The case involves a dispute between Tunisian footballer Tijani Belaid and Czech club SK Slavia Praha, adjudicated by the Court of Arbitration for Sport (CAS) on December 3, 2014. The conflict stemmed from a cancellation agreement signed on January 20, 2011, which terminated Belaid's employment contract. Under this agreement, Belaid waived 50% of his unpaid salaries (1,500,000 CZK) in exchange for his release, while the club agreed to pay the remaining 1,500,000 CZK in installments, with an 8% interest for late payments and a 100,000 EUR penalty for non-compliance. The club failed to meet its payment obligations, prompting Belaid to file a claim with FIFA’s Dispute Resolution Chamber (DRC). In April 2013, the DRC ruled that the club owed Belaid the unpaid amount plus 8% interest but rejected the 100,000 EUR penalty, deeming it excessive when combined with the interest. The DRC interpreted the penalty as applicable only to the failure to deliver the International Transfer Certificate (CIT), which had been issued, rather than for late payments.
Belaid appealed to CAS, arguing that the penalty clause was intended to ensure compliance with all contractual obligations, including timely payments. CAS reviewed the case under its full power of examination, applying general contract interpretation principles. It found that the penalty and interest served distinct purposes—compensating for contractual breaches and late payments, respectively—and thus could coexist. However, CAS also considered the principle of proportionality, assessing factors like the gravity of the breach, fault, parties' commercial experience, financial situation, and the penalty's relation to the damage. The club did not participate in the proceedings, despite multiple opportunities.
CAS upheld the DRC’s decision to award the unpaid amount with 8% interest but reduced the 100,000 EUR penalty to 50,000 EUR, deeming the original sum disproportionate. The ruling emphasized that contractual penalties must be reasonable and aligned with the actual harm suffered, while reaffirming the enforceability of agreed terms unless manifestly unfair. The decision underscores CAS’s role in balancing contractual freedom with equitable outcomes in sports disputes.
The case also involved jurisdictional and applicable law issues. Belaid argued that Swiss law should apply as supplementary law, given the parties' submission to FIFA and CAS procedures, while the contract specified Czech law for unresolved matters. FIFA’s statutes prioritized its regulations and Swiss law as supplementary, excluding conflict-of-law rules. CAS concluded that resolving this potential conflict was unnecessary unless legal differences affected the outcome, as both Czech and Swiss law permitted the cumulative application of penalty clauses and default interest, provided the latter was not punitive.
The tribunal analyzed the contractual intent, noting that the penalty clause and default interest pursued distinct objectives and were likely intended to apply cumulatively. The club’s failure to meet payment deadlines was deemed a severe breach, given its commercial experience and awareness of potential financial difficulties. Belaid, who was 23 at the time, faced significant financial and psychological hardship due to the non-payment. The penalty was upheld as proportionate, considering the harm suffered and the club’s fault. The decision highlights the importance of clear contractual interpretation and the parties' intent in resolving disputes, while reinforcing the legal principles governing penalty clauses and default interest in cross-border disputes.
Ultimately, CAS confirmed the FIFA decision regarding the unpaid amount and interest but adjusted the penalty to 50,000 EUR, rejecting Belaid’s subsidiary claims for additional penalty interest due to lack of legal basis. The ruling underscores the seriousness of the club’s breach and the fairness of the contractual penalty in light of the circumstances. The case serves as a reminder of the need for proportionality and reasonableness in contractual penalties, as well as the role of arbitration in ensuring equitable outcomes in sports-related disputes.