The case involves a dispute between Football Club Dynamo Brest and Ukrainian football player Yevhen Khacheridi over the termination of an employment contract and the validity of a penalty clause. The arbitration was conducted under the Court of Arbitration for Sport (CAS) rules, with a sole arbitrator presiding. The key issues included the participation of third parties, the validity and reduction of the penalty clause under Swiss law, and the factual background of the contract. The arbitrator ruled that third-party participation in CAS proceedings is only permissible under specific conditions and cannot be unilaterally initiated by an appellant. The penalty clause, set at USD 1,000,000 for unjustified early termination, was scrutinized under Swiss law, which requires such clauses to include essential elements like the parties involved, triggering conditions, and specified measures. While parties have contractual freedom to determine penalty amounts, Swiss law imposes limitations to ensure fairness and proportionality, allowing reduction only in exceptional cases of gross unfairness.
The employment contract, signed in October 2019, included provisions for salary payments, bonuses, and a professional fee, with amounts fixed in USD but payable in Belarusian rubles. The penalty clause was triggered if either party terminated the contract without justification. The player terminated the contract in January 2021 due to the club's repeated failure to pay wages, totaling USD 204,794.58. The club acknowledged the debt but later transferred its obligations to a new entity, which refused to honor the penalty clause. The player filed a claim with FIFA’s Dispute Resolution Chamber (DRC), which ruled in his favor, ordering the new club to pay USD 1,000,000. The club appealed to CAS, contesting the decision.
The arbitrator found the club’s breach of contract justified the player’s termination, making the penalty clause applicable. The clause was deemed enforceable as it reflected the contract’s total value and was not excessive. However, the arbitrator later reconsidered the proportionality of the penalty, noting it corresponded to the net value of the entire contract, which had eleven months remaining. Given the player’s received payments (USD 425,000 plus a USD 200,000 relocation allowance), the full penalty was deemed disproportionate. The penalty was reduced to USD 600,000, comprising USD 500,000 for the remaining contract duration and USD 100,000 for the severity and intentional nature of the breach.
The CAS partially upheld the appeal, amending the FIFA DRC’s decision to reflect the reduced penalty. The club was ordered to bear arbitration costs and contribute to the player’s legal expenses. The ruling reinforced the enforceability of contractual penalties in sports disputes while ensuring proportionality and fairness under Swiss law. The decision underscores the balance between contractual freedom and legal safeguards against disproportionate penalties, aligning with FIFA regulations and CAS jurisprudence. The case highlights the complexities of contractual disputes in sports, particularly regarding termination clauses and financial compensation.