CAS Case Digest · Verified against the full award text

CAS 2003/O/506 — FC Bayern Munchen AG v. Club Alianza Lima

"Bayern Munchen v. Alianza Lima" · CAS set aside the DRC's EUR 225,000 award and fixed training compensation at EUR 210,000 for Paolo Guerrero's transfer to Bayern Munich.

What happened in Bayern Munchen v. Alianza Lima

Jose Paolo Guerrero, born 1 January 1984, trained as an amateur with Club Alianza Lima from age 9 but never signed a professional contract. In early 2002 he ceased training with Alianza Lima and on 1 September 2002 signed an employment contract with FC Bayern Munchen. FIFA confirmed he was a free player. The FIFA Players' Status Committee acknowledged Alianza Lima was entitled to training compensation but not transfer compensation. When no amicable agreement was reached, the FIFA Dispute Resolution Chamber on 4 July 2003 awarded EUR 225,000, upwardly adjusting a Circular 826-based calculation of EUR 110,000 on grounds of disproportion linked to the player's U-18 national team appearances. Bayern Munich appealed to CAS on 21 August 2003; Alianza Lima cross-challenged seeking up to USD 1,371,786 based on actual training costs. CAS set aside the DRC decision and fixed compensation at EUR 210,000, applying Circular 826 indicative amounts, reclassifying Alianza Lima from category 3 to category 2 (EUR 60,000/year for ages 15-18) and using category 4 (EUR 10,000/year) for ages 12-15 over six full training years (1996-2001). The case is significant for establishing that FIFA training compensation is a reward/incentive system, not a cost-reimbursement mechanism, and for confirming that Circular 826 governs over earlier circulars under lex posterior.

Procedural history of CAS 2003/O/506

The FIFA Players' Status Committee issued a decision on 20 March 2003 confirming Guerrero was a free player and that Alianza Lima was entitled to training compensation but not transfer compensation, directing the parties to reach an amicable settlement under Circular 826. No agreement was reached. On 4 July 2003 the FIFA Dispute Resolution Chamber awarded EUR 225,000 as training compensation, calculating EUR 110,000 under Circular 826 and then increasing it on grounds of disproportion due to the player's U-18 national team appearances. The DRC Decision was notified on 4 August 2003. Bayern Munich filed a CAS request for arbitration on 21 August 2003, seeking to reduce the award to no more than EUR 110,000. Alianza Lima joined the appeal on 2 September 2003 and filed its answer on 16 October 2003, seeking USD 1,371,786 based on actual training costs. A preliminary CAS decision on 18 November 2003 confirmed jurisdiction and dismissed the stay application. A hearing was held in Lausanne on 1 April 2004.

Key holdings in CAS 2003/O/506

• FIFA training compensation is a reward and incentive for clubs that train young players, not a reimbursement of actual costs, and must be calculated using the indicative amounts in Circular 826 as the starting point.
• Circular 826 prevails over Circulars 769 and 799 under the principle lex posterior derogat priori, and the FIFA Secretariat's table classifying Peruvian clubs only in categories 3 or 4 was incompatible with Art. 6 of the Application Regulations.
• Alianza Lima, as a first-division club in a country with professional football, must be classified in category 2 under Art. 6 of the Application Regulations, entitling it to the EUR 60,000 European category 2 indicative amount for the years the player was aged 15-18.
• The burden of proving 'clear disproportion' under Circular 826 rests on the party objecting to the indicative-amount result and requires clear and convincing proof to the comfortable satisfaction of the panel.
• Interest on training compensation runs from 30 days after signature of the player's first professional contract pursuant to Art. 9 of the Application Regulations and Art. 102.2 of the Swiss Code of Obligations, at 5% per annum under Art. 104 of the Swiss Code of Obligations.

How the CAS panel reasoned

The panel first resolved the applicable law question by holding that FIFA rules governed, with Swiss law complementary, and that Circular 826 superseded Circulars 769 and 799 under lex posterior. It rejected Alianza Lima's argument that actual training costs should govern, finding that FIFA rules consistently refer to category averages rather than individual club budgets, that costs are assessed by reference to the new club's country rather than the training club's country, and that no provision compels use of individual club accounts. The panel then corrected the DRC's categorisation of Alianza Lima: the FIFA Secretariat's table placing Peruvian clubs only in categories 3 or 4 violated Art. 6 of the Application Regulations, which mandates category 2 for first-division clubs in countries with professional football. Deferring to FIFA technical experts who excluded category 1 for Peruvian clubs, the panel placed Alianza Lima in category 2. For the training period, the panel counted six full years (1996-2001), rejecting the DRC's five-year count and Alianza Lima's seven-year claim, applying Circular 769's requirement of full years of effective training. On disproportion, the panel found neither party met the clear-and-convincing standard: the player's limited national team appearances did not justify an increase, and Alianza Lima's accounts were incomplete and insufficiently audited to establish clear disproportion downward. The panel also dismissed Alianza Lima's breach-of-obligations claim, noting the player was confirmed free by FIFA and Bayern Munich was not bound by Peruvian federation rules.

Why Bayern Munchen v. Alianza Lima matters in CAS jurisprudence

This award is a foundational CAS authority on the methodology for calculating FIFA training compensation. It established that: (i) Circular 826 indicative amounts are the mandatory starting point under lex posterior; (ii) training compensation is an incentive/reward, not a cost refund; (iii) the FIFA Secretariat's confederation tables cannot override the mandatory club-categorisation hierarchy in Art. 6 of the Application Regulations; and (iv) the 'clear disproportion' exception requires clear and convincing proof from the objecting party.

Cases cited in this award

CAS 2002/O/422 CAS 2003/O/465 CAS 2003/O/527 CAS 2003/O/469 CAS 2003/O/500 CAS 2003/O/486

Frequently asked questions about Bayern Munchen v. Alianza Lima

How did CAS calculate training compensation for Paolo Guerrero in Bayern Munich v Alianza Lima?

The panel applied Circular 826 indicative amounts for Europe over six full training years (1996-2001). For ages 12-15 (years 1996-1998) it used EUR 10,000 per year (category 4), totalling EUR 30,000. For ages 15-18 (years 1999-2001) it used EUR 60,000 per year (category 2, after reclassifying Alianza Lima upward from category 3), totalling EUR 180,000, giving a grand total of EUR 210,000 plus 5% interest from 1 October 2002.

Why did CAS reclassify Alianza Lima from category 3 to category 2 in this case?

The panel held that the FIFA Secretariat's table attached to Circular 826, which placed Peruvian clubs only in categories 3 or 4, was incompatible with Art. 6 of the Application Regulations. That provision mandates that all first-division clubs in countries with professional football (other than those in category 1) must be placed in category 2. Since Peru has professional football and Alianza Lima is a first-division club, category 3 was impermissible. The panel deferred to FIFA technical experts who excluded category 1 for Peruvian clubs and therefore placed Alianza Lima in category 2.

Can a South American club claim training compensation based on its actual costs rather than Circular 826 indicative amounts?

No, according to this award. The panel held that FIFA's training compensation system is designed to construct a 'virtual and fair' value rather than reimburse actual costs, and that no provision in the Regulations or Circulars compels use of individual club accounts. The panel also noted a clear-cut rule in Circular 769 that costs shall not be established for each individual club. Circular 826 governs as lex posterior, and actual costs are relevant only to the 'clear disproportion' adjustment, which requires clear and convincing proof.

What standard of proof applies when a party argues training compensation under Circular 826 is clearly disproportionate?

The burden falls on the party objecting to the indicative-amount result and requires clear and convincing proof to the comfortable satisfaction of the panel that truly particular circumstances exist. In this case, neither Bayern Munich nor Alianza Lima met that standard: the player's limited national team appearances did not justify an increase, and Alianza Lima's financial accounts covered only 2001, lacked invoices and receipts, and contained an incomplete 'player factor' calculation that excluded players who signed professional contracts abroad.

Topics: Training compensation & solidarity at CAS

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