Santa Clara Acores Futebol SAD v. Esteghlal Football Club

At a glance

Parties

Santa Clara Açores Futebol SAD (Portugal) v. Esteghlal Cultural and Sport Company of Iran (Esteghlal FC)

Case no.

CAS 2023/A/9571

Forum and rules

Court of Arbitration for Sport, appeal under the Code of Sports-related Arbitration (2023 edition)

Instrument

Loan Agreement of 10 August 2022 (Clause 1.4 penalty clause); FIFA Statutes Art. 57(1)

Tribunal

Marco Balmelli (Sole Arbitrator)

Sector

Football player loan

Outcome

Appeal partially upheld (27 October 2023). The FIFA decision was amended to add a contractual penalty, reduced from EUR 600,000 to EUR 345,000.

Amount

Claimed: EUR 139,995 plus 5% interest from 11 August 2022, and a EUR 600,000 penalty. Awarded: EUR 139,995 plus interest, and EUR 345,000 as the penalty.

The dispute

On 10 August 2022 CD Santa Clara loaned a player to Esteghlal FC until 30 June 2023 for a loan fee of EUR 230,000, payable by 10 August 2022. Under Clause 1.4, a heavy breach not cured within 15 days of formal notice led to automatic termination and a fine equal to the EUR 600,000 purchase option. Esteghlal paid only EUR 90,005. It blamed banking sanctions on Iran, and the award notes that it had sent forged bank transfer documents. The FIFA Players' Status Chamber awarded the outstanding EUR 139,995 plus interest but refused the penalty, finding that Santa Clara had not validly terminated the agreement. Santa Clara appealed for the penalty. Esteghlal argued that termination and penalty must be read together, that it was not at fault, and that the penalty was excessive.

Key holdings

1. Esteghlal did not file its own appeal, and counterclaims are not admissible in CAS appeal proceedings. Its request to confirm the validity of the Loan Agreement was therefore inadmissible. ¶ 47
2. Failing to pay the loan fee was a heavy breach. Banking sanctions on Iran were neither new nor unforeseeable and did not excuse the breach. ¶¶ 62–63
3. The first notice of 12 September 2022 was not a proper notice under Clause 1.4. The notice of 18 October 2022 was, and the agreement terminated when its grace period lapsed on 2 November 2022. Under Art. 107 CO, Santa Clara was entitled to insist on performance first, so it had not acted inconsistently. ¶¶ 67–70
4. Santa Clara is entitled to the contractual penalty under Clause 1.4, which is a valid penalty clause under Arts. 160 et seq. CO. ¶¶ 59–61, 72–73
5. Under Art. 163(3) CO, which is a matter of public policy, a judge must reduce an excessive penalty. The rule against the drafter (in dubio contra stipulatorem) did not apply, because the parties had negotiated on an equal footing. A penalty equal to the value of a definitive transfer, about 260% of the loan fee for a one-season loan, was excessive and would unjustly enrich Santa Clara. ¶¶ 77–97
6. FIFA's settlement proposal of EUR 69,998 was made without prejudice and sets no minimum. Weighing Esteghlal's conduct (forged documents, non-cooperation with the ITC request) and Santa Clara's loss of use of the fee over three transfer periods, the Sole Arbitrator set the penalty at EUR 345,000: one full loan fee plus half a loan fee. ¶¶ 99–111

Procedural history

1. 10 August 2022Loan Agreement concluded.
2. 21 November 2022Santa Clara files its claim with the FIFA Players' Status Chamber.
3. 14 February 2023The FIFA PSC awards EUR 139,995 plus interest and rejects the penalty claim. Grounds are notified on 24 March 2023.
4. 13 April 2023Statement of appeal filed with CAS.
5. 12 June 2023Sole Arbitrator appointed; no hearing is held.
6. 27 October 2023Award: appeal partially upheld, with a penalty of EUR 345,000.

Tribunal, counsel and experts

Decided by

• Marco Balmelli Sole arbitrator, Court of Arbitration for Sport — appointed by the institution

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Keywords

• football
• loan agreement
• contractual penalty
• penalty clause
• Article 163 CO
• reduction of excessive penalty
• Swiss law
• heavy breach
• termination
• venire contra factum proprium
• in dubio contra stipulatorem
• banking sanctions
• Iran
• FIFA Players' Status Chamber
• purchase option
• ne ultra petita
• forged bank documents

Summary generated with AI from the published documents — refer to the award for the authoritative text.