Davidson, who played in Australia's three World Cup group matches, believed he had finished his contract with Heracles and had become a free agent.
Heracles, however, informed Davidson they had triggered a one-year option on that deal and he remained their player.
To get the deal over the line, Albion have paid an undisclosed fee for the 23-year-old left-back, who has signed a two-year contract, with an option in the club's favour for a further season.
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