The case involves a legal dispute between Sport Club Internacional, a Brazilian football club, and Galatasaray Spor Kulübü Derneği, a Turkish football club, concerning the interpretation and enforcement of a co-ownership agreement related to the economic rights of a Brazilian football player. The Court of Arbitration for Sport (CAS) issued its award on 17 March 2005, addressing the legality of the co-ownership agreement and the obligations arising from it. The central legal issue was whether FIFA regulations permit the sharing of economic rights between clubs, even though a player can only be registered with one club at a time. The CAS panel clarified that while FIFA rules prohibit dual registration, they do not prevent clubs from apportioning economic rights, provided the player consents. The distinction between registration (an administrative mechanism) and economic rights (contractual entitlements) was emphasized, with the panel ruling that economic rights can be partially assigned, making co-ownership agreements legally valid under FIFA regulations.
The dispute stemmed from a co-ownership agreement signed on 2 July 2002, involving Internacional, Galatasaray, the player, and his agent. Under this agreement, Galatasaray acquired the right to employ the player for five seasons and held an option to purchase additional economic rights. If Galatasaray did not exercise its option by 15 December 2002, it would owe Internacional an annual fee of $100,000 for the loan of 50% of the player’s rights. The agreement also stipulated a minimum sale price of $8 million for 100% of the rights and required Galatasaray to pay $3.5 million to Internacional if the player was sold to another club. Galatasaray did not exercise its purchase option, and the player later terminated his employment contract in October 2003, citing personal and professional reasons. The termination agreement extinguished all contractual obligations, including a settlement payment of $600,000 to the player.
Internacional filed a claim with FIFA, arguing that Galatasaray breached the co-ownership agreement by failing to pay the stipulated $3.5 million after the player’s departure. Galatasaray contended that the termination of the employment contract nullified its obligations. The FIFA Players’ Status Committee partially accepted Internacional’s claim, ordering Galatasaray to pay $100,000 for the 15 months the player played for them. Galatasaray complied, but Internacional appealed to CAS, seeking the full $3.5 million and legal costs. The CAS panel upheld the distinction between registration and economic rights, reinforcing that co-ownership agreements are enforceable under FIFA rules. However, it found that Galatasaray breached the agreement by allowing the player to become a free agent without Internacional’s consent.
Regarding compensation, the panel noted that Internacional failed to provide evidence supporting its $3.5 million claim, such as offers from third parties. Without proof of lost opportunities, the panel limited compensation to the agreed annual fees. It determined that the early termination caused Internacional a direct economic loss equivalent to five years of annual fees ($500,000). Since Galatasaray had already paid $100,000, it was ordered to pay the remaining $400,000. The CAS partially upheld Internacional’s appeal, reversing part of the FIFA Single Judge’s decision and requiring Galatasaray to pay the additional $400,000. The ruling emphasized that Galatasaray’s failure to utilize the player for the full five-year period did not negate its obligation to compensate Internacional for the agreed fees. The case highlights the complexities of player transfers, economic rights, and contractual obligations in international football, providing clarity on the enforceability of co-ownership agreements under FIFA regulations.