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Mishcon Academy: Digital Sessions - COVID-19 and Sport: Preparing for Life After Lockdown

Posted on 19 May 2020

Mishcon Academy: Digital Sessions are a series of online events, videos and podcasts looking at the biggest issues faced by businesses and individuals today.

This session was recorded on 14 May 2020. The information in the film is correct at the time of recording.

Maria Patsalos:

Welcome everyone, I am Maria Patsalos and I will be your host today.  I am a Partner in the Sports Group at Mishcon de Reya and I specialise in Immigration.  The impact of Covid-19 on the sports industry has been dramatic and some would say it has been the biggest impact ever.  Even during ancient times, wars would be paused while the Olympics were held and during WW2, which was the last biggest disrupter of sports, some sports such as cricket and baseball found a way to continue.  However, Covid-19 has effectively shut down sport as we know it for the last couple of months but are we now at a turning point?  What is next for sports as we know it?  What will be the impact on contracts and governments and what are the legal steps governing bodies, clubs and athletes should be taking now in an anticipation for a post-lockdown world?  What will the challenges and opportunities be going forward?  Well we have a fantastic panel for you today to answer those very questions.  We have John Mehrzad QC of Littleton Chambers.  We also have Moya Dodd.  Moya is a former Australian international footballer and one of the first three women on the FIFA's executive committee.  And last but not least we have our very own Simon Leaf who is the new head of our Sports Group here at Mishcon de Reya.  What are the one or two reoccurring themes that each of you are seeing post-Corona from worried clients or contacts in the sports industry whether that's players, clubs, agents or regulators.  Moya, if you can go first.

Moya Dodd: 

I think that the common reoccurring themes that I am seeing and hearing is first of all, in this early phase, it's like you have been dropped into the middle of a maze and people are trying to find their way out and it's just been a sudden dropping off the edge of a cliff of cash flows of revenues.  I think the other underlying worry now is that I think there is a perception that things are not going to go back to as it was, certainly not quickly so there's an intervening period where we need to live with Covid and try and help sport on a recovery path while we are living with Covid.

John Mehrzad:  Now we've moved on to going back to a stage where we are contemplating resuming a new ______, what happens to the clubs who are relegated or promoted or not will miss out on prize money or European qualification.  What redress do they have?

Simon Leaf:

I think the two main themes that we are seeing so far are firstly uncertainty , nobody knows exactly what's going to happen next and following on from that is caution.  I don't think anybody is acting in haste or taking firm steps now to enforce their rights but I think in the background, people are looking at what those rights would be and preparing themselves in case seasons are unable to be completed or decisions are taken that would adversely prejudice their interests.

Maria Patsalos:

What impact will the suspension of sport including the disruption to broadcast arrangements have in the medium and long term?

Simon: I think in the medium term, really we are looking at a more depressed market in all aspects of sport and on a broadcasting side, even before the pandemic hit, we heard of difficulties that premiership rugby were having in agreeing a new TV rights deal for the Premiership from 2021.  I think there are opportunities out there as well particularly for rights holders and there are certain categories that haven't been adversely impacted by the pandemic, there are potential opportunities in the medium term to perhaps focus their efforts on those kind of brands that have had a good crisis.  In longer term, inevitably there will be changes, brands and particularly the broadcasters will be looking at getting value from contracts going forward so I think we will see more of a breakdown on how those rights are split up.

Moya Dodd:

This is a really interesting and perhaps pivotal point in broadcast history I think because live sport has always been considered to be the driver of eyeballs and we were always in the transitional phase right now between broadcast and digital and perhaps this will accelerate it.  There is of course all sorts of arm wrestling going on over these agreements now, will they be terminated, will they be renegotiated and while all of that goes on, I think the innovators of the industry will be thinking, we'll what does an empty stadium look like and already people are selling tickets, virtual tickets there are screens that will go up and you will get your little block on the screen and the players can actually run over to the screen and celebrate in front of their zoom call with hundreds of fans in there or even have a stadium that is just like a big studio.  So I think all of these things will actually make the clubs more directly connected with their fans and perhaps they will move more towards a business that's driven by the value of customer data.

Maria Patsalos:

UEFA recently announced new guidelines for eligibility in international competitions which is due to the fact that it is becoming more and more clear that some of the football leagues are not going to complete the [1920] season.  John, can you tell us what kind of legal ramifications there could be as a result of leagues failing to complete their seasons?   

John Mehrzad:

UEFA were absolutely adamant at the beginning of April that seasons should be finished.  They went so far as to suggest that disciplinary action could be taken against national associations if they didn't do so.  The Belgian league, that has affectively come to an end, the Dutch league that's come to an end and in response to that, UAEFA at the end of April have come out with new guidelines.  The national association should still try to end their seasons and if not come up with an alternative way of ending a season and, in the event that seasons have to be cancelled, then decisions have to be based on objective, transparent and non-discriminatory criteria.  These have to be a set of procedures that are proposed, that are voted upon on at national level and are agreed under the respective rules of each domestic association within the Premier League and the EFL.  The key decision maker is the FA.  If the FA agrees to an amendment to its rules then we move on to a vote at Board level within the Premier League and the EFL.  Within the Premier League, each one of the 20 clubs are shareholder and to cut a long story short, 14 out of 20 of them have to vote in favour of whatever is proposed but there are inevitably going to be some clubs who will be disgruntled with the decision.  Those clubs effectively have two forms of actions.  One is a breach of contract because everything I have just said in terms of procedures and rules is a contractual framework.  If those procedures aren't followed properly, adequate notice isn't given or votes aren't carried out properly then that is obviously a breach of contract.  Secondly, we have a shareholders action called 'Unfair Prejudice' and minority shareholders can suggest that they be prejudice and most clubs would like to stop any decision in its tracks and that would mean an injunction application most likely to be based on procedures not being followed properly or obvious prejudice.

Maria Patsalos:

So Santos has asked about Force Majeure.  Can you just explain to us very briefly what it is and how is it going to affect sports contracts?

John Mehrzad: 

A Force Majeure clause is effectively a contractual clause.  That contractual clause is subject to normal principles of contractual interpretation and there are two things that it needs to set out.  One is reference to particular events so, in terms of the situation that we are in, it is a pandemic and secondly, the consequences of that particular event and so the general consequences are the contract will terminate with immediate effect and then maybe a pro-rating of the sums which are payable depending on what has been provided under those sums.  A good example is Wimbledon.  Apparently it had a Force Majeure clause covering unusually the specific event of a pandemic.  There are actually relatively few that cover this particular event.

Simon Leaf: 

Generally speaking, what people need to bear in mind at the moment is that if they are entering into new contracts, that won't actually help a party at the moment unless they say that Force Majeure events include Covid.  Often the Force Majeure clauses that we include in a complex sponsorship agreement and broadcasting agreements that we draft will tend to have had a long-stop date in them.  Effectively the party that has had to continue performing which is usually the paying party, may reach a point where the tipping point is reached and that party then has a right usually to terminate the agreement or at least then have a right to renegotiate.

Maria Patsalos: 

What happens if players feel uncomfortable or unsafe playing?  Can the clubs force the players to play?  What's your view on that?

John Mehrzad:

The general employer/employee contract is based on so called neutrality of obligation but these are not straightforward circumstances.  There are well known decisions and there are also statutory provisions that means that where the health and safety of a player or indeed any employees, staff member, coach or otherwise is in a serious or imminent danger, then a player and that employee can refuse to train or to play.  That is based on the reasonable belief of that particular employee and that belief can actually be wrong but provided that incorrect belief was, if you like, reasonable in the first place then they can still avail a protection under that statute.  If they suffer any form of detriment which means fines, dismissals, not being paid, then they are protected under legislation and they can seek recompense through the tribunal system.

Maria Patsalos:

Moya, what changes to sporting rules and regulation are likely to arise from the pandemic and what can be done now to prepare for them?  There has been some cause for financial fair play to be abolished and things like that.  Can you give us an idea of what your thoughts are on this?

Moya Dodd: 

Well I think it's very difficult to be precise in predicting what rules and regulations will come forward because the big question is who is going to be left at the table?  We are already hearing, I guess perceptions, perhaps people are resetting their view of sport, so people are getting back into participation again and they are thinking of sport or exercise as something that they do rather than something that they watch.  The big players will find their way through this but there is at risk a whole layer below that layer or two or three tiers below that are at risk or may survive in a much smaller form in terms of their economic size.

Simon Leaf: 

I think it is worth bearing in the mind the context of where we are at the moment with governance and regulatory issues in sport.  It is well known that Man City have had issues with UEAFA on financial fair play and we really saw a strengthening of the regulators and the regulators showing their team.  After the pandemic, in lots of other areas outside of sport we have heard about regulatory forbearance where effectively regulators have said we are now going to go easy on companies and organisations because we appreciate that we are in such difficult times.  I just think it will be interesting to see what happens over the next few months particularly with financial fair play.  As things stand, other than the UAEFA rules, which do have a Force Majeure provision, the Premier League and football league equivalent financial fair play rules don’t.  Certain clubs are nervous about putting funds into the club at the moment because they are concerned that it may mean that they inadvertently breached financial fair play rules by doing the right thing and continuing to pay their staff and pay players so I think it is really important that regulators step up and show that ultimately the rules were designed for a particular purpose and the current crisis clearly wasn't foreseeable and there should be greater tolerance for those that are unable to comply because of the pandemic.

Maria Patsalos: 

I have been reading as have a lot of the audience members as well, many articles since the lockdown warning about the demise of women's sports post-Covid.  Do you think that these fears are justified and is there anything that we can do to avoid it?

Moya Dodd: 

I think anytime there is cost cutting and economic shrinkage you have to be very conscious of which bits you're going to cut and I think women's sports advocates are right to be concerned about it because women's sports is so under represented at the decision making table.  A hundred years ago was the year when 53,000 people crammed into Goodison Park and watched two women's club teams play each other.  Women's football was banned from the stadiums and men's football accelerated away for 50 years or more and frankly in 100 years we have never recovered to the position that we were in 1920.  It is a big opportunity to reset things.  If you treat the products equally then the difference in demand there actually isn't a difference in demand.  If you don't assume that the demand's not there then you actually find that it is there. 

Maria Patsalos: 

Exactly, I like that rallying call and it is a good place to stop.  It just remains for me to say thank you to all of the audience for joining us today and especially to our speakers for their amazing insight and advice.  For out latest guidance and online content related to Covid 19, please visit our hub at mishcon.com/covid-19 and if you have any follow up questions, please feel free to contact us on our dedicated email address coronavirus@mishcon.com.  Thank you again everyone.

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