SPORTS LAW

Legal issues every sports team, player and sponsor should consider

As sport continues to grow as a multi-million-pound industry, there are legal issues which can affect both the professional game and the amateur ranks. A number of high profile matters have recently hit the headlines:

The typhoon which threatened to cause major disruption to the recent Rugby World Cup wasn’t the only storm the tournament organisers became caught up in. Scotland indicated they were considering legal action if their vital match with Japan was called off due to the weather and not rescheduled. World Rugby took exception to Scotland’s stance deeming it to be insensitive given the human tragedy and the matter was referred to the Independent Disputes Committee who fined the Scottish Rugby Union £70,000 and ordered them to write a meaningful apology.

Meanwhile, earlier this year Liverpool and Egypt footballer, Mo Salah, had a public dispute with the Egyptian FA after the player’s image was used to promote the association’s official sponsor, WE, a telecommunications firm. Salah also has a personal contract with Vodafone, a rival to WE, in which he was not allowed to promote other telecommunications firms.

The legal and sporting worlds intersect on numerous occasions. Here are some common examples of matters which may or will require legal input:

Participation Agreements

These bind participating teams to the competition rules and have been increasingly construed as contracts in the courts, as seen in the case of Korda v ITF Ltd [1999].  Participation agreements detail the obligations both parties owe within the competition and should set out the structure and terms of the competition.

As referenced above in the case of Scotland, participation agreements are a topical issue in the media recently after the Rugby World Cup 2019. In order to take part in the Rugby World Cup every participating Union had to sign the Participation Agreement. Within the tournament rules, to which the Unions were bound, it explicitly stated that in the occasion that a pool match could not take place on its scheduled day, it would be cancelled and result in a draw with no score registered. Scotland queried the applicability of this provision given the extenuating circumstances regarding the weather.

Sponsorship Agreements

These are contracts governing the legal relationship between the sponsor and the individual, a team or event organiser.

Forming sponsorship agreements can be very valuable and profitable for a company, therefore it is no surprise that a recent report revealed that commercial spend on sports sponsorship is set to grow this year by 4% to a staggering £35bn globally.

As a general rule, sports sponsorship agreements are detailed in writing in order to protect the interests of both the sponsor and the other party. This minimises the risk of disputes, provides security and makes terminating the sponsorship relationship easier.

Image Rights

An Image Rights Contract (IRC) formed between an organisation and an individual permits the organisation to commercially use the player’s image, by way of sponsorship and endorsement activities. Often, for tax reasons, the player (or more often his or her agent) will create an image rights company. This allows the licence fee paid to player to be taxed at Corporation Tax rates, which are significantly lower than the tax rates applied to their wages. 

Whilst IRC’s are legal, it is best for individuals and companies to seek legal and tax advice in relation to this issue. In the recent decision of Hull City Tigers (AFC) Ltd v HMRC [2017], the tribunal ruled that payments made by a football club to an offshore service company, purportedly in respect of a player’s image rights, in fact constituted the player’s earnings and should be taxed accordingly. In general terms the payment for use of the image must be proportionate. In other words a player with little or no media profile cannot be paid a large sum for use of the image.

An interesting development for British & Irish athletes to note this year was the decision in Germany to allow their athletes to benefit from a relaxation of Rule 40 (3) of the Olympic Charter whereby they could continue to promote local and long standing sponsors and supporters citing “that the restrictions of advertising opportunities arising from the current application of Rule 40 of the Olympic Charter are too far-reaching and thus constitute abusive conduct”.

Disciplinary Issues

As sport has become more professional and monetised over the years, it has also been increasingly regulated with a rise in the use of mediation within sport. 

As the individual sports’ National Governing Bodies are responsible for creating their own regulations and disciplinary procedures, challenging the decision of these private bodies can prove to be difficult to reverse, therefore mediation is a popular avenue for sporting disputes or issues.

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