The case involves a dispute between Delfino Pescara 1936, an Italian football club, and Envigado CF, a Colombian football club, regarding the interpretation of contractual clauses related to the transfer of a player. The Court of Arbitration for Sport (CAS) was tasked with resolving the matter, with José Juan Pintó serving as the Sole Arbitrator. The dispute centered on the interpretation of ambiguous contractual terms, the determination of when a payment obligation becomes due, the allocation of unspecified payments to debts, and the appropriateness of an annual default interest rate.
The key facts of the case began with Envigado entering into employment agreements with the player in 2009 and extending the contract in 2011. Later, Envigado loaned the player to Atletico Nacional, which included a purchase option for 75% of the player's economic rights. In 2012, Pescara expressed interest in acquiring the player and negotiated a transfer agreement with Envigado and Nacional. The agreement stipulated a total transfer fee of $2,100,000, with specific payment schedules and conditions, including a 20% share for Envigado in any future sale of the player. Envigado modified the agreement by crossing out a clause specifying the surplus value and adding a phrase indicating the 20% would be net of any future sale.
A subsequent agreement, titled "Acuerdo de Transferencia," was signed by all parties, confirming the transfer terms. However, disagreements arose regarding the interpretation of the 20% clause, the timing of payments, and the allocation of payments made by Pescara. The Sole Arbitrator applied Swiss law, particularly the Swiss Code of Obligations (SCO), to interpret the contractual clauses. The interpretation focused on the parties' common intentions, considering the wording, context, and circumstances of the agreement. The arbitrator determined that, in the absence of clear consensus, the terms should be interpreted in good faith.
Regarding payment obligations, the arbitrator ruled that a debtor is in default upon receiving a formal reminder or upon the expiry of an agreed deadline. For unspecified payments, the SCO dictates that such payments should be allocated to the debt that is due first or, if multiple debts are due, to the one that first triggered enforcement proceedings. The arbitrator also addressed the default interest rate, rejecting Pescara's claim that the rate was excessive, as the parties had agreed to it and no evidence proved it violated Swiss public policy. A past CAS decision had set a precedent that an annual default interest rate of up to 17% could be acceptable under Swiss law.
The dispute also involved complications due to Envigado's inclusion on the U.S. government's "Clinton List," which prohibited transactions with the club due to alleged links to drug cartels. This created a legitimate reason for Pescara to delay payments until a workaround was agreed upon in a Memorandum of Understanding (MoU) in June 2016. The MoU specified new payment terms and excluded interest accrual during the period of enforced delay.
In conclusion, the Sole Arbitrator resolved the dispute by interpreting the contractual clauses in line with the parties' intentions and Swiss legal principles, ensuring fairness and adherence to the agreed terms. The decision emphasized the importance of clear contractual language and the application of good faith in resolving ambiguities. The arbitrator ruled that Envigado was entitled to 20% of the net profit from the player's transfer to Porto, not the gross fee, and adjusted the interest calculation accordingly, considering the legal and practical obstacles faced by Pescara. The decision provided clarity on payment obligations, debt allocation, and interest rates, ultimately settling the dispute between Pescara and Envigado.