The Extra-Cover Blog
COVID 19 AND FOOTBALL: AN OVERVIEW OF THE EFFECT ON EMPLOYMENT CONTRACTS IN INDIAN FOOTBALL
Updated: Jul 10, 2020
The post is part of our COVID-19 series and has been authored by Rahul Naresh.
Rahul is a second-year student of the B.B.A. LL.B. course at Symbiosis Law School, Hyderabad. His passion for sports and early years at law school drove his interest towards sports law.
The emergence of the Coronavirus pandemic has a devastating effect on all of us. This disaster has massively affected nearly every sphere of work around the world. Sports have also taken a severe hit as a result of the pandemic, with several nations suspending their sporting leagues indefinitely and some even canceling them. Football, which is one of the most popular sports in the world today, has been facing some tough challenges during these unprecedented times. One such challenge pertains to the payment of wages and fulfillment of contractual obligations between clubs and their players.
It is no surprise that football activities have been halted due to the pandemic, which has created an unfortunate situation wherein players are unable to fulfill their contractual obligations. This essentially means that the players are unable to join practice sessions and take part in organized matches which are originally one of the main obligations to be fulfilled when it comes to representing a club’s team. As a result, a tricky situation is created, where clubs may still have to fulfill their contractual duties to pay players, to ensure that the livelihood requirements of players are met. However, several clubs may deem this situation as unfair to them, as it would mean that they will be solely performing their contractual duties while the players would not need to comply with their end of contractual duties. In India, this problem goes a little further because clubs may not have sufficient funds to pay their players without generating enough revenue, as the case has been in the past few months. The enforcement of force majeure clauses that may be present in the contracts between the club, their players and coaches thus stand out as a viable solution for many clubs.
A LIKELY OPTION
Force majeure, embodied by Section 32 of the Indian Contract Act, 1872, is defined as the occurrence of an event, which is beyond the reasonable control of the interested parties and simultaneously disables them from performing their contractual obligations. Acts that may constitute force majeure may include war, strike, epidemic, or any event of such nature that could potentially disallow the performance of contractual obligations. Given this fact, Indian clubs seeking exemption from their payment obligations on the ground of force majeure shall have to prove that the Coronavirus pandemic comes within its purview. Moreover, the question of whether a pandemic of such a nature (COVID-19) qualifies as force majeure needs to be decided on a case-to-case basis.
Currently, the I-League has been suspended as a result of the pandemic. Clubs have an option to invoke the force majeure clause and show their inability to pay their players, coaches, and staff as per the requirements in respective contracts. However, by invoking the force majeure clause, it does not mean that clubs shall be completely exempted from paying salaries to their players and coaches. It shall merely postpone the performance of the stipulated contractual duty for the time being. Once the play resumes and the leagues are underway, the clubs will have to pay the salaries due to the players and coaches.
THE ALTERNATIVE ROUTE
In cases wherein a force majeure clause is absent, clubs have an alternative option of exploring the doctrine of frustration of contract. The frustration of a contract has been defined in Section 56 of the Indian Contract Act, 1872. The section states that a contract may be rendered void in case of impossibility to perform the contract as a result of an event that neither party could have foreseen at the time of commencing the contract. When such an unforeseen event creates an impossibility for parties to perform their contractual obligations, the contract becomes frustrated. Considering the current situation, it is quite uncertain to conclude, that the event has become impossible. The I-league in India has only been suspended and not canceled. However, the I-league panel that recently sat to decide the future of the I-League, has recommended to the All India Football Federation (“AIFF”) to conclude the I-League and crown Mohun Bagan as champions. In such a situation, the possibility of claiming the frustration of a contract may become quite likely.
FIFA in response to the Coronavirus pandemic, and the ensuing issues regarding salary payments, has responded with a set of guidelines for clubs to follow during this crisis. FIFA has stated that clubs must work together with their players and coaches to negotiate payments that the clubs shall make to the players. FIFA urges players and coaches to work with clubs to come out with a possible settlement that would potentially avoid litigation and clubs going bankrupt. However, the guidelines further provide that in cases where such negotiations would not be possible, the national laws of the country must be ‘adhered to’ especially while addressing termination or amendment of contracts. In cases where both conditions stated above are not fulfilled, the unilateral decisions to amend the terms of the contract will be recognized if made in good faith and found to be reasonable and just by FIFA’s Dispute Resolution Chamber (“DRC”) or Players’ Status Committee (“PSC”). To discover good faith, the DRC or the PSC would seek whether the club has tried all reasonable means to find mutual agreement with its employees; the financial position of the club; the proportionality of the contractual agreement; the net income of the player’s post variation to the contract and whether the player concerned was singled out or that the amendment and changes equally apply to the entire squad.
If the unilateral termination of such a contract does not contain a just cause, then in such circumstances, clubs may be held liable to pay compensation for such termination. Such a termination without just cause shall violate the FIFA Regulations on Status and Transfer of Players (“FIFA RSTP”) as well as the AIFF Regulations on Status and Transfer of Players (“AIFF RSTP”). FIFA has also clarified that contracts that were due to expire by the end of the season shall be altered to end on the new date issued by the respective federations (i.e. in India’s case the AIFF), which may extend beyond the stipulated end date of the contract. The same shall be also applied to contracts that were due to commence from the next season, which is 2020/21. These contracts shall also commence once the new date for the start of the new season has been confirmed. The above guidelines shall apply to the I-League which is still due to end for the current season. However, vis-à-vis the ISL, the performance of contracts has been completed from the players and coaches end, as the season ended with Atletico de Kolkata being crowned champions for this season.
In tough times like these, the path back to glory is becoming too distant for the clubs and the players involved. Despite certain leagues, especially major ones like Bundesliga getting back into action, though with no dazzling crowd or ear crashing chants, the road ahead for the football leagues in the developing world, seems like a wall with barbed wire. We must not forget that all the stakeholders involved in the game, are there to earn a living and therefore a big or a small league, does not make much of a difference. However, there is no iota of doubt that the leagues in countries like India or probably the ones outside of Europe are bound to suffer more from this pandemic, most likely due to the unstable revenue structures and adverse financial conditions. Hence, a safety net for the players involved in terms of wages and salaries is a must, as they are the ones most likely to be compromised in this crisis. To avoid greater losses and bankruptcy, clubs are seeking legal avenues to justify the delayed payment of salaries. Ideally, clubs and their employees must work with each other and find an amicable solution rather than pursuing unilateral decisions. It would help both parties understand the needs of each other and reach a reasonable compromise. Indian clubs must strive to follow and adhere to the FIFA guidelines that have been laid down. The beautiful game, as it has been dubbed, is in trouble and it requires those who are a part of it to help it get through this torrid time.
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Cite as: Rahul Naresh, COVID-19 And Football: An Overview of the Effect on Employment Contracts in Indian Football, Extra-Cover: The Sports Law Blog of India (18th Jun 2020), Accessed at https://www.extra-cover.org/post/covid-19-and-football-an-overview-of-the-effect-on-employment-contracts-in-indian-football [Date of Access].