The 30-year-old Isco had looked set to sign for Union as a free agent after undergoing a medical in Berlin on the final day of the transfer window, but club officials then announced that the deal had collapsed.
“We would have been happy to see Isco among us, but we have our limits. These were exceeded today, contrary to the previous agreement, so the transfer is not taking place,” Union general manager Oliver Ruhnert said.
Neither Union nor Gestifute, the player agency run by Jorge Mendes which represents Isco, gave any further details on why the deal collapsed, according to AP.
Isco was earlier pictured in Berlin arriving for his medical check at the sports medicine department of the Charité hospital.