West's double was intended as competitive, but explained when asked during the auction as penalties. (EW were a Dutch pair who may not have been familiar with the alerting regulations. Whether it was alerted or not, NS were given this explanation.)
Result: 2♠X(S)-1, NS-200
West led ♥2 to the queen. ♣Q was covered and won by West, who continued with two more rounds of clubs. The third was ruffed by South, and a diamond discarded from dummy. South led a trump, won by West's ace, and West continued with ♦2.
South went up with dummy's ace, played ♥A and ruffed a heart to finesse ♠10, playing West for something like ♠AQx ♥Kxx ♦x ♣A109xxx for his "penalty" double, and so went one off.
South claimed that if he had known West's double was competitive he could have finessed in diamonds and made the contract.
EW's convention card carries the statement that "most doubles in competition are for takeout". They produced a system file the following day which said (in Dutch) that double is for penalties when the opponents protect. [NB system notes are not necessarily admissible evidence, but may be considered.]
How would you rule?