The case involves a dispute between Brazilian football club Cruzeiro E.C. and Ecuadorian club Independiente del Valle over unpaid transfer fees for player L. The clubs signed a contract on October 17, 2016, stipulating Cruzeiro would pay $1,800,000 in three installments of $600,000 each, due on January 25, 2017, January 25, 2018, and July 25, 2018. The contract included penalties for late payments: a 5% fine on overdue amounts and 6% annual interest until payment. Cruzeiro failed to pay the first two installments, prompting Independiente to file a claim with FIFA on August 21, 2017, seeking the full transfer fee, penalties, interest, and legal costs.
FIFA’s Single Judge of the Players’ Status Committee ruled on June 5, 2018, ordering Cruzeiro to pay $1,200,000 (the outstanding first two installments) plus 6% annual interest from the respective due dates. The judge rejected the claim for the full $1,800,000, as the contract lacked an acceleration clause, and dismissed requests for additional penalties and legal costs. Cruzeiro appealed to the Court of Arbitration for Sport (CAS), arguing the penalties and interest were excessive. The CAS Sole Arbitrator, Prof. Gustavo Albano Abreu, upheld FIFA’s decision, confirming that under Swiss law and FIFA regulations, formal notice of default was not required to impose penalties. The arbitrator also found the 6% interest rate reasonable and consistent with FIFA jurisprudence. The December 19, 2019 award affirmed Cruzeiro’s obligation to pay $1,200,000 plus interest, rejecting Cruzeiro’s arguments.
Cruzeiro contested the penalty clause, claiming it was a liquidated damages provision requiring proof of actual damages, which Independiente had not demonstrated. They also argued Independiente waived its right to penalties by not issuing a notice of default or invoking FIFA’s Article 12 bis, which grants a 10-day grace period. Independiente countered that the penalty was contractually agreed and enforceable under Swiss law, which allows penalties regardless of actual damages. They emphasized that default occurred automatically upon missing payment deadlines, making notice unnecessary. The CAS arbitrator agreed, ruling the contract’s Clause 3.3 was clear and unconditional, requiring no prior notice for penalties to apply.
The arbitrator also rejected Cruzeiro’s argument that default interest should accrue from the date of FIFA’s decision (June 5, 2018) rather than the original due dates (January 26, 2017, and January 26, 2018). The final decision dismissed Cruzeiro’s appeal, upheld FIFA’s ruling, and reinforced the enforceability of contractual payment terms under FIFA regulations and Swiss law. The case highlights the complexities of international sports disputes, particularly regarding penalty clauses and procedural requirements, while affirming the binding nature of contractual terms in football transfers.