The case involves a dispute between Bursaspor Kulübü Derneği (the Club) and retired professional football player Sebastian Frey (the Player) over the interpretation and enforcement of a settlement agreement. Initially, the Club and the Player signed an employment contract in 2013, obligating the Club to pay the Player €1,500,000 (net) for the 2015/16 season. On 13 July 2015, they entered into a settlement agreement reducing the amount to €850,000 (net), payable in ten monthly installments. The agreement stipulated that if any installment remained unpaid for more than 60 days, the original €1,500,000 would become due. The Club made the first payment on time but delayed subsequent payments. The Player notified the Club on 31 December 2015 that the original amount was now owed due to the late payment of the October installment. The Club continued making delayed payments, and the Player filed a claim with FIFA’s Dispute Resolution Chamber (DRC). The Club eventually paid all installments, albeit late.
The case was brought before the Court of Arbitration for Sport (CAS), where the Sole Arbitrator ruled on key legal principles under Swiss law. The arbitrator found that the settlement agreement did not include a penalty clause but rather reinstated the original employment contract terms if payments were late. Since the Club eventually paid all installments, albeit delayed, the Player was not entitled to the full €1,500,000. The arbitrator concluded that the settlement agreement could not be interpreted to impose additional penalties beyond reinstating the original contract terms. The Club argued that the 60-day period should be interpreted as two calendar months, extending the deadline to 31 December 2015, but the Sole Arbitrator ruled that the agreement clearly referred to 60 days, not two months. The Club’s payment on 31 December 2015 was thus late, breaching the agreement.
The Club also contended that Article 3 of the settlement agreement constituted a penalty clause and sought its reduction under Swiss law. The Sole Arbitrator rejected this argument, explaining that the clause was not punitive but rather a reversion to the original employment contract terms if the settlement conditions were not met. The Club further raised mitigating circumstances, such as financial difficulties and organizational changes, but the Sole Arbitrator found no evidence of the Player acting in bad faith or any justification for reducing the owed amount. The Club consistently paid installments late without explanation and failed to demonstrate how its internal issues should affect contractual obligations.
The FIFA DRC had previously ruled that the Club owed the Player the difference between the reduced settlement amount (€850,000) and the original employment contract amount (€1,500,000), plus interest for late payments. The Club appealed this decision to CAS, but the Sole Arbitrator upheld the FIFA DRC’s ruling, confirming the financial award and dismissing all further claims. The final CAS decision, dated 23 July 2018, reinforced the earlier judgment, leaving the Club responsible for the outstanding payments and interest as initially determined. The case underscores the importance of timely compliance with contractual obligations and the limitations of penalty mechanisms in settlement agreements. It also highlights the legal interpretation of settlement agreements in employment disputes, emphasizing that contractual terms must be understood based on the parties’ intentions and applicable legal principles.