With the rise in Coronavirus (Covid-19) cases in the UK, and the severity of the issue escalating across the world daily, football’s governing bodies, leagues and clubs are struggling with uncertainty around legal issues in these unprecedented circumstances.
Here are some of the key issues and questions being raised by football clubs, and some practical tips for clubs to follow which will mitigate the impact of a government imposed shutdown.
Stadium operations on match days are as frantic off the pitch as they are on it. The social, economic and commercial impact that ‘behind-closed-doors’ (“BCD”), delayed or cancelled matches may have on clubs will be huge. Putting aside the detail of these issues, the uncertainty around the impact is caused largely by being unprepared for this kind of scenario.
Most commercial contracts (with sponsors, partners and insurers) will include ‘force majeure’ clauses, which allow parties to absolve themselves of any liability to perform their contractual obligations if something outside their control prohibits them from doing so. So, is the outbreak of coronavirus a force majeure event? This depends on the facts of the situation and the wording of the contract, but it remains to be seen (before any subjective analysis of any facts and contracts) how the impact of coronavirus will be treated.
It is not difficult to envisage the impact that BCD, delayed or cancelled matches will have on commercial contracts:
– Perimeter advertising deals (which carry a significant pound per minute premium in the Premier League) are valued largely on a brand’s exposure to fans in the stadium and viewers on television.
– Hospitality and catering service providers will have deals with clubs which include matchday revenue sharing from sales, as will ticketing and betting facility service providers.
– Service and product providers such as photographers, data collectors, security personnel and other casual labour contractors will likely have contracts with clubs which largely revolve around the complete matchday experience – with the presence of fans.
What should clubs be doing now?
– Reviewing all key matchday related contracts and identifying any terms which relate to non-performance, express cancellation and ‘force majeure’.
– Identifying areas of uncertainty (which there will be in these circumstances) and formulating a practical strategy as to how to best manage the relationships with other parties.
– Ensuring that you are aware of any steps which must be taken to correctly perform your obligations under the contract. For example: a force majeure clause may impose an obligation on the affected party to promptly notify in writing the other party as soon as practicable.
– Avoiding doing anything that will constitute a breach of contract. Await formal government or governing body instructions and take care before announcing anything or taking significant action (such as holding your own BCD matches) independently.
Uncertainty around the interpretation of contractual clauses in these circumstances is unavoidable. Whilst force majeure clauses are often drafted with general wording to accommodate unusual and rare events, whether coronavirus triggers a force majeure clause depends on what the contract says. Our advice is to engage in early dialogue with your contractual partners and avoid overly legalistic discussions. Focus on working together to identify a practical way forward.
Player and competition related issues
We are in the final third of a season, in the middle of a European match competition schedule and an international match schedule is diarised for later this month. In addition to BCD, delayed or cancelled matches, the football world has also seen cases of player and team wide quarantines, alongside travel bans and reduced physical meeting schedules.
Clubs carry the primary obligation to ensure that they compete in various competitions and that their players are released for international duty. They also carry onerous contractual obligations towards their players (including performance related payments). Clubs are right to ask questions like:
– Can we refuse to participate in certain European matches?
– Can we refuse to release players for international duty?
– How will cancelled matches or an extended season (particularly one that goes beyond 30 June) impact on the playing squad and player contracts?
– Taking each question in turn, our advice is as follows:
In the absence of government intervention or the relevant governing body granting permission to avoid fulfilling participation obligations, clubs should tread carefully when considering this type of action. If a particular venue or country of origin of visiting team is of concern, then open a sensible dialogue with the relevant governing body and the opposing team as soon as possible. If there are genuine concerns about the health and wellbeing of players, staff and fans, then request formal permission from the governing body and consent from the opposing party to cancel, with a view to rescheduling, the match.
If the governing body refuses your request, then you face a balancing act between your duties as a responsible employer and the threat of sporting sanction.
It is a FIFA imposed obligation that clubs release players following requests from national associations in respect of all international windows in the international match calendar (which includes friendlies). A club cannot contract out of this obligation with its players. Therefore, if national associations make the relevant requests then clubs are obliged to release those players.
However, if a player makes their own decision not to report for international duty then that will be an issue for the player. Rather than trying to force this decision on the players, clubs should initiate an early dialogue with the relevant national associations and raise any genuine concerns ahead of the forthcoming international fixture calendar.
The majority of player contracts will have a natural expiry date of 30 June. Therefore, if matches are cancelled and / or rearranged taking the season past June 30, then clubs face a real dilemma of having players out of contract during the season. If they aren’t already doing so, clubs should be considering the contracts of any key players and identifying any of those which expire on 30 June 2020.
If clubs are considering any unconventional ways of bolstering their squads for the remainder of this (extended) season (for example: the registration of ‘free agents’ or attempting to get creative around soon to be expiring contracts) then it is imperative that those registrations complete before 27 March 2020. Regulations stipulate that attempts to register players after this deadline will not be approved. It is essential that clubs speak to The FA and the leagues about any such plans and potential registrations.
In the event that matches are cancelled and / or rearranged, forcing the end of the season past the currently scheduled dates of 2 May 2020 (for the EFL) and 17 May 2020 (for the Premier League), then this may have a knock on effect on the dates of the summer.
The general position, as provided for in both the EFL and Premier League regulations, is that the Summer Transfer Window commences either at midnight on the last day of the immediately preceding season (for domestic transfers) or at midnight on the date 12 weeks prior to the date on which it is to conclude (for international transfers). As things stand, the closing date of the Summer Transfer window is 1 September 2020. However, the open and closing dates of the Summer Transfer Window may now be subject to change depending on whether or not the current football season continues ‘as planned’.
Clubs should also consider other relevant employment law and general duty of care obligations they have. The Brabners Employment Team has put together a separate blog to help employers in these circumstances
A number of insurers have been taking proactive steps to confirm that loss of revenue for cancelled events will not be covered under certain standard insurance policies. Depending on the nature of the event and the sophistication and extent of the insurance coverage, some policies contain “notifiable or communicable disease” extensions that may cover business losses (e.g. ticket refunds and the cost of unfulfilled contractual obligations with third parties).
On 5 March 2020 the government announced that a statutory instrument was made into law that adds COVID-19 to the list of notifiable diseases. Whilst this is beneficial news for many, clubs need to be aware that some insurance policies in relation to future events may now expressly exclude Covid-19 as a ‘pre-existing circumstance’.
Clubs need to be mindful that the current situation is outside the normal business experience of many insurers and therefore, if clubs are able to bring a claim, settling it may take months which means that the clubs will need to prepare to face the short-term liabilities.
Clubs competing in international competitions and / or who have arranged pre-season tours need to review the terms of their travel insurance policies as these may also exclude Covid-19. For clubs who may not have renewed their travel insurance or are new to international travel, the implications are grave with a number of UK insurers having stopped the sale of travel insurance to new customers with immediate effect. Other insurers through fears of immeasurable claims have significantly increased their renewal costs. Insurance is designed to provide cover for unforeseen and unexpected events and is priced on that basis.
What should clubs be doing now?
– Checking all relevant insurance policy wording carefully;
– Speaking with insurers and your professional advisors to better understand the scope of insurance, any excess, notification and duty to mitigate provisions;
– Calculating potential losses and forecast cash flows, as well as gather and maintain as much documentary evidence of losses as possible; and
– Implementing sensible savings, cash flow and procedural management strategies.
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