THE IMPACT OF COVID-19 ON FOOTBALL: A TIGHT CORNER-PART 2
Updated: Jul 10, 2020
The 'Part 2' of our two-part blog piece authored by Gursimar Setia.
Gursimar is a third-year student of the B.A. LL.B. course at West Bengal National University of Juridical Sciences, Kolkata.
In this part, the author shall examine the impact of a Force Majeure clause and FIFA’s COVID-19 Guidelines on contractual relations between players, staff, and clubs. An assessment of the rights of players and commercial partners has also been made with special reference to Indian Football.
FORCE MAJEURE
Force Majeure (French for “superior force”) is a clause contained in contracts that relieves the parties from performing their contractual obligations owing to certain circumstances that are beyond the control of parties, making the performance of a contract commercially impracticable, illegal, or impossible.
The parties in the contract usually predetermine the circumstances that trigger force majeure. It may include events outside the control of the parties, such as natural disasters, terrorism, war, epidemics, labor or union strikes. Upon the occurrence of any of the events mentioned in the clause, a party can be excused for non-performance (or breach) of the contract. The COVID-19 crisis is a typical example of a force majeure event, usually covered under the bracket of epidemics, pandemics, or health emergencies.[i] A force majeure clause may provide for suspension or alteration of obligations and, in some cases, completely excuses the parties from performance when it becomes impossible. A force majeure clause is a form of a contingent contract — enforceable under Section 32 of the Indian Contract Act.
In case a contract does not contain a force majeure clause, the parties can rely on legislative provisions dealing with a fundamental change in circumstances (rebus sic stantibus) warranting unilateral modification or termination of a contract.[ii] In case common law applies, parties can rely on the doctrine of frustration.[iii]
If the contract contains a generic force majeure clause that encapsulates wide phrases like 'events outside the reasonable control of the party' or 'acts of God', with no clear demarcation for events arising out of a pandemic, parties to such contract could still resist performance, provided, they meet certain requirements. This is owing to the existence of some degree of acceptance for the term 'force majeure' as courts have interpreted the term to have a meaning in itself. The parties could be excused under a generic clause if they can prove that the event and non-performance were due to circumstances beyond their control, and no reasonable steps could have been taken by them to avoid or mitigate the consequences of the event. Thus, such contracts that could not be fulfilled due to the pandemic could be avoided.
An analysis of the CAS jurisprudence reveals that the court panels are prepared to import the principle of force majeure even in the absence of an express clause in the contract.[iv] The CAS, in PAOK FC v. UEFA, defined the principle of force majeure as an “impediment, beyond the control of the obliged party, that is unforeseeable, that cannot be resisted and renders the performance of the obligation impossible”.[v] The CAS confirmed the application of the doctrine in the context of payment of salaries in Alexandria Union Club — where when an employer dismisses a player without a ‘just cause’ in case of a force majeure event, it may be excused from performing all or part of its contractual obligations.[vi]
However, whether clubs are excused from the performance of obligations due to the pandemic is mostly a determination of facts.[vii] Force Majeure is seldom invoked by the CAS, interpreting it narrowly.[viii] For instance, if a club engages in any activity that demonstrates its ability to discharge its obligations, it can be argued that the obligations did not become impossible to perform; but onerous at best. Thus, even in cases of suspension of the entire season, a club may not be able to escape paying compensation in case of a unilateral termination of a contract, simply by relying on force majeure.
FIFA’s COVID-19 GUIDELINES
As a response to the growing uncertainty, FIFA recently released its guidance for tackling the unique issues faced by member associations, clubs, players, and related staff. These guidelines seek to address primary concerns relating to contracts of players and club staff.
With domestic seasons across various leagues extended to accommodate for the remaining games, player contracts expiring on 30th June, a date that usually coincides with the season end, have been thrown into ambiguity. Players may be able to leave their clubs on 30th June despite fixtures remaining in the respective domestic league. FIFA has proposed that due to an 'overwhelming desire' of all parties to complete the competitions, all contracts expiring at the end of the season, be extended to the new end date of the season.[ix] Similarly, contracts that have been pre-negotiated for the next season will have to be postponed.[x] It would be simpler to implement these measures in civil law countries, as parties can rely on the aforementioned statutory provisions to seek alteration of terms of a contract.[xi] However, in other legal systems, like the Indian and English, such a move may have to be achieved with the consent of the parties, as contract laws do not allow unilateral alteration of an agreement.[xii] Indeed, these problems have already arisen as some players have refused these short term renewal deals in England.
The guidelines declare the COVID-19 pandemic to be an 'exceptional' circumstance warranting modification of dates of commencement of Transfer Windows. Accordingly, FIFA has agreed to approve all requests to postpone the commencement of Transfer Windows in accordance with Article 5.1 of Annex 3 of the RSTP. However, the guidelines have carved out an exception for players whose contracts have expired or been terminated as a result of the pandemic; entitling them to registration by an association outside the period of a Transfer Window.
With regards to obligations under the contract like payment of salaries, FIFA has urged that clubs, players, and staff work together to reach collective agreements on a club or league level for the period of suspension of competitions.[xiii] If the club and employees cannot reach an agreement and national law does not address the situation, any unilateral alteration of a contract by the club should be reasonable and proportional.[xiv] As per the guidelines, clubs will be insulated from the risk of disciplinary sanctions in any future disputes if there is an attempt to reach a mutual agreement.[xv]
IMPACT ON INDIAN FOOTBALL
All contracts formed under the aegis of the ISL and I-League, be it with clubs, players, coaches, support staff or other commercial engagements concerning participation in the ISL and the I-League, have an overriding clause stipulating the parties to such contract be compliant with the rules and regulations issued by FIFA from time to time. Therefore, FIFA’s COVID-19 guidelines become applicable to the stakeholders of Indian Football.
With a travel ban prohibiting the entry of foreigners into the country, Indian Super League [hereinafter "ISL"] clubs may have to go ahead with the season without the participation of overseas players; entitling clubs to rescind the contracts with these players unilaterally. Recently, at least three I-League clubs reportedly served termination notices to their players.
It would suit ISL clubs and the Football Sports Development Ltd. ("FSDL"), the organizer of ISL, best to resolve contractual issues amicably, per the FIFA COVID-19 guidelines, as the concerned parties may suffer reputational damage if disputes were to arise.
Concerning ISL’s recently concluded 2019-20 season, any wages and payments due will have to be paid, and clubs cannot invoke force majeure. This is because the clause can only be invoked in respect of those obligations which were directly hindered by the force majeure event.[xvi]
Most club competitions like the ISL and I-League are played in a stretch of a few months with an off-season break. Stakeholders like broadcasters and sponsors with multi-year deals with clubs or organizers will find it easier to accommodate their interests by mutually agreeing to terms for revised payment plans. For instance, some broadcasters have temporarily suspended payment of due amounts citing the suspension of competition. However, some sponsorship and broadcasting deals may expire at the end of the season. With the I-League 2019-20 season cancelled, sponsorship deals that were set to expire at the end of the season would not be honored, and no accommodations can be made in the next season as new deals are usually agreed to well in advance.
As the ISL’s 2020-21 season is speculated to be played without live spectators, some sponsors may not agree to proposals of playing matches behind closed doors as they have no value in sponsoring an event without physical footfall. A commercial sponsor can claim ‘frustration’ of a contract if it shows that the performance of the obligation under changed circumstances is radically different from what the original agreement contemplated. The change of circumstances being talked about is such that strikes at the root of the agreement.[xvii] For instance, a sponsor of a ‘fan box’ in the stadium can argue frustration in case matches are to be played behind closed doors.
CONCLUSION
The present crisis will help practitioners learn valuable lessons on how to deal with these extraordinary circumstances. There are a lot of potential fall-outs despite FIFA and regulatory bodies around the world taking emergency measures. For instance, FIFA’s COVID-19 Guidelines are not binding, and courts may choose to ignore them.
Legal interest surrounding force majeure has peaked in recent months as parties seek to claim relief resulting from an unprecedented health hazard. Once considered a boilerplate contractual clause, it has now ended up having a significant impact on their rights and obligations in extraordinary circumstances. This pandemic will make parties carefully negotiate the 'standard terms' of a contract in the future.
[For going back to the Part 1 of this blog-piece, Click Here!]
The author can be reached for comments on his email at simars@nujs.edu
Cite as: Gursimar Setia, The Impact Of COVID-19 on Football: A Tight Corner , Extra-Cover: The Sports Law Blog of India (20th Jun 2020), Accessed at https://www.extra-cover.org/post/the-impact-of-covid-19-on-football-a-tight-corner-part-2 [Date of Access].
End-Notes [i] An example of such a clause is as follows: 'Subject to the other provisions of this Agreement, the failure by a party to fulfill any of its obligations under this Agreement shall not be considered to be a breach of, or a default under, this Agreement insofar as the inability arises from an event of Force Majeure, provided that the party affected by that event has taken reasonable precautions, has duly communicated the occurrence of the event to the other party, and has taken due care and attempted to mitigate the consequences of such event, all with the objective of carrying out the terms of this Agreement without delay. For the purposes of this Agreement, “Force Majeure” means an event or circumstance which is beyond the reasonable control of a party and which makes a party’s performance of its obligations impossible and includes but is not limited to wars, acts of terrorism, civil riots, hostilities, public disorder, epidemics, fires, acts of God, Court orders or governmental restrictions and actions, acts and decisions of regulatory and sports authorities.' [ii] These remedies are usually found in civil law systems. It is necessary to discuss remedies in Civil Law as CAS applies Swiss Law in addition to FIFA Regulations as per Article 57(2) of the FIFA Statute; See e.g.,: Article 119, Swiss Code of Obligations, 1911 (Switzerland); Article 6:258, Dutch Civil Code, 1992 (Netherlands). [iii] Taylor v. Caldwell, [1863] EWHC QB J1 (per Blackburn J.). [iv] John Shea, Will COVID-19 Excuse Contractual Performance in International Football Contracts?, April 21, 2020, available at: https://www.lewissilkin.com/en/insights/will-covid19-excuse-contractual-performance-in-international-football-contracts (Last visited, May 29, 2020). [v] PAOK FC v. UEFA CAS 2006/A/1110. [vi] Alexandria Union Club v. Juan José Sánchez Maqueda & Antonio Cazorla Reche, Arbitration CAS 2014/A/3463 & 3464. [vii] Shea (n 4). [viii] Ibid. [ix] FIFA COVID-19 Football Regulatory Issues, v1, 4. [x] Ibid. [xi] Supra (n 2). [xii] See e.g., Indian Contract Act, 1872, Section 61. [xiii] Supra (n 9) 6. [xiv] Ibid 7. [xv] Ibid 7. [xvi] Eshwar Ramachandran, Nihal Zachariah, A guide to FIFA’s COVID-19 guidelines and their effects on Indian football clubs, May 20, 2020, available at: https://www.lawinsport.com/topics/item/a-guide-to-fifa-s-covid-19-guidelines-and-their-effects-on-indian-football-clubs#_ftnref14 (Last visited, May 29, 2020). [xvii] Taylor (n 3).