COVID-19: The Key Question for Sport – to Cancel or to Postpone?

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COVID-19: The Key Question for Sport – to Cancel or to Postpone?

April 17, 2020

The outbreak of the COVID-19 pandemic has resulted in all major sporting events in Ireland and many across the globe being postponed or cancelled. We consider the main legal considerations for competition organisers by assessing the approach taken by the Premier League, Wimbledon and the Tokyo 2020 Olympics.

The Premier League

The Premier League is suspended until at least 30 April and is reportedly planning to resume in the summer, following the postponement of Euro 2020. The substantial revenue derived from broadcasting and commercial rights, in addition to directions from UEFA, is likely to have been a major factor in the Premier League’s decision to postpone and resume the season, rather than to cancel it.

Implications for Broadcasting Contracts

The Premier League owns the rights to broadcast Premier League matches. It sells these rights to broadcasters and streaming services in various jurisdictions in return for payment, which accounts for over 50% of its revenue. The most recent Premier League broadcasting rights were reportedly sold for £9.2 billion over a three-year period. The Premier League’s primary obligation under these broadcasting contracts is to organise football matches for broadcasting. Since the postponement of the Premier League due to COVID-19, it is likely that the Premier League has been technically in breach of this obligation. However, commercial contracts typically contemplate unforeseen events such as the COVID-19 pandemic with force majeure clauses.

A force majeure clause anticipates events beyond the control of the parties that affect the parties’ performance of the contract, as we discussed in our previous articles here and here. For example, the Premier League may not be in breach of its contract if it can show that a force majeure event, such as the COVID-19 pandemic, has prevented it from performing its contractual obligation to organise football matches for broadcasting. This should be relatively easy for the Premier League to demonstrate in circumstances where the UK government has banned all sporting events.

Importantly, to rely on a force majeure clause, a party is obliged to mitigate its losses. In the sporting context, losses owing to COVID-19 could be mitigated by postponing, rather than cancelling, the season. Playing matches behind closed doors, if and when permitted by the respective governments, is another potential mitigating action. Finally, a party seeking to rely on a force majeure clause must promptly serve a notice on the other party.

While invoking these steps will protect the legal position of rights holders, the commercial implications of the COVID-19 crisis may persuade broadcasters to contest the contract and refuse to make payment. For example, it has been reported that the beIN Media Group, one of the French Ligue 1 broadcasters, is withholding payment since the suspension of all Ligue 1 matches.

Wimbledon

While the Premier League has been being making contingency plans to resume the season, other major sporting events have been cancelled. Wimbledon will not take place in 2020 at all. It is worthwhile considering the protection that can be offered by event cancellation insurance when considering the different approaches taken by the Premier League and Wimbledon.

Event cancellation insurance may cover irrecoverable cost, expenses and loss of profit up to the sum insured where a cancellation is necessary due to an event beyond the control of organiser. Wimbledon is reported to receive around £114m from its event cancellation insurance for the 2020 tournament.

Tokyo 2020 Olympics

The International Olympic Committee (“IOC”) are taking a different approach with the Tokyo 2020 Olympic Games. The Host Agreement between the IOC, the Japanese Olympic Committee and Tokyo, protected the IOC in the event the Olympic Games were not held in 2020. The IOC had the right to terminate the Host Agreement and award the Olympic Games to another city, while the other parties indemnified it against all losses suffered by third parties. While this put the IOC in a strong contractual position, there is no suggestion that the IOC contemplated engaging another city to host the Olympic Games this summer given the global nature of the pandemic. In addition, rather than trying to enforce the termination provisions and indemnities in its favour in the Host Agreement, it was in the IOC’s interest for the Olympic Games to be re-arranged. As a result, the IOC and Tokyo mutually agreed to postpone and re-arrange the Olympic Games for the summer of 2021.

Disputes on the Horizon?

Sports competition organisers are facing an unprecedented situation where they must decide whether to postpone competitions until COVID-19 restrictions are lifted or to cancel the competitions altogether. Unless all relevant parties agree to cancellation of a competition or the cancellation is adequately covered by insurance, competition organisers should be aware that legal disputes are less likely to arise where competitions are postponed and resumed after COVID-19 restrictions have been lifted.

Contributed by Patrick Murphy