Friday, December 19, 2014

Fines imposed by sporting organisations and the penalty doctrine

Sporting organisations regularly impose fines on players, clubs and other persons within their control1.  For example:

• In late October 2014 New South Wales and Cronulla Sharks NRL player Paul Gallen was fined $50,000 ($15,000 of which was later suspended) for sending an abusive comment on social media concerning the NRL.  The amount of the fine was significant and some, including the former NRL judiciary chairman, suggested it was excessive and not in proportion to Mr Gallen’s offending behaviour2.  

• In November 2014 in the United States, Seattle Seahawks NFL running back Marshawn Lynch was fined US$50,000 (with a further $50,000 imposed from a previous suspended fine) for violating the NFL’s media policy by not speaking to the local media3.  Lynch has appealed the fine.

The rules of sporting competitions generally provide sporting organisations with an ability to sanction players, clubs and other persons within their control with monetary sanctions or fines. Fines are used to discipline players and clubs who breach the rules of the sport or the governing body and may cover a variety of events including on-field and off-field conduct, player transfers and drafts, player payment rules and conduct that brings the sport or sporting organisation into disrepute.  While the amount of fines imposed by sporting organisations can range from relatively small sums to very large amounts, in many cases the damage suffered by the relevant sporting organisation or by the sport in respect of the breach of the rules is difficult, if not impossible, to quantify.

The penalty doctrine has recently been the focus of judicial consideration in a number of Australian cases.  Most recently, Gordon J delivered her judgement in Paciocco v. Australian and New Zealand Banking Group Limited4 (Paciocco), a class action against Australia and New Zealand Banking Group Limited (ANZ) which challenged the validity of a number of different fees charged by the bank. This followed Gordon J’s decision in the original action filed in Andrews v Australian and New Zealand Banking Group5 (Andrews), which was subsequently appealed to the High Court6.

In light of the controversy surrounding Mr Gallen’s fine and recent Australian case law, it is timely to consider whether fines and other sanctions imposed by sporting organisations can be considered void and unenforceable under the penalty doctrine. 

The penalty doctrine

The penalty doctrine provides relief to parties against an obligation to make a payment by reason of that party’s breach of a provision in a contract where the payment was out of proportion with the damage suffered by the breach.

Before the High Court delivered its judgement in Andrews, it had generally been accepted that the penalty doctrine only applied when the relevant fee or penalty resulted from a breach of contract.  That is, if a fee was linked to some other condition it did not evoke the penalty doctrine.

This concept was summarised by Coleman J in Lordsvale Finance Plc v Bank of Zambia:

 • whether a provision is to be treated as a penalty is a matter of construction to be resolved by asking whether at the time the contract was entered into the predominant contractual function of the provision was to deter a party from breaching the contract or to compensate the innocent party for breach7.

On this basis at first instance Gordon J held in Andrews that certain honour, dishonour, non-payment and over limit fees were not charged by ANZ upon breach of contract by the customer (although her Honour did hold that a late payment fee levied by ANZ was payable upon breach of contract and could therefore be characterised as a penalty).  Her Honour also found these fees did not represent a fee charged in respect of an obligation or responsibility on the customer to avoid the occurrence of an event.

However, on appeal the High Court unanimously held the penalty doctrine is not confined to breaches of contract.  The High Court held that the penalty doctrine can also apply to grant relief from an obligation to make payment which is triggered by the occurrence of a condition which does not amount to a breach of contract.  What will be relevant is whether the purpose of the fee is to secure performance of an obligation or whether it is for further services or accommodation.  If it is for further services or accommodation, it will not be characterised as a penalty even if the fee is significant.  If the fee is payable to secure performance by a party to a contract, it will be enforceable only if it is a genuine pre-estimate of the damage suffered because of that party’s non-performance.

The decision of whether or not the honour, dishonour, non-payment and over limit fees imposed by ANZ were in fact a penalty was reverted back to the Federal Court for decision in Paciocco.  Interestingly, the outcome of Paciocco was very similar to the trial decision in Andrews, notwithstanding the comments of the High Court in Andrews in relation to the scope of the penalty doctrine.

Are fines imposed by sporting organisations unenforceable penalties?

Generally speaking sporting organisations impose monetary sanctions or fines as part of disciplinary procedures with the purpose of having a deterrent effect in relation to certain behaviours and ensuring compliance with the rules.  This disciplinary action is required to help protect the relevant competition, the players and/or the club/teams and in this sense supports the core objectives of the sporting organisation which often focus upon developing the relevant sport for the benefit of the community at large.

Traditionally the courts have not viewed such disciplinary actions or sanctions as ‘penal’ in nature, rather they have been seen as protective of the community or the welfare and reputation of the relevant organisation.

Indeed, the High Court has described disciplinary actions undertaken by a professional association as ‘entirely protective, and, notwithstanding that its exercise may involve a great deprivation to the person disciplined, there is no element of punishment involved’8.  

While much of the relevant case law involves disciplinary procedures which are sanctioned by statute and involve professional bodies there is no reason why the same approach would not also be applied to disciplinary actions of sporting organisations.

For example, in Thompson v British Medical Association (NSW Branch)9 a doctor was expelled from the New South Wales branch of the British Medical Association and, much like a sporting organisation, the disciplinary orders were made by a governing body (not sanctioned by any statute) under the Rules of the Association which have their basis in contract law.  In that matter the Court observed that:

• The object of the rule is, in their Lordships’ view, not to penalise or impoverish or injure (the plaintiff) … but solely to keep up the discipline and ‘morale’ of the members of the association to protect and promote its interests10.

Consideration of a purported penalty clause, particularly one which involves a financial sanction, also requires consideration of the quantum of the proposed penalty.  Courts have historically directed juries to assess the real damages suffered by the plaintiff for the breach of the agreement and permitted the plaintiff to recover that sum11.  As a result, where it is impossible to assess the loss that has been suffered the penalty doctrine is unlikely to be engaged.  This approach was reinforced by the High Court in Andrews when it stated that:

• the penalty doctrine is not engaged if the prejudice or damage to the interests of the second party by the failure of the primary stipulation is insusceptible of evaluation and assessment in money terms12.

It would be difficult to characterise many of the monetary sanctions or fines in the rules of sporting organisations as being intended to provide for an element of compensation for economic loss or damage which might be sustained by a sporting organisation by any particular breach or infringement of its rules.  The object of the rules of sports and sporting organisations are usually protective as opposed to compensatory.  Financial sanctions for disciplinary matters are therefore not likely to be regarded as ‘penal’ in nature.

In some circumstances, a breach of a sporting organisations’ rules (particularly involving breaches by clubs of player payment rules or transfer rules) may indeed lead to significant long term damage and economic loss to the sport.  However, even if the sanctions were intended to provide some form of compensation, such losses are likely to be impossible to assess.

It is in this context that Mr Gallen would have faced a number of problems had he wished to challenge the fine imposed by the NRL as an unenforceable penalty.  Not only could the NRL argue the sanction was designed to protect the image, reputation and integrity of the game, but it would also have been difficult, if not impossible, to determine the economic loss which would be suffered by the NRL as a result of Mr Gallen’s comments on social media.  How do you quantify the effect of the comments made by Mr Gallen’s, a senior player who has represented his county, on the NRL’s battle to win the ‘hearts and minds’ of Australian sports fan?

Practical suggestions

While there are sound grounds that monetary sanctions and fines imposed by a sporting organisation under its rules for disciplinary reasons do not amount to a penalty, there are nonetheless a number of practical things which sporting organisations can do to strengthen their position to avoid confusion and rebut any claim that a financial sanction should be characterised as an unenforceable penalty:

• include provisions in the relevant rules and associated contracts clearly stating that the purpose of the sanctions is to protect the competition, the sport, players, clubs and/or other relevant participants or stakeholders in accordance with the objects of the sporting organisation;

• decision makers should give consideration to proportionality when imposing any fine, particularly where the fine has or may be seen as having an element of compensation; and

• refrain from using the word ‘penalty’ in the relevant rules, instead words such as ‘fine’ or ‘sanction’ are more appropriate.

 

Martin Ross
Partner
Mark Lebbon
Lawyer
Hall & Willcox LLP, Sydney
martin.ross@hallandwilcox.com.au 
mark.lebbon@hallandwilcox.com.au


1. For discussion of the class of persons subject to the rules of a sporting organisations, see Commentary - the 'purview tof the rules principle', http://www.hallandwilcox.com.au/news/Pages/Sports-and-Entertainment-Update-230812.aspx’:  

2. Peter FitzSimons, ‘NRL had to act over Paul Gallen’s foul tweet’, Sydney Morning Herald (Sydney), 31 October 2014 http://www.smh.com.au/sport/the-fitz-files/nrl-had-to-act-over-paul-gallens-foul-tweet-20141031-11etcl.html

3. Ed Werder, ‘Silence costs Marshawn Lynch $100k’ ESPN, 20 November 2014 (online) http://espn.go.com/nfl/story/_/id/11904067/nfl-takes-100k-seattle-seahawks-marshawn-lynch-media-silence?src=mobile

4. [2014] FCA 52 (‘Paciocco’).

5. [2011] FCA 1376.

6. Andrews v Australia and New Zealand Banking Group Limited 247 CLR 205, 217.

7. [1996] QB 752, 762.

8. NSW Bar Association v Evatt (1968) 117 CLR 177, 183-184.

9. [1924] AC 764.

10. [1924] AC 764, 769-770.

11. Kemble v Farren (1829) 130 ER 1234; Reynolds v Bridge (1856) 119 ER 961.

12. 247 CLR 205, 217.


• This article was originally published on the Hall & Willcox LLP internet site. To access the original, click here.

 


NFL Wins Publicity Rights Dispute With Retired Players

Former professional football players who opted out of a settlement with the National Football League (NFL) over claims of publicity rights violations had their new lawsuit thrown out of a Minnesota federal court. The case originated from a class action brought by former professional football players who challenged the NFL’s use of video footage for NFL Films productions. Most of the original plaintiffs resolved their claims with a $42 million settlement deal, which established a fund for the benefit of the former players and appointed a licensing agency to assist those players in exploiting their publicity rights.

Three players – John Frederick Dryer, Elvin Lamont Bethea, and Edward Alvin White – opted out of the earlier settlement and filed their own suit alleging, among other things, that their publicity rights were violated. They argued that the videos – footage of plaintiffs playing in actual football games – were meant to promote the NFL brand and as commercial speech were entitled to minimal First Amendment protection.

But U.S. District Court Judge Paul A. Magnuson disagreed. The films “are essentially compilations of clips of game footage into theme-based programs describing a football game or series of games and the players on the field,” he explained. That the productions generated substantial goodwill for the NFL is not itself dispositive of whether the productions are advertising, the court went on to explain.

In fact, the court found the “productions themselves are not advertising,” as television networks paid the NFL for the right to air those productions and other advertisers had to pay to have their ads inserted into the production broadcasts.

Moreover, the court found that the films tell the story of a football game, or a football team, and in a sense “a history lesson of NFL football.” “The only way for NFL Films to tell such stories is by showing footage of the game – the plays, the players, the coaches, the referees, and even the fans. The NFL is capitalizing not on the likenesses of individual players but on the drama of the game itself, something that the NFL is certainly entitled to do.”

“While the NFL certainly reaps monetary benefits from the sale and broadcast of these productions, the use of any individual player’s likeness – the productions’ display of footage of plays involving an individual player – is not for commercial advantage but because the game cannot be described visually any other way,” the court said.

As noncommercial speech, the films are entitled to First Amendment protections that trump the plaintiffs’ publicity rights, the court concluded. In addition to finding that the footage satisfied an exception for newsworthy events or matters of public interest, the court found that the plaintiffs explicitly or impliedly consented to the NFL’s use of game footage by participating in interviews with the film crew.

To read the decision in Dryer v. NFL, click here.

Why it matters: In approving the November 2013 settlement, the judge indicated that the deal was fair and reasonable in large part because the chance the lawsuit would succeed on the merits was “slim at best.” The decision of these three plaintiffs to opt out and take their chances on a separate lawsuit proved unwise, as the court resoundingly rejected their publicity, copyright, and Lanham Act claims, in large part because the productions at issue were not commercial speech.

• This article originally appeared on the Manatt, Pehlps & Philips LLP blog. To access the original, click here


Wednesday, November 19, 2014

Senet group: promoting responsible gambling

The Senet Group, set up in September by four of Great Britain's biggest multi-channel gambling operators, is a new watchdog dedicated to promoting responsible gambling standards. Ron Finlay, its Chief Executive, explains its role.

 

Initially funded by William Hill, Ladbrokes, Coral and Paddy Power, membership of the Senet Group is now open to any company across the gambling industry. We aim to help members fulfil their commitment to responsible gambling and will hold them to account for compliance with codes of good practice.

Social responsibility

The Group has already committed to a series of measures in pursuit of social responsibility. From January, we will be running a major advertising campaign to help educate people on how to stay in control of their betting and keep it fun. All advertising from members will also include more prominent responsible gambling messages in a bid to further strengthen the 'stay in control' message.

Mindful of children and young people watching sport on TV, member companies have agreed not to advertise free bet and free money sign-up offers on TV before the 9pm 'watershed.' Alongside this, all advertising of gaming machines (sometimes referred to as FOBTs or Fixed Odds Betting Terminals) have been removed by members from shop windows. And 20% of shop window space is now to be dedicated to messages about responsible gambling and staying in control.

These voluntary advertising measures go beyond those required by Government and the regulator in Great Britain, the Gambling Commission. Senet Group members took this initiative in response to what they perceived as increasing public concerns over the tone of some gambling advertising, particularly from parents anxious about the possible impact on their children watching sports in the afternoon or early evening.

Governance

Modelled on the Portman Group, the self-regulatory body for the alcohol industry, the Senet Group will be chaired by an independent Standards Commissioner. Applications to become the Chair of Senet Group or one of its independent directors are now open until 21 November 2014 and details may be found at http://www.senetgroup-appointments.org.uk. Dame Janet Gaymer, former Commissioner for Public Appointments, has kindly agreed to oversee the recruitment process, which is being conducted transparently following the so-called 'Nolan Principles' of standards in public life. 

The wider Senet's membership, the more effective the Group will be. For industry operators concerned that Senet will be unduly concerned with the interests of its founding members, there is good news: the Group's constitution has not yet been finalised and there is a commitment to shape it to suit companies with different operating models, subject to its being able to fulfil its compliance function with due independence. The sanctions available to the Group for members found in breach of good practice will include 'naming and shaming' and fines.

Welcome

The Group's creation has been hailed as 'positive move' by politicians and critics of the gambling industry as a whole. UK Prime Minister, David Cameron, said he was "heartened that the industry (was) proactively introducing these measures," while Sajid Javid, Secretary of State at the Department for Culture, Media and Sport, said that it was "really good the industry is taking these initiatives."

The Gambling Commission was also positive about the new commitments, saying: "We welcome this initiative and look forward to it being translated into action. We hope it will gain traction across the industry more widely." Clive Efford, Shadow Minister for Sport, said the creation of a watchdog was a "welcome step," but it needed to cover the whole industry.

Future

Over the coming months, the Committee of Advertising Practice is expected to announce the results of its review into gambling advertising; and the Gambling Commission will be considering the results of its consultation on amendments to the social responsibility provisions in the licence conditions and codes of practice for gambling operators. In the longer term, changes in technology are likely to offer opportunities for product development and new marketing initiatives by gambling operators, while social attitudes towards gambling may also change, but are hard to predict.

The industry needs the public's confidence that it is striking the right balance between promoting an enjoyable leisure pursuit and doing its best to minimise potential harm, and the Senet Group has an important role to play. Membership will be a badge of pride. After all, as Patrick Kennedy, CEO of Paddy Power, said at Senet Group's launch: "Putting responsible gambling at the heart of our business is simply the right thing to do."

 

Ron Finlay
Chief Executive
Senet Group
ron.finlay@senetgroup.org.uk
 

The impact of the Gambling (Licensing and Advertising) Act 2014

The Gambling (Licensing and Advertising) Act 2014 has changed the way in which gambling is regulated in Great Britain from a point of supply to a point of consumption basis. Ewen Macgregor, a Partner with Bond Dickinson LLP examines the implications of these changes for the industry.

 

There have been some significant changes to the regulation of remote gambling since the Gambling (Licensing and Advertising) Act 2014 ('the Act') came into force at the start of this month. Previously, remote operators only required a licence if they had at least one piece of remote gambling equipment located in Great Britain. Remote gambling operators who located all of their equipment offshore did not need a licence and were not subject to the regulatory supervision of the Gambling Commission (UKGC). 

From 1 November 2014, gambling in the UK is regulated at the point of consumption rather than the point of supply. This means that remote gambling operators now require a licence from the UKGC if their gambling facilities are used in Britain, even if no equipment is located here. From 1 December 2014, they will also be liable to pay remote gaming duty of 15% on their profits generated from UK customers, no matter where in the world the operator is situated1. This is a major change in the way the gambling industry is regulated, as previously around only 15% of remote gambling operators had a UKGC licence. 

In addition, only licensed operators are able to advertise their services to British consumers. The advertisement of gambling is unlawful if an operator does not hold the required licence from the UKGC for the gambling to take place as advertised. A remote gambling operator will commit an offence if their remote gambling facilities are capable of being used in Great Britain and a remote operating licence is required for the gambling to take place as advertised, but the operator does not have the requisite licence2.

Background to changes

It is estimated that online gambling has a 10.9% share of the overall EU gambling market and that the UK has the largest remote gambling market out of all the EU countries, with gross gambling revenues of over €2.5 billion in 20113, but most of this gaming comes from overseas4. The Government's impetus for the changes was based on the fact that overseas based operators were not required to:

- contribute to research, education or the treatment of problem gambling; 

- report suspicious gambling to the UKGC or sports bodies; 

- report crime to the Serious Organised Crime Agency (SOCA); or 

- to test products to UKGC standards. 

The desired change also supported the Governments objective of a 'fairer tax system,' albeit that this aim was disputed by many in the industry.

The White listing system, in which non-EEA jurisdictions apply to the British government for permission for their operators to be able to advertise gambling services in Britain, is essentially taxpayer and licence-fee funded. Many British facing brands are located in white listed countries or other EEA states like Gibraltar (such as Betfair, William Hill and Ladbrokes). The Government considered that it was unfair for overseas operators to be subsidised in this fashion and effectively compete directly with British based companies without contributing in the same way to the costs of regulation, or towards the British economy5

The Government hopes that the new regulatory regime will increase protection for British consumers, as previously they may have encountered differing standards, depending on the operator they used to gamble with. The benefits of changing regulation so that gambling is regulated at the point of consumption rather than supply brings Britain into line with the approach of other European countries. 

In addition, it hopes to:

- Put domestic operators on a level playing field by making the non-domestic operators obtain an operator's licence. 

- Ensure that the UKGC's work with overseas operators is properly funded meaning that British based operators and the taxpayer will not subsidise this. 

- Provide a legitimate way for global operators to enter the British market that may assist in reducing the incidence of illegal gambling provision in Britain and provide an incentive for improved standards worldwide. 

- Make consumer protection consistent - all operators active in the British market will be expected to meet UKGC standards. 

- Simplify the system for consumers and advertisers - it will be straightforward to determine whether an operator is authorised to provide services in Britain and will become possible for the UKGC to provide advice to consumers about the majority of websites they may be using to gamble. 

- Permit instant regulatory action in the event of a problem.

Industry criticism

Unsurprisingly, many gaming companies disagreed with the Government's perception that the previous system adversely affected British consumers and suggested that there was little concrete evidence in support of this. Others suggested that requiring overseas operators to obtain a licence would duplicate the regulation already taking place in the jurisdictions where most British facing operators are based, and with which the UKGC were already familiar. White list jurisdictions are required to demonstrate they have the capacity, technical and regulatory ability to enforce gambling regulation and inform the UK Government of any changes to their regulatory systems. They were also required to comply with relevant British advertising codes of practice, which apply to the form and media in which they advertise their gambling facilities or services. 

However, the Government considers that there is nothing to stop a Member State from implementing an authorisation system notwithstanding the fact that an operator already holds an authorisation in another Member State, provided that such a system is compliant with EU case law on issues such as proportionality and discrimination. The Government also rejected suggestions that non-statutory changes such as increased regulatory co-operation and memoranda of understandings would improve things, as without a statutory system, the UK would have limited ability to enforce the provisions of an agreement if a party withdrew its co-operation6. In addition, there are operators targeting British consumers from other countries that do not have an independent regulator or a robust system of gambling regulation. Seeking out such jurisdictions and negotiating agreements would undoubtedly incur further cost - again something that the taxpayer would bear. 

High Court challenge

The legislative framework introduced by the Act was recently the subject of a High Court challenge by the Gibraltar Betting and Gaming Association (GBGA), which claimed the new regime was 'unlawful because it is an illegitimate, disproportionate and discriminatory interference with the right to free movement of services guaranteed by Article 56 TFEU.' In addition, the GBGA claimed that the new regime would actually undermine consumer protection and create perverse incentives which would encourage the uptake of unlicensed gambling. 

However, Justice Nicholas Green disagreed, rejecting the claim and concluding that the GBGA had not established that the new regime was unlawful under EU or domestic law, and it served a series of legitimate objectives. He stated that remote gambling services are highly profitable for those that provide the service, but the financial benefit to the provider can be at the expense of the social welfare of the consumer and can bring about a high consequential social and economic clean-up cost for the State7. He considered that if the Government could not lawfully move to a point of consumption regime, the prospect of any form of regulation of remote e-commerce becomes increasingly difficult. 

 

Our thoughts

Whilst one can understand the Government's financial rationale for switching the regulation and taxation of remote gambling in the UK to the point of consumption rather than supply, it remains to be seen how successful the new regime will be in practice and what level of enforcement action the UKGC will take against operators whom it considers to be breaching the new rules. 

There are some grey areas which remain to be tested. For example, the question of whether blocking access by British consumers to websites of overseas' operators is sufficient to avoid committing the offence of unlawful advertising. The UKGC says that the position is arguable, and that consumers can circumvent blocking measures. Further clarification has been given recently in relation to land-based advertising of online gambling where the UKGC has stated that gambling operators cannot advertise their services without both making it clear in the product as advertised, and in reality, that betting with that particular operator is not available to those in Britain8

Justice Green make it clear in his judgment that a an unlicensed operator whose services are capable of being used by customers in Great Britain will commit a criminal offence if it advertises its services in this jurisdiction and this will apply even if the operator has no intention of targeting British customers, but is not able effectively to block such customers accessing its services9

Translating the land-based guidance to online advertising by making it clear that if the facilities are not available in Great Britain will help to some degree. However, the bottom line is that, operators should ensure they have fully addressed the due diligence and technical challenges of making sure that consumers do not circumnavigate blocking measures. Operators should have clear policies and due diligence procedures in place to ensure they have a robust evidence trail in the event of an investigation by the UKGC. 

Of some, albeit limited, comfort to operators is the fact that the Government has stated that it will watch and learn how the new regime operates in practice and if lacunae or flaws emerge it will consider strengthening the legislation10. Only time will tell. In gambling, the many must lose in order that the few may win11

 

Ewen Macgregor
Partner
Bond Dickinson LLP, London
ewen.macgregor@bonddickinson.com

 

1. Profits are the amounts due to an operator as stakes or for use of facilities it provides for remote gaming, less amounts paid out as winnings. 

2. Section 3(3) Gambling (Licensing and Advertising) Act 2014.

3. Library of the European Parliament, Online gambling in the EU, May 2013, p2.

4. Department for Culture, Media and Sport, Remote gambling regulation - impact assessment (IA No. DCMS 029), June 2011,p9.

5. Ibid, paragraphs 51 and 52.

6. DCMS, Remote gambling regulation - impact assessment (IA No. DCMS 029), June 2011, paragraph 63.

7. Gibraltar Betting & Gaming Association Ltd and the Secretary of State for Culture, Media & Sport and others [2014] EWHC 3236 (Admin).

8. www.gamblingcommission.gov.uk/pdf/Sports%20body%20letter.pdf

9. Gibraltar Betting & Gaming Association Ltd and the Secretary of State for Culture, Media & Sport and others [2014] EWHC 3236 (Admin), paragraph 50.

10. Ibid., paragraph 117.

11. George Bernard Shaw.


Football League Championship Clubs Tweak their Financial Regulations

On November 6, representatives at an EGM of the Football League’s 24 Championship clubs voted in favour of a new set of new financial regulations which will, in two seasons, replace their previous financial fair play regulations (FFPRs). They have however taken the lead from the Premier League in renaming their new regulations that will be implemented from the 2016/17 season, the ‘Profitability and Sustainability Regulations’ (PSRs). Daniel Geey, a Senior Associate with Field Fisher Waterhouse LLP, examines the implications and consequences of this.
 

The Football League’s Press Release and Some Initial Comment

1. ‘At an EGM at Derby County, Championship clubs have agreed a new set of “Profitability and Sustainability” Regulations that will bring the division’s approach to Financial Fair Play into line with that used by the Premier League.’

Three quarters of all Championship clubs were required to vote in favour of the rule changes for any agreement to be reached. From a consensus building perspective, the Football League administration has done well to persuade at least 18 clubs to vote in favour of the new PSRs. This is because the current Football League FFPRs rules benefited a number of compliant Championship clubs that would have the competitive advantage of signing players at a time when other Championship clubs in breach (because of losses over the acceptable permitted amounts) would have been sanctioned with a transfer embargo from January.

2. ‘From the beginning of the 2016/17 season, Championship clubs will have their financial performance continuously monitored over a three season timeframe and will be permitted to lose up to £15 million during that period without having to be prescriptive over how that loss will be funded.’

Interestingly, the Football League PSRs framework will be similar in substance to the Premier League PSRs (click here for an explanation on the Premier League regulations). It would appear beneficial to have two regulatory systems that align especially because of the fluid nature of relegation and promotion between the two leagues. As is explained below, the Football League PSRs now provide practical compliance guidance for clubs that ‘yo-yo’ between the leagues to ensure they know what losses will be permitted. This was not previously set out in such a joined-up manner. Similarly, whereas before the Championship FFPRs were only based on one years’ set of accounts (see here for the detail), from the 2016/17 season, both Premier League and Football League PSRs will align to cover a three year rolling accounting period.

The example provided for in the Football League press release explains that ‘A club that moves between the Premier League and Championship will be assessed in accordance with the average allowance that is permitted in the relevant division (for example, a club that had played two seasons in the Championship and one in the Premier League would have a maximum permitted loss of £61 million – consisting of one season at £35 million and two at £13 million)’.

As such, both sets of PSRs work regardless of whether a club is in the Premier League or the Football League for the relevant calculation season. This joined up approach from a regulatory compliance perspective will be of value to clubs and, to some degree, shows both the Premier League and the Football League working together to make the PSR process more manageable and straightforward.

3. ‘In addition, they will be permitted to lose more than £15 million, but not more than an aggregate of £39 million (compared to an equivalent figure of £105 million in the Premier League) but will be subject to additional regulation when doing so. This will include providing evidence of Secure Owner Funding and Future Financial Information for the two seasons ahead. The maximum deviation under the regulations will remain at £6 million for 2014/15 and will increase to £13 million in 2015/16, in line with the maximum loss (£39 million over three seasons) permitted under the new rules.’

From the 2016/17 season (i.e. the previous Football League FFPRs continue in force for the current two seasons), Championship clubs will be permitted to lose £13m per year (up to a total of £39m over three years if they remain in the Championship) so long as club owners provide, a guarantee for the overspend. Based on the fact that the acceptable FFPR loss that a club could make in their 13/14 accounts was £8m and next year will be £6m, there will be a large increase in the acceptable loss amounts permitted so long as an owner is willing to guarantee such spending. This will give clubs from the 2016/17 season, more leeway than under the current FFPRs.

4. ‘Clubs also agreed transitional arrangements for the period leading up the introduction of the new regulations in 2016. These can be summarised as follows:
- The existing Championship FFP framework will remain in place for the 2014/15 and 2015/16 seasons.
- Any sanctions for accounts relating to the 2013/14 season will continue to take effect as intended (and in accordance with the amounts specified at the time).’
 

As explained above, the clubs that were in line to comply with the current Football League FFPRs would have needed incentivising to accept and vote in favour of the new Football League PSRs. It appears that the method for coaxing some clubs to sign up to the new regulatory framework was to ensure that the existing FFPRs will still bite for this and next season. As such, Championship clubs that are in breach of the £8m figure for the 13/14 accounting period season, during this current season, will to be sanctioned with a transfer embargo in January 2015. Similarly, clubs who were promoted to the Premier League and are in breach of the £8m acceptable deviation amount for the 13/14 season when they were in the Championship will be fined. This suggests that, if reports are to be believed, the Football League will still impose a hefty fine on QPR for their Football League FFPR breach regardless of these recent changes.

Some may argue that clubs like QPR that were promoted to the Premier League, that are no longer in the Championship and that are inherently affected by this vote have unreasonably had no say in shaping the amended regulations. Others may disagree and say they are no longer in the Football League Championship and as they are not a member they do not get a say. Similarly, it appears that no substantive changes have been made to the current sanctioning punishments so that any Championship club in breach of the £8m threshold will incur a transfer embargo (with some leeway in specific circumstances) regardless of whether they are £10,000 or £10m over the acceptable loss amount.

Conclusion

The next steps for the Football League are likely to involve issuing sanctioning decisions for those clubs in breach of the current FFPRs, imposing fines on clubs promoted to the Premier League (i.e. QPR) and transfer embargos on current Championship clubs. The rules have changed but the current FFPRs still remain in force for this and next season. In short, expect clubs to be embargoed and fined come January 2015.


Daniel Geey
Senior Associate
Field Fisher Waterhouse LLP, London
daniel.geey@fieldfisher.com

 

This article originally appeared on Daniel’s Blog, ‘The final score on football law’. You can access the original by clicking here.

 


Can ‘Rooney’ Tackle Discrimination In UK Football Management?

In October, the Football League commissioned a study into why there are so few black managers in English football. Andrew Peters, an Associate with Squire Patton Boggs, examines the US’ ‘Rooney’ rule and whether such an approach could work in the UK.

 

The issue of discrimination in professional football has again come to the fore through public statements by Fifa Vice President Jeffrey Webb in The Guardian newspaper that such discrimination is “overt”. This time attention turns to the under-representation of ethnic minority managers in the English football leagues. In particular, the talk has focussed on the “Rooney Rule”, an American initiative established in 2003 which requires NFL clubs there to interview at least one minority candidate for any head coach or senior football operations vacancy. Though the Rule does not require any active preference to be given to that candidate, minority representation in NFL team management has reportedly jumped over that period from 6 to 22%. If we assume, as we must, that the fortunes involved in doing well in the NFL mean that no team will consciously appoint anyone other than the person it sees as the best candidate, it becomes apparent that the compulsory minority interview has brought candidates into view who might otherwise have been missed.

On this basis Webb, Keith Curle (one of only two non-white football managers currently plying his trade in the top 4 flights of English football, 92 Clubs all told) and Kick it Out believe that the introduction of such a rule would address the under-representation issue here, while others have either denied that racism exists in the sport or argued that if it does, the Rooney Rule is not the answer.

While those statistics are striking, the obvious first question, however, is whether the Rooney Rule would even be lawful in this country. The Equality Act 2010 prohibits discrimination in relation to race (that covers positive discrimination too, for the most part) in both employment and recruitment, including in the ‘arrangements’ made for deciding to whom to offer employment. ‘Arrangements’ is construed broadly and would include any selection process, including for example the questions on an application form or the compiling of any short-list. On the face of it therefore, the Rooney Rule is likely to be held to be discriminatory if, in giving effect to it, the inclusion of the non-white candidate was at the expense of a better-qualified white candidate, rather than his simply being an additional candidate. Even in the latter case, there is still a risk, however – if you have to have an ethnic minority candidate, that excludes considerations of ultimate fit for that person, while a similarly (un-) qualified white applicant might not get that same chance to be interviewed. The Club might argue that the minority candidate would not have got the job anyway and therefore that the white claimant suffered no loss as he would not have got it either, but the Rooney Rule experience in the US seems to militate against this. Where premiership manager salaries run into millions, the compensation for discriminatory exclusion even from a chance of appointment could be very sizeable.

Since April 2011 the Equality Act has allowed positive discrimination in certain very limited circumstances. An employer may hire a candidate based on his race provided that (a) members of that race are disadvantaged or that their participation in an activity is disproportionately low (as would clearly be the case in respect of minority football managers) and (b) this individual is “as qualified as” the other best candidate, i.e. his race was in effect the tie-breaker. In the relatively subjective world of football management, however, it would be very difficult for a Club seeking to rely on this positive action provision to prove that the two candidates were indeed “equally qualified”. These are not all formal or quantifiable qualifications such as coaching badges, length of experience and number of wins. Clubs would quickly find themselves debating the respective but intangible merits of varying levels of success, domestic and international history, reputation, transfer market dealings, links to player targets, etc.

As a result, if a Club sought to exercise the positive action provisions to hire an ethnic minority manager and later faced a Tribunal claim from an unsuccessful white candidate, it may be safer not to base its defence on positive action, but to instead explain why it felt that the ethnic minority candidate was a better match for the role. This avoids the need for the Club to tread the dangerous and difficult line of having to prove that the two candidates were ‘equally qualified’. In reality, since the histories and circumstances of serious candidates for top-flight football management roles will never be identical, the practical likelihood of two such candidates being genuinely “equally qualified” is in any case minimal.

So, if the Rooney Rule would be unlawful discrimination and if the positive action tie-breaker provisions in the Equality Act are potentially dangerous, what is the answer to addressing the blatant under-representation of non-white football managers in the UK?

So what is the answer? It is a difficult problem to solve. There is a Catch-22 in that football clubs, and certainly the elite clubs, inevitably base their hiring policy on experience and a proven track record which are justified and legitimate recruitment criteria.  That in itself will disadvantage non-white candidates trying to break into management as they are less likely to have those attributes, given the exceptionally low number of minority managers currently plying their trade, scarcely 2% of the UK’s top 92 Clubs.  We are unlikely to get any help from the Employment Tribunals for two reasons – first, that Clubs will almost inevitably be found to have appointed on grounds of genuinely perceived merit rather than race, and second, that unless and until the ethnic minority candidates are at least “equally qualified” on the measures referred to in my earlier post, race claims will generally fail anyway.  So overall, the law would seem to offer little direct help in this matter.

The answer may lie in a deeper analysis of the point at which the minority candidates drop out of the running to be football managers. For example, are there proportionate numbers of non-white coaches earning their coaching licence/managing at grass roots level and, if not, why?  Does the problem lie at this early stage? If so, the Equality Act’s positive action provision allows for bodies to overcome a perceived disadvantage by encouraging such under-represented groups to undergo training courses and gain relevant qualifications.  A Club may, for example, choose to hold sessions for its ethnic minority playing or coaching staff to meet leading figures in coaching to discuss how to break into elite football management.   This is not giving minority candidates preference over better- qualified white candidates, but giving them a helping hand to become as (or better) qualified and so to compete on the proverbial level playing field for a managerial appointment on merit.

No one can magic up from thin air a cohort of ethnic minority candidates with equivalent experience and qualifications if they do not exist, but the game and its Clubs and governing bodies can certainly help ensure that there will be such candidates in the future.  In my view, the answer lies, as ever, in ensuring that minority candidates are given (and take) opportunities at gross-roots level.  This is of course not just a race issue – the same could equally be said of women seeking to enter football management.  When Karren Brady became a director of Birmingham City FC aged 23, it is reported that the Club Chairman told her that to succeed she would have to be twice as good as the men there.  “Luckily”, Brady is said to have replied, “that’s not difficult”.   Hopefully a solid pipeline of minority candidates will avoid the same pressure being placed upon them.

 

Andrew Peters
Associate
Squire Patton Boggs (UK) LLP, London
andrew.peters@squirepb.com

 

This article was originally published on the Squire Patton Boggs ‘Employment Law Worldview’ internet site in two parts, which you can access here and here. A search on World Sports Law Report’s internet site for ‘employment’ turned up 161 articles. To sign up for a free trial to World Sports Law Report, click here.

 


NFL Wins Publicity Rights Dispute With Retired Players

Former professional football players who opted out of a settlement with the National Football League (NFL) over claims of publicity rights violations had their new lawsuit thrown out of a Minnesota federal court. Linda A. Goldstein, Jeffrey S. Edelstein
and Marc Roth, of Manatt, examine why.

The case originated from a class action brought by former professional football players who challenged the NFL’s use of video footage for NFL Films productions. Most of the original plaintiffs resolved their claims with a $42 million settlement deal, which established a fund for the benefit of the former players and appointed a licensing agency to assist those players in exploiting their publicity rights.

Three players – John Frederick Dryer, Elvin Lamont Bethea, and Edward Alvin White – opted out of the earlier settlement and filed their own suit alleging, among other things, that their publicity rights were violated. They argued that the videos – footage of plaintiffs playing in actual football games – were meant to promote the NFL brand and as commercial speech were entitled to minimal First Amendment protection.

But U.S. District Court Judge Paul A. Magnuson disagreed. The films “are essentially compilations of clips of game footage into theme-based programs describing a football game or series of games and the players on the field,” he explained. That the productions generated substantial goodwill for the NFL is not itself dispositive of whether the productions are advertising, the court went on to explain.

In fact, the court found the “productions themselves are not advertising,” as television networks paid the NFL for the right to air those productions and other advertisers had to pay to have their ads inserted into the production broadcasts.

Moreover, the court found that the films tell the story of a football game, or a football team, and in a sense “a history lesson of NFL football.” “The only way for NFL Films to tell such stories is by showing footage of the game – the plays, the players, the coaches, the referees, and even the fans. The NFL is capitalizing not on the likenesses of individual players but on the drama of the game itself, something that the NFL is certainly entitled to do.”

“While the NFL certainly reaps monetary benefits from the sale and broadcast of these productions, the use of any individual player’s likeness – the productions’ display of footage of plays involving an individual player – is not for commercial advantage but because the game cannot be described visually any other way,” the court said.

As noncommercial speech, the films are entitled to First Amendment protections that trump the plaintiffs’ publicity rights, the court concluded. In addition to finding that the footage satisfied an exception for newsworthy events or matters of public interest, the court found that the plaintiffs explicitly or impliedly consented to the NFL’s use of game footage by participating in interviews with the film crew.

To read the decision in Dryer v. NFL, click here.

Why it matters: In approving the November 2013 settlement, the judge indicated that the deal was fair and reasonable in large part because the chance the lawsuit would succeed on the merits was “slim at best.” The decision of these three plaintiffs to opt out and take their chances on a separate lawsuit proved unwise, as the court resoundingly rejected their publicity, copyright, and Lanham Act claims, in large part because the productions at issue were not commercial speech.

 

Linda A. Goldstein

Partner

Jeffrey S. Edelstein
Partner
Marc Roth
Manatt, New York
lgoldstein@manatt.com 

edelstein@manatt.com

 

This article was originally published on the Manatt internet site. You can view the original by clicking here. A search on World Sports Law Report’s internet site for ‘image rights’ turned up 46 articles. To sign up for a free trial to World Sports Law Report, click here.


Thursday, November 06, 2014

Football League Championship agrees new FFP rules

England’s Football League Championship agreed new financial fair play regulations at an Emergency General Meeting in Derby on 6 November, which are designed to bring the division’s approach in line with that of the FA Premier League. ‘At an EGM at Derby County, Championship clubs have agreed a new set of “Profitability and Sustainability” Regulations that will bring the division’s approach to Financial Fair Play into line with that used by the Premier League,” read a Football League media release. ‘From the beginning of the 2016/17 season, Championship clubs will have their financial performance continuously monitored over a three season timeframe and will be permitted to lose up to £15 million during that period without having to be prescriptive over how that loss will be funded. In addition, they will be permitted to lose more than £15 million, but not more than an aggregate of £39 million (compared to an equivalent figure of £105 million in the Premier League) but will be subject to additional regulation when doing so. This will include providing evidence of Secure Owner Funding and Future Financial Information for the two seasons ahead.’

‘A club that moves between the Premier League and Championship will be assessed in accordance with the average allowance that is permitted in the relevant division (for example, a club that had played two seasons in the Championship and one in the Premier League would have a maximum permitted loss of £61 million - consisting of one season at £35 million and two at £13 million),’ continued the release. ‘Clubs also agreed transitional arrangements for the period leading up the introduction of the new regulations in 2016. These can be summarised as follows: 

• The existing Championship FFP framework will remain in place for the 2014/15 and 2015/16 seasons.

• Any sanctions for accounts relating to the 2013/14 season will continue to take effect as intended (and in accordance with the amounts specified at the time).

• The maximum deviation under the regulations will remain at £6 million for 2014/15 and will increase to £13 million in 2015/16, in line with the maximum loss (£39 million over three seasons) permitted under the new rules. Following the Championship’s decision, The Board of The Football League has been given a mandate by its clubs to complete a new financial solidarity arrangement with the Premier League in accordance with that currently under discussion between the two leagues.’

The launch of new regulations for the Football League Championship was predicted at Player Contracts 2014, a two-day conference organised by World Sports Law Report. It is understood that the meeting was called in response to the current situation, where a number of Football League Championship clubs could face sanctions for breaching the current regulations in December / January.

 


Friday, October 31, 2014

Consolidation a key theme at Day Two of Player Contracts 2014

Day Two of Player Contracts 2014 highlighted how through regulation, football is consolidating its financial position, but this process is causing a new set of issues. Through financial fair play (FFP) regulations, the deregulation of agents and bans on third party ownership, football appears to be managing growth in player wages better than ever before. However, these measures are having more of an impact on clubs outside of the established European elite, and risk affecting their competitiveness.  

In 2012, revenue growth in European football outpaced wage growth for the first time since UEFA started collecting data in 2006, highlighted Daniel Geey of Field Fisher Waterhouse, in the opening talk of the day. However, Geey said that as many as one third of the Football League Championship clubs may be in breach of the Football League's FFP regulations. He gave the example of Queens Park Rangers, which faces a potential fine of between £30 million and £40 million for the season it spent in the Football League Championship, before being re-promoted.

Geey said that as a result of this, the Football League is to hold a meeting next week to bring its regulations "more into line with" the FA Premier League's FFP regulations, which have much more of a wide remit for losses. "The Football League will be the new FFP flashpoint come December / January, when a number of clubs could be sanctioned", he said.

Ian Lynam of Charles Russell highlighted how the Premier League already operates a "soft salary cap" through its short term cost control measures, which limit how much more a club with a large wage bill can spend on wages in the following seasons. In a session on performance-related contracts he said that currently, the amounts specified in such contracts are so small that players disregard them, but there has been a huge increase in their use during the last five to ten years.

FC Barcelona and Manchester City were highlighted as two clubs that are innovating in offering a new contract structure to players, which consists of two-thirds fixed wages, one third variable pay. Lynam said that as the average tenure of a Premier League player is now less than three seasons, players are naturally risk-averse. However, Lynam said that agents had indicated that players would go for performance-related pay as long as it balances the interest of the club with that of the player.

It was highlighted that difficulties may arise in this area - for example if a striker is paid a goal bonus, does that make him less likely to pass? In answer to this, it was highlighted that many clubs offer some players positive motivation, whilst offering others negative motivation - for example, some players will be offered a goal or win bonus, whilst others will be offered incentives for not losing. It was pointed out that in the Premier League, relegation clauses are hugely important for all clubs outside of the top eight, as clubs don't want to be saddled with a Premier League wage bill in the Championship.

The globalisation of football has also affected player image rights contracts. Fladgate LLP highlighted that in recent years, agencies will often agree both onshore and offshore deals regarding the same area of image rights for a player. 'Tweet quotas' are often included in image right contracts, such as a reward for a certain number of new followers. In an interesting 'show of hands', nobody considered Nike to be an official sponsor of the FIFA 2014 World Cup, despite their huge marketing spend around the tournament, whilst many correctly agreed that Adidas was the official sponsor.

In an detailed session on training compensation, Mark Hovell of Mills & Reeve explained that clubs have two years in which to put forward a claim for compensation under Article 25.5 of FIFA's Regulations on the Status & Transfer of Players (RSTP). He pointed out that this can create problems when a case is referred to FIFA if clubs have already been in contact, but one has refused to pay, as FIFA can rule that the two-year time limit has elapsed. This happened in CAS 2012/A/2919, FC Seoul v. Newcastle Jets, but FC Seoul was successful on appeal to the Court of Arbitration for Sport (CAS).

Marie-Anne Lindhardt, of Maqs Law Firm, pointed out how Article 49 of UEFA's FFP regulations can ensure that clubs are paid training compensation, through the requirement that no overdue payables are due to other clubs. She said that clubs often repeatedly request payment only to receive nothing, then as soon as the payee qualifies for Europe, payment magically arrives!

Andrew Rogers, Salary Cap and Regulations Manager of Premiership Rugby, gave a fascinating insight into how salary caps can work and be effectively policed by sport. "The key is that it is their regulation", he said. "The 12 club board members make the decisions about the system, and we manage it".

Perhaps the hottest topic of the day was FIFA's proposed ban on third party ownership (TPO) of players in football. Wouter Lambrecht, Legal Manager with the European Club Association (ECA), explained how the FIFA Working Group on TPO had considered three approaches:

• Full transparency, involving uploading all documents through FIFA's Transfer Matching System;
• Full transparency, but involving restrictive regulations;
• An outright ban.

He said that the Working Group had chosen the third option at a 2 September meeting - a second meeting was held yesterday, the outcome of which you can read about here. He said that the ECA had been "taken by surprise" by the timeline, which aims to have final regulations in place for approval at the May 2015 FIFA Executive Committee meeting. The ECA agrees with the decision to ban TPO, but believes that it should be allowed when it is "pure financial investment".

Lambrecht also expressed surprise that none of the stakeholders had requested analysis of whether a ban on TPO is consistent with European Union law. Ángel Juárez, of Juárez Veciana Abogados, said it was "quite possible" that a complete ban could come into conflict with Article 63 of the Treaty on the Functioning of the European Union. The ECA's main concerns are that a ban would drive the practice underground; and that FIFA will face difficulty in policing the regulations and issuing sanctions.

Through Article 18bis RSTP, FIFA currently does ban any TPO that 'enables any other party to that contract of any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of teams'. However, it was pointed out that FIFA hasn't sanctioned any clubs under this article since its introduction on 1 January 2008.

In a detailed presentation, Juárez said that the "overall economy weight" of TPO is estimated at $360m per year, or 9.7% of the transfer compensation paid in international transfers. He said that the percentage of transfer compensation accounted to third parties, when they are involved, ranges from 10% to 40%. 

Juárez, Benfica CF and FC Porto disputed the suggestion that TPO presented a risk to the integrity of football, pointing to the lack of any evidence. "The only clubs that will benefit under an outright ban on TPO will be the top clubs", said Juárez. "Smaller clubs will suffer". A suggestion was made that a sensible solution might be to create a panel or sub-committee, to which all TPO deals were submitted under agreed criteria. "The more you restrict movement and fees, the more the big clubs will profit", said a delegate, pointing out that clubs in European countries where TPO is permitted will become less competitive.

Ariel Reck, an independent Argentinean sports lawyer, pointed out that no FIFA rules currently exist prohibiting bridge transfers, where a club sells a player to another club by putting it through a 'middle' club. He explained in detail the reasons that clubs do this, and how it can create a problem when clubs use bridge transfers to inflate player fees, circumvent FIFA regulations or tax law.

Reck pointed out that as FIFA's regulations on intermediaries are set to limit the amount that agents can be paid, a TPO ban is possible and loans are on the increase due to FFP, bridge transfers will become more common. "There is therefore a need for a specific rule on this", he said.

Many thanks to all 200 delegates who made the journey to Player Contracts 2014 from 35 countries (and 43 clubs!), and to our excellent Chairmen and Advisory Board, which made Player Contracts 2014 possible. Also, many thanks to the Cecile Park Publishing team, especially Paul Moran and Carli Nelson, who worked tirelessly to make this event happen.

You can read a review of Day One of Player Contracts 2014 by clicking here. Presentations are available to delegates through a link in the delegate pack. For more information on World Sports Law Report events, click here. We hope to see you at Sport & Betting 2014 at the end of the month!

Andy Brown

 


Thursday, October 30, 2014

Transparency & Protection: key themes at Player Contracts 2014

Day One review…

Regulations and jurisprudence governing player contracts should be more transparent, and should be fit for purpose were the underlying themes at Day One of Player Contracts 2014, organised by World Sports Law Report. Around 200 delegates from 35 countries, including 43 clubs, made their way to Arsenal's Emirates Stadium to hear presentations on topics including FIFA's Intermediary Regulations; Contract Termination; Protection of Minors; FIFA's Transfer Matching System and more.

In the opening session, speakers highlighted the difference between dealing with disputes at the FIFA level and the Court of Arbitration for Sport (CAS) level. It was agreed that CAS procedural rules are generally stricter than FIFA's, which are more "forgiving", as CAS Arbitrator David Casserly put it. It was argued that both approaches have their advantages, but that more transparency is needed in publishing both FIFA and CAS jurisprudence, as sometimes unpublished jurisprudence is relied upon as precedent.

FIFA pointed out that its procedural regulations are available online, but it was highlighted that these are not often followed by decision makers. It was also mentioned that CAS might consider publishing a 'closed list' of arbitrators, as at present 40 out of a list of over 300 arbitrators are used for 80% of the cases, and that it would be useful for everyone to know which arbitrators hold expertise in which areas (i.e. what cases they have acted on).

Last season, 60% of Premier League clubs sacked their manager, was a shocking opening figure from Nick Carter, Senior Legal and Commercial Counsel at Manchester City, in a presentation on termination of manager contracts. He also mentioned that corporate CEOs remain in their job for an average of six years, as compared to two years for football managers. Lucio Colantuoni, a CAS arbitrator, also highlighted that Antonio Conte, the new manager of the Italian national team, will receive over half of his pay from sponsor Puma. It emerged that manager contracts are often complex and subject to national peculiarities, and manager contract termination remains an emerging area of sports law jurisprudence.

Of course, jurisprudence is not lacking when it comes to player contract termination, but it is becoming harder for players to walk out of their contracts, due to the compensation mechanisms in place. "It would take a brave lawyer to advise a player to walk out of his contract", said John Mehrzad, a Barrister with Littleton Chambers. In an entertaining session, in which he likened the legal negotiations underpinning player contracts to a magic show, he highlighted the Comolli case as one where compensation had already been paid, but it was ruled that statutory compensation was also "magically" due.

The importance of recognising mediation clauses in player contracts was also highlighted, as Premier League clubs can be penalised if they ignore such clauses. Pekka Aho, of Studio ELSA, pointed out that mediation clauses can also be used to settle buyout clauses in player contracts, when time is an issue.

Ritchie Humpreys, Chairman of the Professional Footballers Association's Management Committee, highlighted some interesting facts from the player's perspective. He said that the average career of a player in England is eight years, and that 95% of players use agents. He also said that education of players is an issue. "Players are sometimes not aware that a clause which cuts their pay by 20% if the club is relegated, but boosts their pay by 20% if the club is re-promoted, will mean that they will be on less money".

Dan Lowen, of Couchmans, highlighted that FIFA's Intermediary Regulations are sometimes wrongly labelled as a de-regulation, when they in fact represent a "shift in focus. FIFA are regulating the activity itself rather than the person." He also said that FIFA is aware that the current regulations are not working because it lacks the resources to police them effectively. He said that the FA would make its position known about the new Intermediary Regulations known next year.

Mel Stein, Chairman of the Association of Football Agents (AFA), gave a characteristic barnstorming performance criticising FIFA's new approach. "There can be no regulation without representation", he said. "We were never consulted by FIFA." He also argued that it is standard industry practice that agents are remunerated at 5% of the transfer fee, and the 3% level suggested within the Regulations amounts to "price fixing". Stein said that the AFA's challenge to the Regulations has been acknowledged by the European Commission, who are awaiting a response from FIFA.

The need to reform FIFA's Regulations on the Transfer of Minors was also highlighted by speakers and delegates, who pointed to difficulties with the wording of the Regulations in their current form. As just one example, Jesús Arroyo, of Sevilla FC, pointed out that one exemption for a block on international transfers of U18 players was if that player's parents move to a new country. He highlighted that there are currently no exemptions to that rule - i.e. it must be both parents that move, and the exemption is not triggered if a player's legal guardians move.

Omar Ongaro, Head of Players' Status and Governance with FIFA, said that FIFA is aware of the issues. He said that a working group had agreed that there is a need to lower the age limit for which an International Transfer Certificate (ITC) is needed, from 12 to 10, which would then imply that even the international transfer of players from the ages of 10 to 12 would need to be approved by the sub-committee appointed by the Players' Status Committee.

In a very interesting presentation, Daniel Lorenz of FC Porto highlighted a number of situations where the Regulations had been strictly interpreted, preventing minors already in another country from playing. He highlighted the case of Valentin Vada, an Argentinean player who had been refused registration in France because it could not be proved that his parents had moved to France for 'reasons unconnected to football'. "The family situation needs to be taken into account", he said. "In certain situations, they could lose the chance for a better life".

Kimberly Morris, of FIFA's Transfer Matching System (TMS), highlighted how forged documents are often entered into the system as proof of last contract end, in an attempt to get a player registered. She said that both clubs and football associations have been sanctioned for trying to get around the rules in this area. In a statistical analysis of the international transfer system, she highlighted how there has recently been a huge increase in the amount of payments to intermediaries. In a new initiative, TMS will offer a tab where national associations can keep track of intermediaries used in player contracts, in order to comply with FIFA's Intermediary Regulations. She also pointed to spending inflation in England, which since 2011 has increased a three times the average market rate.

The final session of the day dealt with the extraordinary lengths that criminals will go to in order to dupe young players into handing over money in exchange for the promise of a free trial. Delegates were shown contract forms from various clubs, sometimes running into numerous pages, produced by agents forming social media profiles with information gleaned from FIFA's list of football agents. "One young player from Africa was duped into flying to Russia", said Eby Emenike of TBD Sports Management, which has launched projects in Africa - including an 'app' - to protect young players from this threat. "He made it back, but was forced to sleep rough for three months."

At Day Two of Player Contracts 2014, which takes place today, delegates will hear presentations on UEFA's FInancial Fair Play Regulations; Bonus Structures & Incentive-based pay; Training Compensation & Solidarity Payments; Salary Caps; Third Party Investment; Bridge Transfers and more. Hot topics are sure to be the European Commission's reported rejection of the Striani complaint yesterday; whether FIFA can effectively ban or regulate TPO; and the old chestnut of whether salary caps are feasible in football.

For updates, follow the #playercontracts14 hashtag on Twitter. For more information on the programme, click here.


Wednesday, October 08, 2014

ASADA Act amendments - what the changes mean for sport in Australia

The Australian Sports Anti-Doping Authority Amendment Bill 2014 (Bill) was recently referred to the Senate Community Affairs Legislation Committee for inquiry and report.

The Bill proposes five amendments to the current Australian Sports Anti-Doping Authority Act 2006 (Cth) (Act) which are all scheduled to come into effect on 1 January 2015.

Violations List

The current "Register of Findings" will be replaced by a "Violations List". The new Violations List will detail all athletes or support persons whose sanction for an Anti-Doping Rule Violation (Violation) has been finalised. This amendment aims to simplify the process of charging and sanctioning an athlete or support person for a Violation.

Under the current system, ASADA issues its show-cause notice to the athlete or support person, and thereafter the Anti-Doping Rule Violation Panel determines whether to place the person's details onto the Register of Findings. If so, ASADA informs the person's sport, and the person is then charged under the terms of the sport's anti-doping policy. This two-stage process is unique to Australia. It has long been considered antiquated and "clunky" in operation, and has resulted in matters in Australia taking a comparatively long time to process as compared to other countries.

The proposed new process is intended to streamline the steps involved. Once an athlete or support person has been charged, a hearing conducted and the person has been sanctioned by their relevant sport, ASADA will list the nature of the doping offence and the resulting sanction on the (publicly available) Violations List. Such an approach will finally align the anti-doping process in Australia with that of the rest of the world.

Prohibited Association

The Bill creates a new Violation of prohibited association, in which it will be a Violation for an athlete or support person to associate, in a professional or sports related capacity, with another person who is banned from sport or has been criminally convicted or professionally disciplined for an action that would constitute a Violation.

By way of example, it will be considered a Violation for an athlete to be trained by a coach who is currently serving a sanction. The proposed wording is very broad and, therefore, it may also be considered a Violation for an athlete to be trained by a coach who is not serving a Violation sanction, but who has been professionally disciplined for an action that would constitute a Violation. For example, a coach who is also a teacher, lawyer, doctor or other industry professional, and who has been disciplined for recreational drug use by their industry body.

The amendment has the potential to be wide-reaching in its application across sports, and will require sports to be thorough in their recruiting and appointments. The prohibition on association only applies in a sporting or professional capacity and is not intended to prevent social or family associations with a banned person.

Other amendments

Other amendments proposed by the Bill include:

Increasing the limitation period (ie the period in which a charge must be brought) for actions in relation to potential Violations from eight years to ten years.


Creating a right of appeal within Australia for athletes who are denied access to medication under a Therapeutic Use Exemption (TUE). Where an athlete's application to have medication approved under the TUE is unsuccessful, they will now have the opportunity to seek consideration of the decision by a review panel, rather than having to appeal directly to WADA.


It will be an offence, with a maximum of two years' imprisonment, to disclose protected information to anyone besides an authorised person for the purposes of the ASADA Act. While there are currently provisions under the ASADA Act relating to disclosure of confidential information, the amendments seek to simplify these rules.

Overall, the measures introduced in the Bill will simplify and streamline the anti-doping process in Australia. In particular, the introduction of the Violations List and the TUE review panel will assist both athletes and sports and are long overdue changes.

The introduction to the WADA Code of the new violation for "prohibited association" and the lack of information surrounding its operation in practice, may create a few challenges for ASADA and is likely to result in some court challenges in order to get clarity on this new violation.

However, the amendments have not addressed some of the major concerns that sport has in Australia such as:

the requirement for matters to be heard by CAS at first instance (in most cases) and the associated costs of such hearings, where other jurisdictions such as the UK, the USA, France, Canada and New Zealand have no-cost tribunals available to their sports and athletes; and

those issues pertaining to professional team sports which face a different set of challenges from individual sports.

It will be interesting to see if the Senate Community Affairs Legislation Committee makes any recommendations on the matters outlined above in its review of the Bill.

 

Amelia Lynch
Senior Associate
Tom Hickey
Graduate
alynch@landers.com.au

 

This article originally appeared on the Lander & Rogers internet site. You can access the original by clicking here. A search for ASADA on the World Sports Law Report internet site returned eight articles. To sign up for a free trial to World Sports Law Report, click here.


Tuesday, September 23, 2014

Major bookies agree self-regulation to promote responsible gambling

The recent announcement by the four major retail bookmakers – William Hill, Ladbrokes, Coral and Paddy Power – that they are committing to a range of voluntary measures to promote responsible gambling standards and ensure that the marketing of gambling is socially responsible, has been well received by the national regulator, the Gambling Commission, and politicians alike.

The proposals

Together these four operators have formed an organisation called the Senet Group, and whilst the founding members are all bookmakers, the organisation is open to all gambling operators.

The response by the betting industry to address very public concerns around gambling sees a commitment to the following steps from the 1st October 2014:

• a voluntary ban on advertising sign-up offers (free bets and free money) on TV before 9pm, mindful of children and young people watching;

• the withdrawal of all advertising of gaming machines from betting shop windows;

• dedicating 20% of shop window advertising to responsible gambling messages.

These measures follow a further initiative taken by the industry in September 2013 when the ABB's Code for ‘Responsible Gambling and Player Protection in Licensed Betting Offices’ was launched.

In addition to the above, from 1 January 2015, a commitment has been made to:

• the creation of a new independent body, The Senet Group, which will be headed by an independent Standards Commissioner to hold the industry to account;

• fund a major new advertising campaign to educate people about responsible gambling;

• all TV advertising carrying more prominent responsible gambling messages.

In launching these initiatives Richard Glynn, CEO of Ladbrokes said that whilst "Gambling has long been a leisure pursuit and part of the cultural fabric of the UK…we are alive to the concerns of the public to keep gambling a responsible and fun activity.”

Patrick Kennedy, CEO of Paddy Power also commented that "Putting responsible gambling at the heart of our business is simply the right thing to do.”

The Public Response

The Gambling Commission has welcomed the initiative adding that they "hope it will gain traction across the industry more widely" whilst Helen Grant MP tweeted that she was ‘encouraged by leading bookmakers announcement …on social responsible gambling’ adding that she was ‘pleased with the industry's pro – activity’.

Needless to say the proposals did not receive universal praise. The Campaign for Fairer Gambling is reported as saying that "the bookmakers are engaging in desperate conjuring tricks to protect their FOBT market monopoly and, put simply, this is just more smoke and mirrors. If the Gambling Commission was fit for purpose there would not be the need for a watchdog. But for any such watchdog to have credibility it should be neither industry-run nor industry-funded."

This may seem a little harsh on an industry who no doubt feels that they are damned if they do and damned if they don’t. In practice, what does all of this mean? Is it too little too late from the industry and has the ‘FOBT’ horse already bolted? There are clearly those who will feel that the industry has not gone far enough and that the proposed measures are a token effort as the political pressure mounts on the sector.

What does this mean in practice?

Whichever side of the argument you find yourself on it is, however, progress and the betting industry should be applauded for the steps that they are going to take. The recent announcement, however, should not been seen as the end for any self-regulation. It should simply be regarded as a start. Any policy, whether they be in relation to responsible gambling or, for example, health and safety, needs to be dynamic, and the steps proposed by the major bookmakers need to be re-visited on a regular basis to keep in step with changing gambling habits and trends.

On a national level the Gambling Commission should have confidence that the words of the industry are now being translated in to actions. Whilst it remains to be seen whether the Senet Group will bear the teeth that it is ultimately given it should at least be given time to bed in before any sensible conclusions can be drawn.

In so far as the local regulators are concerned, when it comes to considering applications for premises licences, local authority licensing committees (and Boards in Scotland) should take greater comfort that those operators who have signed up to the above initiatives will not only comply with their statutory obligations under the Gambling Act 2005 (‘the Act’) but will be going over and beyond that which is required of them by statute to ensure that the objectives under the Act, and in particular the protection of children and the vulnerable, are being upheld.

These steps do not of course not stop an operator from proposing its own application specific conditions nor from preventing a local authority from adding its own additional conditions on any licence where there is evidence that to do so would be necessary to uphold and promote the licensing objectives under the Act.

The future

The argument over fobts, the debate over primary gambling activity, and the political pressure on betting operators will inevitably continue (there are outstanding consultations on the LCCP and planning regulations in England and Wales as well as Scotland). There has also been an announcement by a well-known operator of AGC premises that they intend to convert their premises from an AGC to a betting office and install four FOBTs.

The recent announcement will have taken some of the heat off the betting industry in the short term at least. Observers of the industry will watch closely to see what impact, if any, the proposed changes have and how the Senet Group holds, as they say they will, the industry to account.

 

Ewen Macgregor
Partner
Emma Feeney
Solicitor
Bond Dickinson, Bristol
ewen.macgregor@bonddickinson.com
emma.feeney@bonddickinson.com


This article originally appeared on the Bond Dickinson internet site. You can access the original by clicking here. A search on World Sports Law Report’s internet site for ‘gambling’ returned 70 articles. Try a trial to World Sports Law Report by clicking here.


NFL Could Learn From New MA Domestic Violence Law

 

Baltimore Ravens running back Ray Rice, Carolina Panthers Pro Bowl defensive end Greg Hardy, and San Francisco 49ers defensive end Ray MacDonald all have something in common (and it’s not just that they are incredibly talented professional football players):  They have all been indicted for engaging in conduct that constitutes domestic violence.  In Hardy’s case, he has been convicted for domestic abuse.  And just a few days ago, Minnesota Vikings running back Adrian Peterson was indicted for abusing his son and is now under investigation for abusing another son.

The National Football League’s travails with perpetrators of domestic violence have been numerous and storied, and after years of dealing with player domestic abuse instances, the NFL finally instituted a Domestic Violence Policy.  While the NFL’s policy is directed towards perpetrators of domestic violence, Massachusetts employers now are required to protect employee victims of domestic violence.

As of 1 September 2014, Massachusetts has joined 20 other states by enacting an Act Relative to Domestic Violence (‘DV Law’).  The DV Law requires employers to:

• Provide notice about the DV Law to all of its employees.

• Grant, and reinstate employees after, domestic violence leave.

• Not engage in discrimination or retaliation against any employee exercising his or her right to leave under the DV Law.  (Employers should also institute a protocol for employees to report possible violations of the DV Law and for investigating such reports.  The protocol may be similar to that used for reporting and investigating reports of sexual harassment in the workplace.)

• Keep confidential any information received in connection with an employee’s requesting or taking leave under the DV Law.

Below is a summary of some additional key terms.

When is the DV Law effective?

The DV Law became effective on 1 September 2014.

What employers are covered by the DV Law?

Employers with fifty (50) or more employees are subject to the DV Law.  As with many Massachusetts statutes affecting employee rights, the definition of employer is not limited to entities organized under the laws of, or having a place of business in, the Commonwealth.  Nor does it define employees protected by such law as those working in Massachusetts.

What employees are covered by the DV Law?

The DV Law protects any employee who:

• works for an employer with fifty (50) or more employees; and

• is, or has a family member who is, a victim of abusive behavior by a current or former spouse or person with whom there was a dating, engagement, cohabitation, or co-parental relationship. 

The employee need not be located in Massachusetts and does not need to have been employed for any period of time before being entitled to the protections of the DV Law.

To what is an eligible employee entitled?

An eligible employee may take up to fifteen (15) days of unpaid leave in a twelve (12) month period to:

• Seek or obtain medical attention, counseling, victim services or legal assistance;

• Secure housing;

• Obtain a protective order, appear in court proceedings, or meet with a district attorney or other law enforcement official;

• Attend a child custody hearing; or

• Address other issues directly relating to the abuse.

What notification or verification must an employee provide?

Where advance notice is available, employees are required to notify their employers as to when and for how long leave is needed.  Where an employee may be in imminent danger, advance notice is not required, but an employee must give her employer notice within three (3) workdays.  However, if an employee takes an unauthorized absence that is for a reason permitted under the DV Law, then her employer may not take any negative action against the employee if the employee provides verification within thirty (30) days from the last absence that the reason for the absence was one that is protected by the DV Law.

Although the DV Law does not require it, taking a page from the NFL’s playbook, it behooves employers, and particularly in-house counsel who must advise on how to handle employee situations that may be publicly damaging, to take this opportunity to consider a policy for handling employees who are perpetrators of domestic abuse (while being mindful of legal requirements related to the use of criminal records information).

 

Renee Inomata
Partner
Chair - Labor, Employment & Employee Benefits Practice
Burns & Levinson LLP
rinomata@burnslev.com

 

This article originally appeared on the Burns & Levinson blog ‘In-House Advisor.’ You can access the original article by clicking here.

 

 


Thursday, August 28, 2014

Fantasy Sports in Kansas May Be Illegal

As our readers are aware, the legality of fantasy sports contests is determined by two things:

• the laws of the individual States in which the participants are located; and

• the rules and features of the contests themselves.

In terms of Federal law, the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA) created a specific carve out for fantasy sports games that left the legality of fantasy sports up to the States. As we have detailed on this blog, some States have decided to allow its citizens to participate in fantasy sports contests, while others are silent on the topic or have outlawed such contests entirely. Kansas appears to have become the latest State to outlaw fantasy sports contests within its borders.

The Legality of Fantasy Sports Contests in Kansas

In a recent update to its website, the Kansas Racing and Gaming Commission (KRGC) states that ‘if a fantasy sports league involves the elements of (1) prize, (2) consideration and (3) chance, then it is an illegal “lottery” prohibited by Kansas criminal law.’

The first and second elements listed by the KRGC are pretty straightforward:

• a fantasy sports prize may consist of cash, gift certificates or tangible goods awarded to the fantasy sports contest winner(s); and

• consideration is a buy-in amount or fee paid by the player to participate in the fantasy sports contest. It is the element of chance outlined by the KRGC that has caused uncertainty in the fantasy sports industry.

Under Kansas law, the element of chance, as it relates to fantasy sports, is satisfied if it predominates over any skill involved. The KRGC acknowledges that some level of skill is required to be a successful fantasy sports player. It is whether that level of skill predominates over the amount of chance involved that has been the subject of significant legal wrangling. However, the KRGC has now definitively ruled that ‘chance predominates over skill in fantasy sports leagues.’ In short, under Kansas State law, if a fantasy sports league requires players to pay a fee to participate and awards a prize to the winner(s), in the opinion of the KRGC, it is an illegal lottery, punishable under Kansas criminal law.

This blog post only touches on a few of the relevant legal issues involved in the fantasy sports arena. If you plan on engaging in, or operating, a fantasy sports venture, be sure to retain competent legal counsel to help you design your associated contests in a way that comports with applicable law, and best protects you and your business.

 

David O. Klein
Managing Partner
Klein Moynihan Turco LLP, New York
dklein@kleinmoynihan.com

 

This article originally appeared on the Klein Moynihan blog. You can access the original by clicking here. A search on the World Sports Law Report internet site for ‘fantasy sports’ returned four results. To benefit from expert analysis on the key sports regulation issues of the day by proven experts, sign up for a free trial to World Sports Law Report by clicking here.


Wednesday, July 23, 2014

Proposed ban on sponsorship of major sports events by alcohol companies kicked to touch

The Republic of Ireland has recently decided not to implement a plan to improve public health by restricting the sponsorship of major sporting events by alcohol companies. Chris Connolly, an Associate with A&L Goodbody, explains the logic behind the proposed ban and why it was decided that it should not go ahead.
 

The much debated ban on sponsorship of major sporting events by alcohol companies will not form part of the government's upcoming legislation, known as the Public Health (Alcohol) Bill. Instead, the Bill will focus on introducing minimum pricing for strong alcohol products and warnings on promotional materials and containers.

The ban is now being considered by a governmental working group, which is expected to report on the issue towards the end of 2014. This follows an agreement at government level that no ban should be implemented until a decision is reached regarding how to secure alternative funding for sports bodies, who had claimed they would suffer a significant loss of income if the ban was implemented.

This issue has caused considerable debate since the National Substance Misuse Strategy Steering Group proposed the ban among 45 recommendations to tackle the issue of alcohol misuse in society in February of last year. The key aspects of the proposed ban were:

- A ban on new sponsorship contracts in respect of major sporting events being entered into between alcohol companies and sports governing bodies from 2016.

- An outright ban on such contracts from 2020.

- The ban would not apply to sponsorship of local events, only ‘major events.’

- The ban would not apply to arts and cultural events.

Views of sports governing bodies


In their submissions to the Oireachtas Committee on Transport and Communications, a number of governing bodies in sport stated that no evidence exists which proves that introducing a ban would help solve the problem of alcohol misuse in this country. They also pointed out that the introduction of a ban would result in a drastic drop in revenue for sports bodies, which would be in addition to the decrease caused by the economic downturn.

The Federation of Irish Sport, an umbrella organisation for over 100 sports governing bodies, asserted that the value of sport sponsorship by drink companies in Ireland in 2012 was €35 million and that if this entire sector of income was to be removed, there would be no alternative source of revenue available, either from the State or sponsors in other sectors. This would cause significant damage to sport at both elite and grassroots levels.

The Football Association of Ireland (FAI) has submitted that a ‘significant part’ of its annual sponsorship of income of €6 million would be lost. Likewise, the Irish Rugby Football Union (IRFU) had stated that a ban would cost it an estimated €9 million per annum.

This reduction in funding would jeopardise the ability of sports bodies to continue with social inclusion and community based projects that promote health and well-being. One such example is the FAI's Late Night League Programme, which takes place in disadvantaged areas during prime anti-social hours.

Views of the Drinks Industry Group of Ireland (DIGI)


The DIGI is the representative of the manufacturing, distribution and retail sectors of the drinks industry. It highlighted that a ban would be extremely damaging to one of the country's most vital industries. This would be at odds with the aim of growing Ireland's export industry using the food and drinks market.

It was also asserted that advances in technology, particularly digital television and video streaming, mean that on a daily basis consumers view content and advertising that originates from outside Ireland, for example the ability to watch foreign television channels and events such as the Heineken Cup in rugby union and the John Smith's Grand National in horse racing. Therefore, a ban applying only in Ireland would not eliminate consumers from exposure to sponsorship of major sports events by drink companies in other countries, where no such ban exists.

 

Chris Connolly
Associate
A&L Goodbody, Dublin
cconnolly@algoodbody.com


This article originally appeared on the A&L Goodbody internet site. You can access the original by clicking here. A search on the World Sports Law Report internet archive for ‘sponsorship’ turned up 216 articles. To access the archive, sign up for a free trial to World Sports Law Report by clicking here.


Tuesday, July 15, 2014

Suarez, Barcelona and Liverpool’s potential £70 million plus transfer profit

With Luis Suarez now reportedly close [n.b. - this article was written before his move was confirmed] to moving to Barcelona for a reported £70 million-£80 million, this blog aims to shed light on how clubs account for the sale and purchase of players and why it is important for Financial Fair Play (FFP) compliance. I have previously written on the value of the David Luiz transfer to PSG, which can be accessed here. Parts of that blog are republished here to explain the transfer amortisation accounting process.

How purchasing clubs account for their spending

In sexy accounting speak, 'when a player is purchased, his cost is capitalised on the balance sheet and is written-down (amortised) over the length of his contract.' In laymen’s terms, transfer fees for accounting purposes are spread over the length of a player's contract. If we take Barcelona’s proposed purchase of Suarez as an example, £75 million over a five year contract is amortised by a club in its accounts to the value of £15 million per season.

A transfer occurring in the summer after the 2013-14 season (depending on Barcelona’s accounting year-end) will have an impact on a club trying to break-even for FFP purposes in subsequent seasons. As noted above, Barcelona will amortise Suarez’s transfer fee over the length of his contract. If we assume a five year contract, Barcelona will have four further £15 million amortisation charges in their 15-16, 16-17, 17-18 and 18-19 accounts. All of those amortisation costs will have FFP significance.

How selling clubs account for their income

The other important amortisation issue is the accounting procedure when a player is sold. On this topic I defer to the Swiss Ramble, who uses the ex-Manchester City player Robinho as an example:

'[H]e was bought for £32.5 million in September 2008 on a four-year contract, so annual amortisation was £8.1 million. He was sold after two years, so cumulative amortisation was £16.2 million, leaving a value of £16.3m in the books. Sale price to Milan is reported as £18 million, so City will report a profit on sale of £1.7 million in the 2010/11 accounts. Therefore, City will show an annual profit improvement of £18.1 million after this deal: £8.3 million lower wages + £8.1 million lower amortisation + £1.7 million profit on sale.'

This demonstrates how clubs write off the transfer value of a player over the lifetime of their contract and also illuminates that because Robinho was worth £16.3 million two years into his four year deal, Manchester City actually made an accounting profit on his transfer of £1.7 million. Fans would see the sale of a player for £18 million bought two years previously for £32.5 million as bad business. The club in their accounts will class it as a £18.1 million profit improvement.

Potential Suarez profit for Liverpool

Liverpool originally purchased Suarez on a 5.5 year deal from Ajax in the January 2011 transfer window for a reported £22.8 million. Suarez’s transfer fee was amortised to around £4.1 million annually (£22.8 million / 5.5 years).

Suarez then signed a (presumed) new five year contract in August 2012. The remaining book value of the transfer fee at the time of his new deal was £16.65 million as around 1.5 years of the original transfer fee (£6.15 million) had been amortised. Therefore £16.65 million amortised over the new five year deal meant a new amortisation cost of £3.33 million per season.

Then in December 2013, he signed a new 4.5 year deal. Almost 1.5 years of his re-amortised total figure of £16.65 million had been amortised, which reduced his total unamortised value by £4.99 million (£3.33 million x 1.5 years) to £11.66 million. His annual amortisation cost became £2.57 million (£11.6 million / 4.5 years), or £214,000 per month.

If you are still with me(!), depending on the exact figures that Barcelona is willing to pay for Suarez, an initial conservative £70 million transfer fee minus the remaining £8.89 million (£11.6 million – £1.71 million), which is eight months further amortisation (£214,000 x eight months December ’13 to July ’14 inclusive), gives Liverpool a total accounting profit on the Suarez sale of £61.11 million. Therefore, with £10.4 million in lower wages1, £2.57 million lower amortisation costs and £61.11 million estimated profit on the sale, Liverpool may show an annual profit improvement of around £74 million.

Such profit will no doubt put Liverpool in a stronger position to spend big this summer, but as Liverpool’s year end is 31 May, transfer revenue from the Suarez deal will only appear in the clubs 2014-15 accounts thus not one of the periods (i.e. 11-12, 12-13 and 13-14) that UEFA will use to assess the club for FFP break-even purposes during the upcoming Champions League campaign.

 

Daniel Geey
Senior Associate
Field Fisher LLP
daniel.geey@fieldfisher.com

 

1. Assuming £200k a week, equaling around £10.4 million per year.

 

This article originally appeared on Daniel's blog, 'The Final Score on Football Law.' You can access the original by clicking here. A search for 'Financial Fair Play' in World Sports Law Report's internet archive returned 36 articles. To sign up for a free trial to World Sports Law Report, please click here.


Sunday, July 13, 2014

Doping tests and privacy rights in Spain: a key court decision

Spain’s Audienca Nactional has recently ruled that the Spanish High Council for Sports cannot require athletes to permanently report their whereabouts, despite concerns that such an extreme measure is necessary to fight against doping. Diego Ramos, a Partner in DLA Piper’s global media, sport and entertainment team, examines the decision and its implications.
 

No one can deny that, over the last decade, Spain has taken the fight against Sports’ doping networks very seriously. In 2006 and 2013, two demanding laws for the health protection of federated sportsmen and the prosecution of fraud in sports competition have been passed by the Spanish Parliament. New and stringent regulations developing both laws were rapidly drafted by the local Sports authorities. Enforcement of the laws and the regulations has been particularly tough. In fact a bit too much, as one Spanish court recently ruled.

The facts are simple. The Spanish High Council for Sports (CSD) issued a regulation requiring certain federated sportsmen (e.g. the ones recovering from injuries) to be available to undergo doping tests ‘permanently’. This meant at any time, workdays or weekends, holidays or working periods, day or night, in public or private life. They need to report where they are at all times (hence the term ‘permanently’). The Spanish Association of Professional Cyclists (ACP) filed a claim against that regulation for this and other legal grounds in front of Spanish Audiencia Nacional, a central court based in Madrid that handles serious crime like terrorism, the lawfulness checking of regulations and other matters like privacy rights.

The Audiencia Nacional, in a decision that has just been made public, dismissed most of the arguments of the claim, supporting strongly the views of CSD against doping. The Audiencia Nacional even ruled that, since doping in sports is a matter of public concern, sports professionals are obliged to accept regular doping tests at unusual periods of time. However, the Audiencia Nacional also found that the Regulation went too far when requiring some federated sportsmen to report ‘permanently’ where they are. They shall report where they can be ‘usually’ found for undergoing a test (the law actually employs the term ‘usually’, rather than ‘permanently’, the court says, so the CSD went too far extending the scope of the legal authorisation, especially when a constitutional right like privacy is at stake). The court could have stopped there. However, it went into detail on the merits of the case, analysing whether the duty to report ‘permanently’ the whereabouts of an individual breaches the constitutional right to privacy. It does, according to Audiencia Nacional. Every individual, also federated sportsmen, has the right to a minimum quality of life and a minimum of dignity. By making privacy zero that goal is not achieved.

The decision could still be appealed in front of the Spanish Supreme Court. Reporting where someone is ‘usually’ may be only slightly different from reporting where s/he is at every single second. However, the decision is important, and not only because it shall improve slightly the lives of Spanish federated sportsmen and sportswomen. First of all, the court that issued this decision handles normally the legal review of the decisions made by the Spanish Data Protection Commissioner. So it is likely to have a very strong impact on any future court decision on privacy in Spain. Second, the court used for deciding a sports’ case arguments borrowed from the Spanish data protection practice, the Spanish Data Protection Commissioner and the European Data Protection Authorities (Art 29 Working Party) in geo-localisation cases (i.a. AEPD reports of 28 June 2012 and 25 May 2009, AEPD Resolution of 6 June 2013, WP Art 29 Opinion of 16 May 2011). The special legal concept of ‘proportionality’ that made up the core of privacy authorities’ and experts’ position in all these instances is the one that also boasts the new court decision. People like policemen and sportsmen can be obliged, for different reasons, to be geo-localised on a regular basis. Personal safety, public security, personal health and sports’ cleanness entail risks that justify such burden. Nevertheless, forcing them to surrender their privacy at all times in all contexts is probably not proportional to those risks that the law tries to mitigate. A life that shall be worth living requires a minimum of dignity, and privacy is a key part of it.

Sources

- The Opinion of 16 May 2011 from the WP ex Art 29 can be checked here

- The resolution of the Spanish Data Protection Commissioner of 6 June 2013 (in Spanish) can be checked here

- The AEPD Report of 25 May 2009 (in Spanish) can be checked here

- The original draft of Spanish Law 3/2013 on protection of sportsmen’s health and fights agains doping in sports can be checked here


Diego Ramos
Partner
DLA Piper, Madrid
diego.ramos@dlapiper.com

 

This article was originally published on DLA Piper’s blog. You can access the original by clicking here.

A search for the term ‘privacy’ on World Sports Law Report’s internet site returned 70 results. A search for the term ‘data protection’ returned 45 results. World Sports Law Report’s internet archive contains over ten years of sports law information. For access, please contact sophie.rowlands@e-comlaw.com.

 


Friday, June 27, 2014

Court Confirms $1.6 Million Judgment Against Former Spartan and Detroit Red Wing Hockey Player

In a 17-page opinion issued on June 5, 2014, the Honorable Gordon J. Quist of the United States District Court for the Western District of Michigan entered an order recognizing a judgment entered in Switzerland against former NHL hockey player Kevin Miller. The case is of particular local interest in that Miller was born and raised in Lansing, played college hockey for Michigan State University, and played professional hockey for a number of teams, including the Detroit Red Wings.

The underlying judgment against Miller arose out of an on-ice incident on October 31, 2010, between Miller and Andrew McKim during a Swiss hockey league game. Miller checked McKim from behind, hitting McKim in the head and neck and causing McKim to fall on the ice and hit his head. McKim suffered a concussion and other injuries and was hospitalized for several weeks. The Swiss hockey league determined that Miller's check was intentional and suspended Miller for eight games.

In addition, McKim brought a civil lawsuit against Miller for injuries resulting from the incident. At the conclusion of the civil proceedings in Switzerland, judgment was ultimately entered in the amount of 1 million Swiss Francs against Miller, which, when converted to United States dollars, and adding interest, costs, and attorneys' fees, resulted in a current judgment amount of approximately US $1.6 million.

Miller challenged recognition of the judgment under the Uniform Foreign Country Money Judgments Recognition Act (FCMJRA), which Michigan has adopted. Miller raised two arguments:

- that the Swiss judgment was repugnant to public policy and violated due process because Miller was not allowed to cross-examine the independent expert who provided opinion testimony about Miller's intent at the time he checked McKim; and

- that it was repugnant to public policy and violated due process for the Swiss civil tribunal to consider as evidence the determination by the Swiss hockey league that Miller's check of McKim was intentional.

The district court was not persuaded that either of these objections rose to the level of the Swiss judgment being repugnant to public policy. The court noted that the fact that Swiss law does not allow for cross-examination of expert witnesses "is a mere difference of procedure that does not trigger the public policy exception." Op. at 11. The district court also noted that the civil tribunal's consideration of the hockey tribunal's disciplinary determination was not repugnant to Michigan public policy in that the hockey tribunal's determination was only one of numerous sources of information, and the "Swiss civil court did not accord preclusive effect to the National League proceeding that determined that Miller intentionally injured McKim." Id. at 12.

The district court also held that these concerns did not deny Miller due process in the Swiss civil proceedings. The district court clarified that foreign tribunals do not have to provide identical procedural safeguards as United States courts, but rather "must only be compatible in that they do not offend the notion of basic fairness." Id. at 14. Although the court acknowledged that the procedures in the Swiss tribunal were not identical to those in the United States, particularly the restriction on Miller's ability to cross-examine the independent expert, "the Court cannot say the Judgment presents a serious injustice or lacks basic fairness, such that nonrecognition is appropriate." Id. at 15.

 

Bryan R. Walters
Partner
Varnum LLP, Grand Rapids
brwalters@varnumlaw.com


This article originally appeared on the Varnum LLP internet site. You can access the original by clicking here. A search on the World Sports Law report internet archive for the term ‘injury’ returned over 70 results. For a free trial to World Sports Law Report, click here.


Thursday, June 19, 2014

Playing it with a straight bat – gagging clauses and the KP settlement soap opera

Say what you like about Kevin Pietersen (and many do) but he is never boring. As a young man, he controversially left his native South Africa in protest at its racial quota system to bring his mercurial talents to England.  Since then, cricket fans have watched him develop from skunk-haired, switch-hitting talisman to record-breaking run scorer, via a disastrous stint as captain and being dropped for sending texts about his team mates to the opposition. ‘KP’ was unlikely to leave the public stage quietly and, when it was announced that his England contract was not going to be renewed following the Ashes tour of Australia, rumours abounded about his (allegedly) disinterested and disruptive influence in the dressing room.  

For a while it seemed that these rumours would remain unsubstantiated as the England and Wales Cricket Board (ECB), keen to avoid further bad publicity after a shambolic winter tour, agreed settlement terms with Pietersen. These apparently included confidentiality and ‘gagging’ provisions on both sides, which prevented either party from discussing the events leading up to the termination of Pietersen’s contract, such as any dressing room bust-ups or details of the severance negotiations. However, this did not stop a constant drip feed of comments from individuals close to the player and eventually the ECB’s Managing Director, Paul Downton, weighed in with comments of his own. In an on-the-record statement to journalists, he remarked that Pietersen had appeared disinterested and distracted in the fifth Ashes Test in Sydney, and that he could not find any team mates who had wanted the batsman to remain in the team.

Pietersen reacted furiously to Downton’s comments, denying them and suggesting that they were in breach of the agreed settlement terms, with the ECB subsequently issuing a bland apology. In a further twist, it has recently been ‘revealed’ that the confidentiality provisions in the agreement expire on 1st October of this year, and that Pietersen has lined up an interview with his friend, Piers Morgan, to ‘blow the lid’ on his sacking.

All of the above begs the question, with this much public mud now being slung, what was the point of the settlement agreement in the first place?

The first point to make is that the precise terms of the settlement reached between the parties are still unknown. However, the relative lack of specific comment by the parties since January does support the idea that the agreement dealt, at least in general terms, with confidentiality and disparaging comments. As such, it seems likely that that any off-the-record briefing of friendly journalists by Pietersen was in breach of his contractual duties and/or that the ECB most likely breached its legal obligations to Pietersen through the actions of Downton.

The second point of interest is that it is very unusual for confidentiality and non-disparagement terms to be time-limited, as it has been suggested is the case here.  Confidential information can usually be divided into two categories: information that is and will always be confidential (for example, KFC’s or Coca Cola’s secret formulas); and information that is confidential now but will not be confidential in the future (for example, details of those companies’ next advertising campaigns). Confidentiality obligations are therefore open-ended, on the basis that there is a legitimate need to preserve the first category of information in perpetuity whereas the second category of information will, by its nature, cease to be protected once it is in the public domain or no longer commercially relevant.

Restrictions on the settling parties discussing the terms and background leading up to settlement and/or making any disparaging or damaging comment about the other also tend to be open-ended. This is because settlement is generally intended to be a final resolution to all disputes between the parties and allowing them to speak ill of the other, even after a reasonable passage of time, can only put such resolution at risk.

If it is true that the settlement agreement contained confidentiality and non-badmouthing provisions, one can only speculate as to why neither party sought to take action to pursue their potential claims against the other in this case. However, the ECB may have felt that proving that Pietersen was the source of comments made by others would be difficult and that getting involved in a public dispute with him would simply fan the flames of publicity. Equally, Pietersen may have been advised that the ECB would claim his conduct had constituted a repudiatory breach of contract, which released it from its obligations to him, and that any action he took could leave him open to an expensive counter-claim. In short, both sides may have considered litigation to be a messy, unsatisfactory and potentially expensive option.

It is also possible that time limiting the relevant terms suited both parties in this case. The ECB probably accepted that it was unrealistic to expect to gag Pietersen indefinitely and that the truth would come out eventually but wanted a window of relative calm to review matters such as the coach’s position and the captaincy. Pietersen for his part may have taken the view that interest in him would remain undiminished and that agreeing to a relatively short period of silence would simply delay his opportunity to have his say in a lucrative autobiography or interview, not reduce it. The way in which events have transpired may not have been perfect for either party. However, judged from this perspective, it appears their aims have broadly been met.

The cricket, and wider sporting world, waits with bated breath for 1st October…

 

James Williams
Partner
Hill Dickinson, London
james.williams@hilldickinson.com


This article originally appeared on the Hill Dickinson blog. To view the original, click here. A search on the World Sports Law Report archive returned three results under the text ‘settlement agreement’. To sign up for a free trial to World Sports Law Report, click here.


Tuesday, June 03, 2014

2022 FIFA World Cup Qatar: a convenient leak?

Last weekend, the Sunday Times published allegations that Mohamed Bin Hammam, former President of the Asian Football Confederation and member of FIFA’s Executive Committee, attempted to bribe football executives in order to secure votes for Qatar’s bid to host the 2022 FIFA World Cup. The allegations are supported by a cache of leaked documents which appear to reveal that Bin Hammam made a total of US$5 million in secret payments, in particular to heads of African football associations.

Following concerns expressed by the Asian Football Confederation, Qatar’s Supreme Committee for Delivery & Legacy, the organising committee for the 2022 World Cup, has denied the allegations. It stressed that Bin Hammam played ‘no official or unofficial role’ in Qatar’s 2022 bid, despite his Qatari nationality.

However, as the BBC points out, the ‘vast majority’ of African officials allegedly receiving payments did not have a vote. The Sunday Times is to publish further articles alleging that Bin Hammam’s strategy was to build a groundswell of support in Africa, which would then influence the four African members of the 22-strong (two were suspended from voting) FIFA Executive Committee members who did hold a vote.

As well as categorically denying the accusations made in the Sunday Times, a media statement from the Confederation of African Football (CAF) appears to question the logic of Bin Hammam’s alleged strategy. ‘The Sunday Times claimed just before 2 December 2010, Mr Hayatou received (60) World Cup match tickets from Mr Bin Hammam,’ reads the statement. ‘As Chairman of the Organising Committee of the 2010 World Cup and vice-president of FIFA, does Mr Hayatou need anybody to offer him match tickets for the World Cup as gifts? Is he not justified and entitled in his positions to receive match tickets?’

As well as replying to the Sunday Times’ allegations, a further statement from CAF President Issa Hayatou reveals that the CAF is considering legal action against the Sunday Times. ‘The CAF president reserves the right to sue and ensure that perpetrators of these fallacious rants are held responsible for their actions,’ it reads. 

If the allegations are proved true, the maximum number of votes Bin Hammam could have secured for his $3 million would have been four. That still leaves 20 members of FIFA’s Executive Committee that would need to be convinced of the merits of Qatar’s bid (two were suspended late on in the process). As the voting process is secret, we are yet to find out who else voted for Qatar and why. 

FIFA has been coming under increasing pressure over its decision to award the 2022 tournament to Qatar. Having previously threatened a boycott, player organisation FIFPro has lent its support for a winter World Cup in 2022, due to summer temperatures that can top 50 degrees centigrade. On the other hand, the European Professional Football Leagues (EPFL) has stated that ‘all scenarios on the re-scheduling  of the World Cup in Qatar are damaging the domestic competitions and Leagues’ business interests.’

Pressure is also building for action on the conditions suffered by migrant workers, almost 1,000 of whom have died building the facilities for Qatar 2022. The International Trade Unions Congress has demanded that FIFA take action over their treatment. UK Politician Jim Murphy has done much to expose the kafala system that ties workers to their employers, who can prevent migrant workers from leaving the country.

It appears that FIFA is caught between a rock and a hard place. If it goes ahead with the tournament as planned, it faces a potential player strike or potential heatstroke deaths. If it reschedules the tournament, it faces potential action from European football leagues due to revenues lost. In either case, it faces a potential political backlash over worker conditions, which could involve sponsors, TV companies and supporters boycotting the tournament.

The leaked emails and documents come just before Michael Garcia, the US lawyer heading the Investigatory Chamber of the FIFA-funded Independent Ethics Committee, is due to report his findings concerning the initial allegations of corruption in relation to the 2022 bidding process, on 9 June. The report and its findings, to be published six weeks later, will not consider the Sunday Times’s allegations. The leaked emails also come just before FIFA’s Executive Committee meeting on 7-8 June, where the 2022 World Cup is on the agenda. Both these events precede the FIFA Congress, on 10-11 June in Sao Paulo.

Any FIFA decision to re-run the election of the 2022 hosts would make all of these issues disappear, without delving into the difficult question of who, exactly, voted for Qatar and why. The Sunday Times’s initial article refers to payments made by a person already banned by FIFA, to smaller national associations not actually involved in the 2022 voting process. It would appear that the leak, upon which the Sunday Times’s allegations are based, has come about at a convenient time and in a convenient way for FIFA to take action.

Andy Brown