The case involves a legal dispute between Cruzeiro Esporte Clube (Cruzeiro) and Club Independiente del Valle (Independiente del Valle), with FIFA as the second respondent, adjudicated by the Court of Arbitration for Sport (CAS). The dispute arose from a 2016 transfer agreement for player Luis Alberto Caicedo Medina, where Cruzeiro failed to pay the third installment of USD 600,000 due on 25 July 2018. The agreement included a penalty clause (5% of the overdue amount) and 6% annual interest for late payments. Independiente del Valle filed a claim with FIFA's Players’ Status Committee (PSC) in September 2018, seeking payment of the overdue amount, penalty, and interest. The PSC ruled in favor of Independiente del Valle in January 2019, ordering Cruzeiro to pay the outstanding amount plus penalties and interest, and imposed potential registration bans if payments were not made within 45 days.
Cruzeiro appealed to the CAS in October 2019, arguing that the penalty clause was unenforceable without proof of damages and that FIFA incorrectly applied the 2018 Regulations on the Status and Transfer of Players (RSTP) instead of the 2016 version. Cruzeiro also contested the need for a formal notice of default and the accrual of interest from the due date. The CAS panel, led by sole arbitrator Juan Pablo Arriagada, examined the case under Swiss law, which governs FIFA's regulations. The panel upheld the PSC's decision, ruling that under Article 161 of the Swiss Code of Obligations, a penalty clause is enforceable without proof of damages. The panel also clarified that Article 12bis of the RSTP pertains to disciplinary sanctions, not contractual penalties, and thus did not apply. The CAS confirmed that Cruzeiro was automatically in default upon missing the payment deadline, making a formal notice unnecessary, and that interest accrued from the day after the due date.
The CAS dismissed Cruzeiro's appeal, affirming the PSC's decision and reinforcing the enforceability of penalty clauses in football transfer agreements under Swiss law. The ruling highlighted the distinction between contractual penalties and FIFA's disciplinary sanctions, emphasizing that contractual obligations must be honored as agreed, irrespective of demonstrated damages. The case underscores the importance of adhering to contractual terms in sports-related disputes and the procedural rigor of arbitration before the CAS. The final decision required Cruzeiro to pay the overdue transfer fee, penalty, and interest, with no modifications to the original ruling.