The case revolves around a dispute between Yeni Malatyaspor FK (YENI), a Turkish football club, and Club Atletico Talleres de Cordoba (CAT), an Argentine football club, concerning the termination of a loan agreement for a player. Initially, the clubs signed a loan agreement on 24 August 2020, which included a transfer fee of USD 530,000 payable in three installments and a penalty clause of USD 100,000 for late payments. YENI failed to pay the second installment on time, leading CAT to issue a default notice. Subsequently, the player sought early termination, prompting negotiations between the clubs. On 19 December 2020, they signed a Termination Agreement, reducing the outstanding amount to USD 110,000, payable in two installments, and introducing a new penalty clause of USD 25,000 per missed installment. YENI failed to pay the first installment, triggering the penalty. CAT filed a claim with FIFA, seeking payment of the outstanding amounts and penalties. The FIFA Players’ Status Committee ruled in favor of CAT, ordering YENI to pay USD 135,000, comprising USD 110,000 in outstanding remuneration and USD 25,000 as a contractual penalty. YENI appealed this decision to the Court of Arbitration for Sport (CAS), arguing that the penalty was disproportionate.
The CAS panel, applying Swiss law, examined whether the penalty was excessive. Under Swiss law, parties are free to set penalty amounts, but courts can reduce penalties deemed excessive. The panel considered factors such as the creditor’s interest, the nature of the contract, the seriousness of the breach, and the parties' economic situations. While the penalty clause was enforceable, the panel found the USD 25,000 penalty per installment disproportionate, given the reduced outstanding amount and the circumstances. The panel reduced the penalty to USD 10,000 per installment, balancing contractual freedom with fairness. However, in the final ruling, the Sole Arbitrator upheld the original FIFA decision, confirming the penalty as valid and enforceable. The arbitrator emphasized that Swiss law does not inherently require proportionality assessments unless explicitly argued, and YENI failed to provide sufficient justification or evidence to support its claim of excessiveness.
The case highlights the complexities of contractual disputes in sports, particularly regarding termination agreements and penalty clauses. It underscores the importance of clear contractual terms and the burden of proof in challenging penalties. The ruling reinforces the principle of contractual freedom while ensuring penalties are not grossly disproportionate to the creditor’s actual interest. The CAS ultimately dismissed YENI’s appeal, confirming the FIFA decision and ordering YENI to pay the outstanding amounts and penalties. The case serves as a reminder of the legal and financial consequences of breaching contractual obligations in sports agreements.