Velez argued that City had not abided by Federation Internationale de Football Association rules on global transfers when they signed Garre, then 16, and that the world governing body's regulations only allow players under the age of 18 to move between clubs in different countries if both are in the European Union.
The Court of Arbitration for Sport says Federation Internationale de Football Association was right to let Manchester City sign teenager Benjamin Garre from Argentine club Velez Sarsfield.
City have been battling in the Court of Arbitration for Sport (CAS) with the 17-year-old's former club, Velez Sarsfield, after snapping up the youngster nearly two years ago.
That case has been running since July, with a court case heard nine months ago.
The Premier League side believed the player was free to join them as he had turned 16 and held an Italian passport but Velez claim that the rule only applies when two European teams are involved.
As reported by the Telegraph, the club will not face a two-window transfer embargo after CAS found nothing wrong with the club's activities that year, but Velez will now have the right to appeal the decision. To further complicate matters Velez have also taken Federation Internationale de Football Association to CAS after they rejected their original complaint in September 2016.
City are waiting to discover if they'll be hit with a transfer ban, according to reports in The Telegraph and The Daily Mail. ESPN's Mark Ogden and Jonathan Smith discuss whether Pep Guardiola can break even more league records after Manchester City won the Premier League.
Barcelona, Real Madrid and Atletico Madrid have been subjected to transfer embargoes in recent years after being found guilty of breaching rules regarding the signing of global players younger than 18.
The player's parents move to the country in which the new club is located for non-footballing reasons.
They live within 100km of the club.