procedural Order requesting that the Claimant: confirm the identity of and explain the role of a “Sergey” referred to in certain communications which were exhibited to the Request for Arbitration; confirm whether replies were received to the Claimant’s representative’s communications enquiring about payment of monies owed; and state the date on which the Claimant believes the Russian Cup Bonus was due for payment.
14. The same Procedural Order requested that the Respondent confirm whether it agreed with the Claimant’s account of the amounts which the Respondent has paid to the Claimant and, if it did agree, that the Respondent explain why not all of the amounts stipulated in the Agreement had been paid. The Procedural Order required responses from the parties by no later than 25 February 2013.
15. The Claimant and the Respondent both responded to the Procedural Order on 22
February 2013.
16. On 14 March 2013, the Arbitrator informed the parties that the exchange of documents was complete and requested that the parties each submit a detailed account of their costs no later than 21 March 2013.

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17. On 18 March 2013, the Claimant’s representative submitted the Claimant’s account of costs. The Respondent did not provide an account of its costs in time for the deadline, or at all.
18. On 22 March 2013, the BAT provided the Claimant’s account of costs to the
Respondent and invited the Respondent to provide any comments by no later than 28
March 2013. The Respondent provided no such comments.

4. The Parties’ Submissions

4.1 The Claimant’s Position

19. The Claimant claims that it has not been paid certain amounts due under the Agreement and is seeking payment of those amounts plus interest. In the Request for Arbitration, the Claimant states:

1. Facts and Legal Arguments

On 9th August 2011 Claimant has concluded contract with Respondent on duration of one season i.e. basketball season 2011-2012. Claimant has fulfilled all commitments taken as basketball professional player according to the contract with Respondent.

Respondent didn’t pay all amount of money stipulated in the contract with Claimant and

was due to pay 350.000 (three hundred fifty USD) NET of salaries.

Up to date, Respondent paid only 306.978 (three hundred six thousand nine hundred seventy eight USD) NET.

[…]

Therefore Respondent’s debt to the Claimant is:

83.022 (eighty three thousand twenty two US dollars) $ NET including:

– last salary to the Claimant of thirty 30.000 (thirty thousand) $,

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– remain of salary for December 2011 in amount of 13.022 (thirteen thousand twenty two USD) $,

– bonus for won Cup of Russia – 40.000 (forty thousand) $ […]”

20. In the Request for Arbitration, the Claimant requested an Award ordering the
Respondent:

“- to complete owed payments in full amount of 83.022 (eighty three thousand twenty two US dollars) $ NET

– to pay the interest of 5% to the Claimant on owed amount for delay period

– to cover non reimbursable handling fee of 2.000 (two thousand) Euro and legal expenses brought upon by Arbitrator

– to pay for legal assistance and lawyer consultations a fee of 7.000 (seven thousand

Euro) […]”

4.2 The Respondent’s Position

21. Although the Respondent did not submit an Answer to the Request for Arbitration, in its response to the Procedural Order, the Respondent stated that:

“the [Respondent] does not deny its obligations as per the Agreement between [the Claimant] and the [Respondent], and the [Respondent] agrees with the Claimant’s account of the amounts owed to the Claimant.”

22. The Respondent went on to state that the reason why not all amounts stipulated in the Agreement had been paid was that there had been a hiatus in financial support provided to the Respondent by the regional government. The Respondent stated that this followed regional government and mayoral elections starting in the end of 2011, the appointment of a new Governor of the Samara region in May 2012, and the appointment of a new head of the regional basketball federation. After these changes,
“priorities and sponsorship flows” were reviewed.

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23. The Respondent stated that new financial support was being negotiated at the time of the response (i.e. 22 February 2013), and proposed to pay the amounts owed in several instalments which, the Respondent suggested, would “allow the parties to reduce the cost of the proceedings, and at the same time will increase the chance of a final settlement”.
24. The Claimant, through his representative, commented on this in his response to the
Procedural Order:

“The part, quote – “This will allow the parties to reduce the cost of the proceedings, and at the same time will increase the chances of a final settlement.”, – that Respondent writes, shows that maybe Respondent doesn’t understand that Claimant has paid non reimbursable handling fee to BAT and Advance on Costs for both parties (Claimant and Respondent). Therefore there is no possibility [sic] to “reduce the cost of the proceedings”. Also is not clear to Claimant “and at the same time will increase the chances of final settlement”, since Claimant was trying to receive any answer or make settlement ever since the 2011-2012 season for him in Respondents club was over, and first signal form Respondent we have only now, when Claimant already filed Request for Arbitration and proceedings started.”

5. The Jurisdiction of the BAT

25. Pursuant to Article 2.1 of the BAT Rules, “[t]he seat of the BAT and of each arbitral proceeding before the Arbitrator shall be Geneva, Switzerland”. Hence, this BAT arbitration is governed by Chapter 12 of the Swiss Act on Private International Law (hereinafter “PILA”).
26. The jurisdiction of the BAT presupposes the arbitrability of the dispute and the existence of a valid arbitration agreement between the parties.
27. The Arbitrator finds that the dispute referred to him is of a financial nature and is thus

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arbitrable within the meaning of Article 177(1) PILA1.
28. The jurisdiction of the BAT over the dispute results from the arbitration agreement contained in clause 14 (IN EVENT OF A DISPUTE) of the Agreement, which reads as follows:

“Any dispute arising from or related to the present contract shall be submitted to the Basketball Arbitral Tribunal (BAT) in Geneva, Switzerland and shall be resolved in accordance with the BAT Arbitration Rules by a single arbitrator appointed by the BAT President. The seat of the arbitration shall be Geneva, Switzerland. The arbitration shall be governed by Chapter 12 of the Swiss Act on Private International Law, irrespective of the parties’ domicile. The language of the arbitration shall be English. The arbitrator shall decide the dispute ex aequo et bono.”

29. With respect to substantive validity, the Arbitrator considers that there is no indication in the file that could cast doubt on the validity of the arbitration agreement under Swiss law (referred to by Article 178(2) PILA). In addition, the Respondent did not object to the jurisdiction of BAT.
30. For the above reasons, the Arbitrator has jurisdiction to adjudicate the Claimant’s
claim.

6. Discussion

6.1 Applicable Law – ex aequo et bono

31. With respect to the law governing the merits of the dispute, Article 187(1) PILA provides that the arbitral tribunal must decide the case according to the rules of law chosen by the parties or, in the absence of a choice, according to the rules of law with

1 Decision of the Federal Tribunal 4P.230/2000 of 7 February 2001 reported in ASA Bulletin 2001, p. 523.

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which the case has the closest connection. Article 187(2) PILA adds that the parties may authorize the Arbitrators to decide “en équité” instead of choosing the application of rules of law. Article 187(2) PILA is generally translated into English as follows:

“the parties may authorize the arbitral tribunal to decide ex aequo et bono”.

32. Under the heading “Law Applicable to the Merits”, Article 15.1 of the BAT Rules reads as follows:

“Unless the parties have agreed otherwise the Arbitrator shall decide the dispute ex aequo et bono, applying general considerations of justice and fairness without reference to any particular national or international law.”

33. As stated above at paragraph 28, the Parties have expressly elected that the Arbitrator shall determine the dispute ex aequo et bono.
34. Consequently, the Arbitrator shall decide ex aequo et bono the issues submitted to him in this proceeding.
35. The concept of “équité” (or ex aequo et bono) used in Article 187(2) PILA originates from Article 31(3) of the Concordat intercantonal sur l’arbitrage2 (Concordat)3, under which Swiss courts have held that arbitration “en équité” is fundamentally different from arbitration “en droit”:

“When deciding ex aequo et bono, the Arbitrators pursue a conception of justice which is not inspired by the rules of law which are in force and which might even be contrary to those rules.”4

2 That is the Swiss statute that governed international and domestic arbitration before the enactment of the PILA (governing international arbitration) and, most recently, the Swiss Code of Civil Procedure (governing domes tic arbitration).

3 P.A. Karrer, Basler Kommentar, No. 289 ad Art. 187 PILA.

4 JdT 1981 III, p. 93 (free translation).

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36. This is confirmed by Article 15.1 of the BAT Rules, according to which the Arbitrator applies “general considerations of justice and fairness without reference to any particular national or international law”.
37. In light of the foregoing considerations, the Arbitrator makes the findings below.

6.2 Findings

38. This is a simple case, in which the existence and scope of the Respondent’s duties to make payments to the Claimant is not disputed, and neither is the fact that the Respondent has breached those duties.
39. As explained at paragraph 5 above, clause 2 of the Agreement provides that the Respondent will pay the Claimant a salary of USD 350,000.00 for the 2011-2012 season in ten monthly instalments of USD 35,000.00, to be paid on the 15th day of each month from and including 15 September 2011 until and including 15 June 2012.
40. As explained at paragraph 6 above, clause 3 of the Agreement (so far as is relevant for these purposes) provides that the Claimant shall be paid a bonus of USD 40,000.00 if the Respondent wins the Russian Cup. The Respondent did win the Russian Cup, beating Spartak Primorje in the final on 12 May 2012.
41. Thus, the Arbitrator finds that under the Agreement the Respondent should have paid the Claimant a total of USD 390,000.00.
42. In fact, the Respondent has acknowledged and the Arbitrator finds that the Respondent has to date paid the Claimant a total of only USD 306,978.33, which was paid on the occasions and in the amounts set out below.

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Date of payment Amount paid (USD)
26 October 2011 35,000.00
09 December 2011 64,774.00
23 December 2011 17,172.00
26 January 2012 35,000.00
22 February 2012 34,015.25
27 March 2012 10,775.12
03 April 2012 25,003.80
19 April 2012 34,223.16
25 May 2012 28,387.00
13 June 2012 17,828.00
1 November 2012 4,800.00
Total 306,978.33

43. The Respondent has not disputed that the amount owed totals USD 390,000.00 or that the amounts paid are as set out above. Nevertheless, the Arbitrator notes, for completeness, that the BAT has consistently held that financial difficulties which are not the fault of the debtor are no defence to a claim based on non-payment of monies owed.5
44. The Respondent has proposed that it might pay the Claimant the money it owes him in instalments. The Arbitrator is unaware of any attempt having been made to do so to
date. The Arbitrator notes the Claimant’s statement that the letter in which that

5 See, e.g., FAT 0099/10 and FAT 0166/11.

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arrangement was proposed (i.e. the Respondent’s response to the Procedural Order) was the first time the Respondent suggested such an arrangement in a lengthy period of correspondence, and that in the circumstances the Claimant declines to agree to such an arrangement. That is the Claimant’s right.
45. In the circumstances, the Arbitrator finds that the Claimant is entitled to be paid:
 that part of his salary which remains unpaid; and
 the Russian Cup Bonus.

6.3 Interest

46. The Claimant has claimed interest at a rate of 5% “on owed amount for delay period”.
The Arbitrator finds that payment of interest is a customary and necessary compensation for late payment and there is no reason why the Claimant should not be awarded interest in relation to the amounts awarded. The Arbitrator finds that a rate of
5% per annum is a reasonable rate of interest. Furthermore, it is in line with the BAT jurisprudence and should be applied to outstanding payments on which payment of interest is appropriate.
47. As illustrated at paragraph 42 above, payments of salary were made in an irregular fashion and were already in arrears at the end of the period of the Agreement. Accordingly, the amount of interest which is due in relation to amounts outstanding at the end of the period of the Agreement must be calculated by reference to the various dates on which payments were due and the amount, if any, that was in arrears from time to time and which remains in arrears. As illustrated in the table below, the Arbitrator finds that the total amount of interest owed on 15 June 2012 (i.e. the date on
which the final instalment of salary was due) was USD 1,757.93.

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Date payment due Amountdue on that date (USD) Date that amount andall previous amounts owed was paid Interest6 No. daysbefore amount due was

paid7

Interest due8
15 September 2011 35,000.00 26 October 2011 4.79 41 196.39
15 October 2011 35,000.00 09 December 2011 4.79 55 263.45
15 November 2011 35,000.00 23 December 2011 4.79 38 182.02
15 December 2011 35,000.00 26 January 2012 4.79 42 201.18
15 January 2012 35,000.00 22 February 2012 4.79 38 182.02
15 February 2012 35,000.00 03 April 2012 4.79 48 229.92
15 March 2012 35,000.00 19 April 2012 4.79 35 167.65
15 April 2012 35,000.00 25 May 2012 4.79 40 191.60
15 May 2012 35,000.00 4.79 30 143.70
15 June 2012 35,000.00 4.79
Total interest accrued on salary payments to and including 14 June 2012: 1,757.93

48. The Claimant, in response to the Procedural Order, submitted that the Russian Cup Bonus was due for payment after the last game of the season. According to publicly available sources, the last game of the 2011-2012 season was the Russian Cup final. The Arbitrator notes that, as the Claimant has acknowledged, the Agreement does not
specify a date for payment of the Russian Cup bonus. The Arbitrator considers that it

6 At 5% p.a. on amount due expressed as daily amount in US dollars.

7 Up to 14 June 2012.

8 I.e. the amount of interest accrued on the relevant instalment until paid in full or until 14 June 2012 (whichever was earlier) expressed in US dollars.

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would not be appropriate to imply into the Agreement a term to the effect that the Russian Cup Bonus would be due for payment, if applicable, on the day that the Respondent won the cup. Rather, it must have been the intention of the parties that the Russian Cup Bonus would be paid within a reasonable period after the Respondent won the cup. The Arbitrator considers that a reasonable period for such purposes would be the next salary instalment due date or fourteen days (whichever was the later). Accordingly, the Arbitrator finds that the Russian Cup Bonus was due for payment fourteen days after the Respondent won the Russian Cup, i.e. on 26 May
2012, and interest on the Russia Cup Bonus should run from that date.
49. Accordingly, in respect of the damages for breach of clause 2 (i.e. for arrears of salary), the Arbitrator finds that the Respondent must pay the Claimant:
 USD 43,021.67 plus interest at a rate of 5% per annum from 15 June 2012 until the date that payment is made; and
 USD 1,757.93 in respect of interest accrued before 15 June 2012.
50. Additionally, in respect of the damages for breach of clause 3 (i.e. for failure to pay the Russia Cup Bonus), the Arbitrator finds that the Respondent must pay the Claimant USD 40,000.00 plus interest at a rate of 5% per annum from 26 May 2012 until the date that payment is made.

7. Costs

51. Article 17 of the BAT Rules provides that the final amount of the costs of the arbitration shall be determined by the BAT President and that the award shall determine which party shall bear the arbitration costs and in what proportion; and, as a general rule, shall grant the prevailing party a contribution towards its reasonable legal fees and

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expenses incurred in connection with the proceedings.
52. On 05 June 2013 – considering that pursuant to Article 17.2 of the BAT Rules “the BAT President shall determine the final amount of the costs of the arbitration which shall include the administrative and other costs of BAT and the fees and costs of the BAT President and the Arbitrator”, and that “the fees of the Arbitrator shall be calculated on the basis of time spent at a rate to be determined by the BAT President from time to time”, taking into account all the circumstances of the case, including the time spent by the Arbitrator, the complexity of the case and the procedural questions raised – the BAT President determined the arbitration costs in the present matter to be EUR 9,000.00.
53. The Arbitrator notes that the Claimant was successful in establishing his claim. The Arbitrator also notes that the Respondent did not pay its share of the Advance on Costs. The Arbitrator considers it appropriate to take into account the non-reimbursable fee when assessing the legal expenses incurred by the Claimant in connection with these proceedings. Thus, the Arbitrator decides that in application of Article 17.3 of the BAT Rules:
 the Respondent shall pay to the Claimant EUR 9,000.00, being the amount of the costs advanced by the Claimant; and
 the Respondent shall pay to the Claimant the amount of EUR 5,000.00 as a contribution towards the latter’s legal fees and expenses.

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8. AWARD

For the reasons set forth above, the Arbitrator decides as follows:

1. BC Krasnye Krylia Samara shall pay Mr. Dragan Labovic, in respect of its liability under clause 2 of the Agreement:

a. USD 1,757.93, representing interest accrued on salary arrears before

15 June 2012; and

b. USD 43,021.67 plus interest at 5% per annum from 15 June 2012 until the date that payment is made.

2. BC Krasnye Krylia Samara shall pay Mr. Dragan Labovic, in respect of its liability under clause 3 of the Agreement, USD 40,000.00 plus interest at a rate of 5% per annum from 26 May 2012 until the date that payment is made.

3. BC Krasnye Krylia Samara shall pay Mr. Dragan Labovic EUR 9,000.00 as reimbursement for his arbitration costs.

4. BC Krasnye Krylia Samara shall pay Mr. Dragan Labovic EUR 5,000.00 as reimbursement for his legal fees and expenses.

5. Any other or further-reaching requests for relief are dismissed.

Geneva, seat of the arbitration, 10 June 2013.
Raj Parker
(Arbitrator)

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