The case involves an arbitration dispute between Bursaspor Kulübü Derneği (Bursaspor) and Estoril Praia Futebol SAD (Estoril) before the Court of Arbitration for Sport (CAS), stemming from a loan agreement dated 27 July 2018. Under this agreement, Bursaspor was to pay Estoril a total loan fee of €350,000 in three installments for the temporary transfer of a football player, with a penalty clause imposing a 10% fee on overdue payments. Bursaspor failed to meet the payment deadlines, leading Estoril to issue formal notices of default on 4 January 2019 and 5 June 2019, followed by a claim filed with FIFA on 24 June 2019, seeking the principal amount, penalty fees, and accrued interest. On 15 October 2019, the FIFA Players’ Status Committee partially accepted Estoril’s claim, ordering Bursaspor to pay the outstanding €350,000 plus 5% annual interest on each installment from their due dates, along with a €35,000 penalty fee. The Committee based its decision on the principle of pacta sunt servanda (agreements must be kept) and noted that Estoril had complied with procedural requirements by issuing written notices and granting a 10-day payment deadline. Bursaspor, having failed to respond to the claim, was deemed to have accepted Estoril’s allegations.
Bursaspor appealed to CAS, arguing the penalty clause was excessive and unenforceable. The CAS panel, applying Swiss law, examined whether the penalty was unreasonable under Article 163.3 of the Swiss Code of Obligations, which permits penalty reduction if deemed excessive. The panel clarified that Swiss law allows contractual penalties for late payments, provided they are reasonable, and the burden of proving excessiveness lies with the debtor (Bursaspor). The panel also affirmed that awarding both interest and a penalty fee is permissible, as they serve distinct purposes: interest compensates for financial loss due to late payment, while penalties deter contractual breaches. The CAS upheld the FIFA decision, finding no grounds to reduce the penalty, as Bursaspor failed to demonstrate its excessiveness. The panel emphasized contractual liberty under Swiss law and the need for penalties to be proportionate but not easily reduced.
Bursaspor further contested the cumulative application of interest and the penalty, arguing that the penalty alone sufficed to cover damages. The Sole Arbitrator rejected this, noting that the loan agreement did not explicitly exclude interest on late payments, and established FIFA and CAS jurisprudence (including CAS 2014/A/3664) supports awarding both when they serve different purposes. The arbitrator upheld the Single Judge’s decision, awarding Estoril the €35,000 penalty fee and 5% interest on the principal amounts (€100,000 from 31 August 2018, €100,000 from 1 December 2018, and €150,000 from 1 May 2019) until full payment. Interest on the penalty itself was denied, as the agreement lacked such a provision. The appeal was dismissed, and Bursaspor was ordered to cover arbitration costs and legal fees.
The ruling reinforces the enforceability of penalty clauses in football contracts, provided they meet legal standards of reasonableness and procedural fairness. It underscores the principle that parties are bound by their agreements and must fulfill contractual obligations, while also clarifying the distinction between compensatory interest and punitive penalties. The case highlights the importance of clear contractual terms and the role of established jurisprudence in resolving disputes over late payments and penalties. The CAS decision ultimately affirmed the original FIFA ruling, ensuring Estoril received the owed amounts and upholding the integrity of contractual agreements in sports transactions.