From 1 January 2021, the UK's relationship with the EU operates under a different legal framework, with the UK and EU Trade and Co-operation Agreement (TCA) governing various aspects of trade between the two. As the UK and EU enter into a new phase of their relationship, there are a number of issues that those in the sports industry should be aware of, consider and (if necessary) take appropriate action to address.
In this note, we outline some of those headline legal issues and consider these in the context of the first 100 days of the post-Brexit world; with a particular focus on the changes in the legal position from an Immigration, Intellectual Property, Employment, Trade in Goods and Services, Commercial Contracts, Corporate and Data Protection perspective.
The UK's Skilled Worker (work permit) visa regime changed following Brexit, with the changes for elite sportspeople introduced in December 2020. These changes are not substantive and instead mostly reflect a revision and simplification of the wording and organisation of the visa rules. We understand the visa rules for sportspeople will undergo further revision in the coming months to continue the Home Office's drive for simplification of the visa options for sportspeople.
Governing Body Endorsement
To obtain a work permit for an elite sportsperson the employer must first obtain a Governing Body Endorsement (GBE). The governing body, for example the Football Association (FA) for football clubs and the Rugby Football Union for rugby clubs, issue GBEs. Governing bodies were required to rewrite their GBE rules following Brexit. This is because their pre-Brexit rules would severely limit which EU players would qualify for work permits, which in turn could reduce the appeal and strength of the domestic leagues. Using football as a case study example, we look at the FA's post-Brexit GBE rules, which the FA announced late last year.
Case study – the FA post-Brexit GBE rules:
Many were expecting a regime that would make obtaining a work permit for foreign players significantly more difficult. However, the new rules seem to strike a fair balance between enabling the signing of players from the EU, and promoting the development of youth players in England. It is important to note that the GBE requirements for female footballers are broadly the same as the criteria for male footballers, although there are slight differences to the criteria in respect of the points required.
- The new rules can automatically grant a GBE to international players:
- This auto grant will depend on the player's senior international appearances and their nation's FIFA ranking. For example, a player representing Colombia, presently ranked 15th in FIFA's men's world rankings, will automatically qualify for a GBE if they have played in at least 40% of Colombia's competitive international games in the previous 2 years. With Colombia currently ranked 26th in FIFA's women's rankings, a female Colombia player would automatically qualify for a GBE if she played in at least 80% of the country's competitive international games in the last 2 years.
- Players who do not automatically qualify through their international appearances now require 15 points to qualify for a GBE and, for a female player, she would need 24 points to qualify for a GBE. If the aforementioned male Colombian player only played in 39% of Colombia's competitive international games in the previous 2 years he would be granted 10 points. He would then have to earn the remaining 5 points through other criteria as outlined below.
- Players will be able to earn points based on how many minutes they have played domestically, their minutes in continental competitions, the final league position of their last club, the continental progression of their last club, and the league quality of their last club. Compared to the old system, there are now more ways to qualify for a GBE.
- Youth Players (under 21s) can score points through the above criteria, but there are also additional criteria that they can use to score points. These are more reflective of where a Youth Player might be in their career (i.e. points earned for minutes in equivalent international competitions like the Under 21 World Cup and points earned for their debut for the senior team).
- The Exceptions Panel has changed as well:
- Historically, the Exceptions Panel was involved when a player did not meet the international appearances criteria to qualify for a GBE. They would consider a number of criteria (amongst others) such as transfer fee, salary and minutes played to assess if a player should be issued with a GBE.
- The panel now considers if there are exceptional circumstances (e.g. injury) that led to a player not being able to achieve the required number of points. If there are, the panel will offer their recommendation to the FA that a GBE should be granted. However, the FA still retains ultimate discretion over the final decision.
- Now that free movement has ended, European and non-European players will both have to satisfy the same requirements to qualify for a GBE and work permit in the UK. In practice, the new GBE rules mean that active players in Europe's top five leagues (English, Spanish, German, Italian, and French) should easily obtain the required 15 points. However, English clubs will find it significantly more difficult to obtain work permits for youth players from Europe's best academies. This means that obtaining a GBE for first teamers such as the Kante's and Ronaldo's of the next generation should be straightforward, but signing a promising youngster such as the next Fabregas (who signed with Arsenal at 16 years old) will be significantly more difficult.
Alternative options to a GBE
Other UK visa options for sportspeople are limited, but they can work if the circumstances are right. For example, sportspeople may want to consider:
- Sportsperson Visitor – a short term visa option, usually for those who are taking part in specific competitions in the UK;
- UK Ancestry – a long term visa option for those who are from a Commonwealth country and can prove one of their grandparents was born in the UK;
- Partner of a British or settled person – a long term visa option for those who are married or in a durable relationship with a British / settled person in the UK;
- Partner of an EEA national – a long term visa option for those who are married or in a durable relationship with a EEA national in the UK (where the EEA national moved to the UK by 31st December 2020); and
- Tier 5 (Temporary Worker – Creative and Sporting) – a 12 month fixed term visa option for elite sportspeople, usually for those who do not satisfy the English language requirement for the Skilled Worker visa.
These alternative options have their own hurdles and in practice it will usually be best to proceed with the Skilled Worker visa option.
In practice, there are already signs, even in the first 100 days of 2021, that clubs and intermediaries have already changed their approaches to player recruitment. In particular, there has been a renewed focus on bringing in promising South American players, often at the expense of lower league European players. We fully expect this trend to continue over the coming weeks and months.
*Speed read – this two minute animation explains the impact of Brexit on existing EU trade marks and designs from 1 January 2021, new rights, and steps to take now.
Many individuals and organisations working in or in connection with sport took advantage of the EU-wide protection regimes available for protecting their valuable brands via a trade mark or a design. Now, they need to obtain protection separately in the EU and in the UK.
Existing IP rights
- Existing EU trade mark and design registrations, and International Registrations designating the EU, were automatically converted into comparable UK rights by the UK Intellectual Property Office on 1 January 2021. Rights holders must renew these UK rights separately from the EU right.
- EU unregistered designs and database rights that were in existence at 31 December 2020 continue to be protected in the UK for the remainder of their term of protection.
Issues to consider include
Rights holders in sports businesses should be alive to the impact on their existing and planned IP portfolios, related agreements, and ongoing/potential disputes, to ensure that their portfolios continue to be robust and well-protected. Particular issues to consider include:
- Implications of the creation of new comparable UK trade marks and designs – for example, in relation to portfolio management, on existing and future agreements, and on disputes (at both the EU and UK Intellectual Property Offices, and the Courts).
- Ensuring dual protection is in place in both the UK and EU across all relevant IP rights, with regular reviews of the use made of marks in both territories.
- Where an application for an EU trade mark or design was pending at the EU Intellectual Property Office on 31 December 2020, a UK application for the same trade mark or design in the UK filed before 30 September 2021 can claim the same priority/filing date as the EU application. It is important to diarise this deadline and make sure relevant UK applications are filed before that date.
- The UK has created a new form of unregistered design protection to replicate the existing EU regime but care must be taken over where designs are first disclosed as this may impact on where they are protected.
- Dealing with cross-border counterfeit trade, where the necessary arrangements must be in place with both EU and UK customs authorities. The UK Government will shortly be consulting on parallel trade and exhaustion of IP rights.
We are already aware of major sports organisations (including top level clubs) in the first 100 days filing trade marks and designs in both the UK and the EU to cover both jurisdictions. We have also seen a number of organisations take advantage of the rule that allows a new UK application filed before 30 September 2021 to claim the same filing date as an EU equivalent that was pending on 31 December 2021. Given the abundance of new UK rights that have been created, there has naturally been an increase in the number of requests, particularly from European based organisations, to manage their new UK trade marks and designs that were cloned from EU registrations and go on record as representative for those rights.
For more detail on the impact of Brexit on protection and enforcement of intellectual property rights, read our checklist and our review of the IP provisions in the TCA.
Brexit is not expected to have any significant implications for UK employment law. The UK Government has committed to avoiding a "race to the bottom" with regard to employment rights, and from the first 100 days of the post-Brexit period there is no indication that any changes are imminent (the UK Government recently u-turned on its review of employment rights).
However, much of UK employment law is derived from EU law, and therefore Brexit does present the possibility of future divergence. For those in the sports sector, the following areas will certainly be worth watching:
- Discrimination: Like much of society, sports continues to grapple with creating an equal, diverse and fair environment for those who work within it. Some commentators have suggested that Brexit may prompt an increase in protection for minority groups who are currently not protected (for example, those from a disadvantaged socio-economic background). Trans-rights may also be bolstered. Further, the UK Government could decide to allow positive discrimination in favour of under-represented groups in a way not currently permissible under EU law.
- Agency Workers: In places, the sports sector relies heavily on agency workers (for example, many match-day staff are provided by employment agencies). The Agency Workers Regulations 2010 (which derive from EU law) are complex and unpopular. Not yet fully embedded in UK law, they might be seen as a possible candidate for complete revocation.
Our Brexit hub contains more guidance on the potential implications for employment rights.
Trade in goods and services
Trade in sports-related goods
Significant volumes of sporting goods, apparel and other merchandise are shipped every day between the UK and the EU. We have already seen that businesses involved in exporting or importing sporting goods have faced significant challenges in terms of delays, paperwork and cost:
- The TCA has provided for tariff free trade in goods, but there are still customs formalities to comply with. Customs declarations must now be made for all goods imported into the EU from the UK. As for goods coming from the EU into the UK, the UK Government has decided to allow importers to defer their declarations until 1 January 2022.
- In addition, complex rules of origin apply meaning that only "UK origin goods" can benefit from tariff free trade under the TCA (and vice versa). This is to ensure that e.g. the UK is not simply a conduit for the sale of non-UK goods into the EU in order to avoid tariffs.
- For example, replica football shirt kits made in Asia and shipped to the UK will now not be regarded as "UK origin goods" when exported to the EU and so will attract a tariff. This has meant some businesses considering opening EU-based hubs for distribution to EU customers and this will no doubt be a feature this summer when replica kits for season 2021/22 are released.
Trade in sports-related services
- Most companies or individuals providing sports services will find they are materially affected by Brexit. In light of the COVID-19 pandemic, business travel has been severely restricted over the past 100 days. Sports persons and trainers, coaches and other advisers to the sports industry (including lawyers, accountants and other professionals) as well as those involved in audiovisual and transport services may have already found business travel challenging now that free movement of persons and services has ceased to apply post-Brexit.
- The lack of any substantial agreement on trade in services in the TCA means that that it may be unlawful to "fly in fly out" to provide certain services in certain EU Member States. This is particularly one to watch for sponsors and athletes – who will often be required under the terms of agreements to attend promotional events outside of the UK on a short-term basis. Business travellers should check visa requirements and any other local restrictions on permitted activities by non-EU business travellers. Even where it is permitted, visas may be required and restrictions placed on the types of activity permitted.
- Prior planning and a review of applicable local laws will be essential for individuals and teams traveling to the EU who will need to assess the legalities of providing services on a country by country basis.
- As with most areas of Brexit, there have already been issues that have arisen that were not obvious on 1 January 2021. For example, we saw that there was an issue in the horseracing world when a trainer based in Ireland had been told that they must pay VAT (or post security) on the value of each horse sent to the UK to race. This can be reclaimed but can still cause significant cash flow issues if an exemption of some sort is not used. Fortunately for the trainer, it seems as though VAT was not levied but this issue goes to show that there are considerable concerns about the tax position in the UK post-Brexit and a lack of clarity. It is hoped that similar problems become clearer across different sports and related industries as things develop over the next 100 days and beyond.
- VAT - In some instances, where companies based in the EU sell to UK customers they have temporarily or permanently suspended sales to UK consumers (a Dutch bicycle parts company made headlines in taking such action). The point at which VAT is collected is no longer the point of importation (i.e. into the UK) and instead is the point of sale. This has meant HMRC requiring such businesses to register for UK VAT and account for such VAT to HMRC.
- UK competition law continues to apply unchanged by Brexit. UK sports businesses should take steps to ensure they are aware of and continue to comply with the rules on anti-competitive agreements and conduct, so as to avoid possible investigations and fines.
- The European Commission will still be entitled to investigate and review agreements or conduct entered into by UK teams or professional sporting individuals where they have an effect on competition in the EU (for example the collective selling of rights to broadcast a sports league). With the conclusion of the next Premier League rights deal imminent, regulators will certainly be keeping a close eye on any changes to the existing business model employed by the Premier League (and others in a similar boat).
- In cases of pan-European cartels or abuses of dominance, there may be parallel investigations with the EU Commission and Competition & Markets Authority both involved. There will certainly be collaboration between the two to ensure a joined up approach to multi-jurisdictional infringements.
- There are no plans to water down pre-Brexit EU consumer laws, which were and remain part of UK law and nothing in the first 100 days of the post-Brexit era suggests that this is about to change.
- When selling products or services to UK or EU consumers, UK sporting companies will therefore still need to continue to comply with the rules on misleading advertising, unfair terms, and rights to refunds. EU laws in these areas have been carried forward into UK law post-Brexit. Over time, UK consumer law may diverge from EU law and so sports companies may need to consider two sets of rules.
- One issue that will impact those across the sports industry (in particular those designing, manufacturing and selling products and merchandise) relates to the product marking system, which indicates conformity with health, safety and environmental protection standards for certain products.
- The UK now has a new UK Conformity Assessed (UKCA) regime for goods sold on the GB market (England, Wales and Scotland), replacing the EU CE regime.
- While the UK Government has provided for a transitional period (until 1 January 2022) during which most products sold in the UK can continue to have the EU CE mark, the new UKCA mark is not recognised in the EU.
- In addition, some products require the new UKCA marking immediately (e.g. those that require mandatory third party conformity assessment in the UK).
Read more about the impact of Brexit on trade and goods in services.
Whilst many sports organisations or individuals may have reviewed or "future-proofed" their existing contractual arrangements to mitigate Brexit-related risks, there are a number of issues they should still continue to bear in mind when negotiating commercial contracts, alongside IP, Trade in Goods and Services and Data Protection.
- Those operating in the sports industry should continue to consider how risk is allocated in their contracts. Particularly, any risks relating to regulatory divergence, trade barriers, logistical and compliance costs, currency fluctuations and any other charges or levies that are now more likely to affect such agreements. These are likely to impact the cost and pricing structure, the duration of the contract and overall risk profile between the parties. Given the risks, we have already noticed that our sports organisation clients are more carefully considering what contractual termination rights to include for both themselves and their counterparty as a direct result of the new conditions that they face.
- UK and EU based sports organisations or individuals are also being increasingly wary of how Brexit may affect the enforcement of contracts in cross-border disputes when entering into commercial arrangements. The rules on jurisdiction and enforcement have changed. As a result, clients are spending more time considering questions such as service of proceedings and whether alternative dispute resolution methods may be more appropriate in light of the potential uncertainties when it comes to enforcing agreements involving international counterparties.
Legal and regulatory changes
- There will be increased divergence over time between the UK and EU's legal and regulatory positions. For example, there are a number of EU laws that are incoming in relation to consumer protection and digital trade, which the UK may or may not seek to replicate, and sports businesses selling to consumers in both the UK and the EU should continue to be alive to this over the next 100 days and beyond.
- Parties should consider the possible impact of this on their existing and future agreements (particularly medium to long-term agreements where there is greater risk that divergence will impact the agreement), and ensure they are satisfied with the allocation of obligations and responsibilities. Additionally, suppliers of sports goods or services may need to review and change standard terms and conditions if previously used for both the UK and EU.
- The UK will no longer participate in the EU's Digital Single Market regime (a series of laws seeking to harmonise areas such as copyright, portability of content, geo-blocking, e-commerce and audio-visual media services). As a result, those in the sports industry should already be considering the following:
- E-Commerce: if a UK based sports organisation is trading online in the European Economic Area (EEA), they should consider and review their website information requirements as they will need to comply with the legal requirements relating to online activities in each relevant EEA country.
- Geo-blocking: The EU Geo-Blocking Regulation (which regulates situations where access to a website is blocked based on the consumer's nationality) no longer applies in the UK. This means businesses may discriminate between EU and UK customers in the UK. However, UK businesses operating in the EU will still have to comply with the EU Geo-Blocking Regulation. Whilst copyright is not included in this Regulation, the EU may introduce this in the future. Rights holders, distributors and agents should be wary of this when negotiating licensing agreements with customers and suppliers to ensure compliance with the applicable laws.
- Portability of Content: As the EU Portability Regulation no longer applies in the UK, UK consumers are no longer legally entitled to benefit from their digital content subscriptions when in the EU. As a result, UK consumers may be unable to view sports content online in the EU (and vice versa). This will affect the licensing arrangements from a technical and operator perspective. Also, for those seeking to exploit rights in the UK and EU (such as sports clubs, governing bodies and sports leagues) it may potentially reduce their value. In particular, VOD platform providers, online TV services, streaming services and online gaming marketplaces are likely to be affected.
- Audio-visual Media Services Directive (AVMSD): As audio-visual services were excluded from the TCA, UK based broadcasters no longer benefit from the "country of origin" principle under AVMSD (which allows EU based broadcasters to obtain a licence and comply with regulatory standards in one EU member state to provide services in other EU states without any additional requirements). Although the European Convention on Transfrontier Television applies, it offers an incomplete solution as not all EU states have signed up to it and how it applies depends on local national law. We may also see changes to the listed events regime for sports events held in the UK and broadcast to the EU, which could impact on commercial value and exploitation opportunities. Rights holders and their agents seeking to exploit their rights should consider existing and future licensing agreements – particularly in relation to the territorial scope of the licence for UK-based broadcasters suppling EU customers (and vice versa).
For further details, see our Brexit hub on Commercial Contracts and Digital Trade.
The main areas that sports businesses should be aware of as a result of Brexit are potential changes to the organisational structure of their businesses and the associated regulatory obligations.
Freedom of establishment to operate and trade in the EU
- If a sports-related business provides its services via a branch or establishment in EU countries, that business should check if local law imposes requirements post Brexit. In particular, before 31 December 2020 there was commentary that loss of the principle of freedom of establishment could affect UK businesses. In particular, the potential loss of recognition of limited liability status for UK-incorporated businesses with their central administration or principal place of business or with branches in remaining EU Member States that operate the "real seat" principle of incorporation. Businesses should ask local lawyers to confirm the position.
Overseas business with UK branch
- Those operating sports-related businesses that are incorporated in an EU country but operate a branch in the UK, may have already noted that there are now extra overseas company filing and disclosure requirements. Businesses had until 31 March 2021 to complete this initial process.
Accounting requirement changes for EU and UK companies
- Certain exemptions in the Companies Act 2006 relating to the preparation of individual accounts no longer extend to UK companies with parents or subsidiaries incorporated in the EU. If a group structure has a UK parent company with a subsidiary in the EU, the business needs to check reporting requirements in the country where that sports-related business subsidiary is based. UK businesses with a branch operating in the EU have become third country businesses and are now required to comply with accounting and reporting requirements in the Member State in which they operate.
Access to funding for your business
- If a sports-related business depends on EU funding sources, the TCA establishes the framework and conditions for the UK’s continued participation in EU funding programmes. Participation is subject to various reservations. Shortfalls in funding as a result of Brexit may in some cases be covered by the UK Government.
Data is becoming an increasingly important asset to those operating in the sports industry. For now, the key point for sports-related organisations to note over the past 100 days has been that the EU GDPR no longer directly applies in the UK, but the UK has introduced its own (largely similar) "UK GDPR". Most businesses in the UK will be subject to the UK GDPR, and may also be subject to the EU GDPR. It will be important to monitor whether divergence between EU GDPR and UK GDPR begins to happen – if it does, this could have important economic and legal implications. Watch this space.
EU GDPR and UK GDPR
- If a sports organisation (for example, a football club) is established in an EU member state, but holds or otherwise processes individuals' data (e.g. players' data or the data of visitors to its website) in the UK (or vice versa), that organisation may be subject to both data protection regimes (EU GDPR and UK GDPR). Whilst these are broadly similar, it means there is the potential for enforcement action to be brought against sports organisations in the UK and EU for a single infringement.
- Where a sports club in the UK (or other sports-related organisation) offers goods or services to (or who monitors the behaviour of) individuals in the EU it may also be subject to EU GDPR. Such clubs who do regular business with individuals in the EU may need to appoint a representative in an EU member state. Similarly, clubs in the EU offering goods or services to (or monitoring the behaviour of) individuals in the UK may also be subject to UK GDPR. Such clubs who do regular business with individuals in the UK may need to appoint a representative in the UK.
International Data transfers
- Until at least 30 June 2021 flows of personal data from the EU to the UK can continue as if the UK were still an EU Member State. The UK Government has indicated that it will allow data flows from the UK to the EU to continue in any event, although this may change if there is a dispute over any decision by the European Commission whether or not to confer an "adequacy decision" on the UK. This means that sports-related organisations have been able so far to continue to move player and athlete data freely across the EU/UK border for the time being but the position may be different in 100 days' time.
- The European Commission is in the process of deciding whether to confer "adequacy" status on the UK's data protection regime for data transfers. If the UK's regime is accepted as adequate, then personal data transfers from the EU to the UK can continue. However, if the UK's regime is not considered to be adequate, organisations will need to assess whether they can rely on other transfer mechanisms. In February 2021, the European Commission issued draft decisions to the effect that the UK's data protection regime was adequate. Until final approval of those decisions is confirmed, sports-related organisations should undertake assessments to identify potential issues and mitigation strategies.
Read more about the impact of Brexit on data protection, the provisions in the TCA relating to digital trade and the Commission's draft adequacy decisions.