Update on FIFA investigations - DAC Beachcroft

Update on FIFA investigations's Tags

Tags related to this article

Update on FIFA investigations

Published 25 May 2016

The fallout continues from allegations of widespread corruption in FIFA, football's world governing body. FIFA has been engulfed in controversy since May 2015, when the US Department of Justice indicted several top executives on charges of corruption.

The latest developments include Michelle Platini's resignation as UEFA President following the appeal decision of the Court of Arbitration for Sport (CAS) to reduce his ban from 6 years to 4 years, and a finding by a New York court that Eduardo Li, former president of the Costa Rican Football Federation, is entitled to recover his defence costs under FIFA's D&O policy.

Alleged corruption at FIFA

In May 2015, the US indicted 14 current and former FIFA officials and associates on charges of "rampant, systemic, and deep-rooted" corruption after an investigation by the FBI. This followed the arrest of seven FIFA executives at a luxury hotel in Zurich.

In December 2015, FIFA President, Sepp Blatter, and UEFA President, Michel Platini, were banned for eight years from all football-related activities by FIFA's ethics committee. This was subsequently reduced to six years by FIFA's internal appeal committee. Blatter was found to have made a "disloyal payment" of £1.3m to Platini in 2011, which the FIFA ethics committee found had demonstrated an "abusive execution" of their positions.

Platini's appeal to CAS was decided in May 2016 and resulted in the ban being reduced to 4 years, resulting in Platini's resignation. Blatter's appeal to CAS is still to be heard. A separate criminal investigation into both men is ongoing in Switzerland.

Cover under FIFA's D&O insurance policy

On 27 April 2016, the court in New York found that FIFA’s D&O insurers were obliged to reimburse and advance legal costs to Eduardo Li, former president of the Costa Rican Football Federation, executive member of the Confederation of North, Central American and Caribbean Association Football (CONCACAF), and member of FIFA standing committees.

Along with other FIFA executives, Li was indicted and charged with racketeering conspiracy, wire fraud conspiracy, and money laundering conspiracy. Li sought coverage for defence costs under FIFA's D&O Insurance Policy, which was declined on a number of bases.

Despite a Swiss jurisdiction clause, Li sued insurers in New York.

The court exercised jurisdiction over the matter, finding that it was incidental to the FIFA criminal proceedings already before the court. The court rejected the insurers’ argument that the insurance dispute should be heard in Switzerland because, as a matter of Swiss law, Li was not bound by this forum-selection clause.

The court granted a preliminary injunction and required insurers to reimburse and advance legal costs in connection with his indictment, extradition and defence in the FIFA racketeering and fraud prosecution, citing the policy’s “broad coverage...for defense, investigation, and extradition costs” and rejected insurers’ arguments that Li was not an additional insured and that Li’s actions were for his personal gain and had nothing to do with his association with FIFA.

This decision introduces a great deal of uncertainty for insurers who provide global coverage to their insureds. Where an applicable law and jurisdiction clause is used, it is usually with the expectation that the parties to the policy are agreeing in advance where any coverage issues will be heard. Policy wordings are prepared with this in mind with lawyers in the applicable chosen territory appointed to review and advise on policy wordings and new products. However, as this case demonstrates, if the relevant applicable chosen law does not bind the parties to the forum that has been identified for disputes, either party is free to seek to have a dispute heard in another jurisdiction, and potentially subject to that local law.

Insurers can protect their position by choosing a jurisdiction where the local law binds the parties to a policy to the choice of forum, exclusively. There will always be a residual risk however that a court in another jurisdiction will accept jurisdiction and that the coverage decision will not reflect the insurers' intention when providing cover.


Declan Finn

Declan Finn

London - Walbrook

+44 (0)20 7894 6935

< Back to articles