Covid-19 & sports broadcasting rights: A game of two halves?

The answer to many legal questions is “it depends”. The commercial frustration this often causes is matched only by the bemusement amongst those in the legal profession that any other answer could be provided.

For example, whether a party can exercise a right under a contract – such as a right to terminate it as a result of Covid-19 – will always depend on the facts, the commercial context and, most importantly, the terms of the contract itself.

It is therefore of little surprise that the impact of Covid-19 on two different broadcasting rights agreements – in two different sports – has led to two very different outcomes. We look at the background to these decisions and what they tell us about the English Court’s wider approach to the impact of Covid-19 on commercial contracts.

Premier League v PPLive

Background

The first case relates to an application for summary judgment by the Premier League against PPLive, a Hong Kong-based broadcaster. The dispute arose out of a Live Package Agreement for the broadcast of both live and delayed Premier League football matches covering three seasons, starting with the 2019/20 season. The parties also entered into a similar – but separate – agreement for the rights to show “clips” or highlights.

Unsurprisingly, the Premier League season was seriously disrupted when Covid-19 hit the UK in full force in March 2020. As a result, the Premier League temporarily suspended the 2019/20 season, which only resumed in June 2020. Even then, the remaining fixtures of the season were played under very different conditions: stadiums were empty and kick-off times later in the day, with more evening matches.

This became a problem for PPLive. In particular, the later kick-off times made the matches unattractive for broadcast in Hong Kong and China: a 7:30pm kick off in the UK means the match will be broadcast at 3:30am in China.

Non-payment and termination

As a result, PPLive did not pay an instalment of US$210.3 million on 1 March 2020 as required under the Live Package Agreement. In response, the Premier League terminated the contract on 3 September 2020. The question before the Court was whether that termination was justified.

The starting point for this assessment would normally be a close examination of the force majeure provisions. However, for reasons that are not entirely clear, this was not raised as a defence.

An obligation to renegotiate licence fees?

Instead, PPLive relied on a clause stating that, where there was a “fundamental change to the format of the Competition”, the parties would enter into “good faith negotiations … to discuss a possible reduction of the Fees”. PPLive claimed that the Premier League had failed to comply with this obligation.

Justice Fraser dismissed that claim, on the basis that there was no fundamental change to the format of the Premier League competition. Whilst the season was delayed, the stadiums empty and the matches played later in the day, this was not a change to the “format” of the Premier League, let alone a fundamental change.

However, if there had been such a change, the Court would have given substance to the obligation to enter into good faith negotiations to discuss a reduction in fees. This reflects a wider trend in English law to enforce obligations to negotiate where they arise in the context of a binding agreement. One notable example, not cited in the judgment, is Associated British Ports v Tata Steel UK Ltd [2017] EWHC 694.) This is in contrast to a bare agreement to agree, outside the scope of any contract, which is likely to be unenforceable (Walford v Miles [1992] 2 AC 128).

Other arguments – Contract is king

PPLive also relied upon a number of other arguments, including that:

• the licence payments were “advance payments”, and therefore PPLive had a restitutionary claim to the extent the payments related to the period after termination. This was rejected as being contrary to the express terms of the Live Package Agreement (see Dargamo Holdings v Avonwick [2021] EWCA Civ 1149);
• a term should be implied that such advance payments should be repaid. The Court rejected this as unarguable as it was not necessary for business efficacy nor was it so obvious that it went without saying (Marks & Spencer v BNP Paribas [2015] UKSC 72); and
• the obligation to pay the licence fee was, in effect, a penalty and so unenforceable. This novel application of the rule on penalties was rejected on the basis that the rule on penalties applies only to a secondary obligation to pay damages on breach. The payment of the licence fee was clearly a primary obligation (Cavendish Square v Talal El Makdessi [2015] UKSC 67).

Thus, the Premier League had been entitled to terminate the Live Package Agreement and obtained summary judgment requiring PPLive to pay the outstanding licence fee of US$210.3 million.

European Professional Club Rugby v RDA

Background

The second case came to a quite different result. That arose out of a Media Rights Agreement between European Professional Club Rugby (EPCR) and the broadcaster, RDA.

RDA was granted rights to broadcast live rugby matches in the European Champions Cup and Challenge Cup for four seasons, starting with the 2018/19 season. Again, the outbreak of Covid-19 had a serious impact on these competitions and, in March 2020, the EPCR announced the postponement of the competitions’ quarter-finals, semi-finals and finals.

RDA responded stating that this was a force majeure event and so its payment obligations were suspended. EPCR subsequently contacted RDA in May 2020 stating that the competition would resume, but not until September 2020 at the earliest.

As a result, RDA terminated the Media Rights Agreement for force majeure. EPCR claimed no such right existed, and RDA was thus in repudiatory breach.

Is it force majeure?

The Court dismissed EPCR’s challenge in fairly short order.

First, the Court decided that Covid-19 was a “Force Majeure Event” under the agreement. The definition expressly included an “epidemic”, which would include a pandemic such as Covid-19. In any event, Covid-19 would have been a force majeure event because it was due to “circumstances beyond the reasonable control of a party”.

Second, the agreement stated that if a “Force Majeure Event prevents, hinders or delays a party's performance of its obligations for a continuous period of more than 60 days, the party not affected by the Force Majeure Event may terminate this Agreement”. The Court concluded that:

• RDA’s underlying motive for terminating the Media Rights Agreement was not relevant. There was no allegation the clause was subject to a Braganza duty of rationality so all that mattered was whether, as a matter of construction, RDA was entitled to terminate the agreement using the machinery of the force majeure clause. The suggestion that RDA’s real reason for terminating was dissatisfaction with the commercial terms was therefore discounted;

• the outstanding matches had been postponed for well in excess of 60 days by the time RDA served notice of termination; and

• RDA could terminate despite the fact it had also relied on the Force Majeure Event to suspend payment. While the termination right was only available to “the party not affected by the Force Majeure Event” the Court said it would be “absurd” to construe those words to deprive RDA of its termination rights because it had also relied on the force majeure provisions to suspend its payment rights.

As a result, RDA had validly terminated the agreement and EPCR’s claim for damages failed. RDA was also entitled to a repayment of some of the licence fees in accordance with a contractual mechanism in the Media Rights Agreement applicable to cancelled games.

Comment

In both cases, the judgments were made on conventional grounds, and demonstrate that Covid-19 is not a deus ex machina to brush aside the parties’ obligations. Rather, the terms of the parties’ contract are paramount, and the English Courts will rarely intervene to alter that bargain. The approach of the English courts in other Covid-19 cases is similar (see our review of English contract law cases of 2021).

This means, rightly, that careful attention needs to be paid to the terms of any media rights agreement both when negotiating its terms and when exercising rights under it.

The Football Association Premier League Ltd v PPLive Sports International Ltd [2022] EWHC 38 is available here.

European Professional Club Rugby v RDA Television LLP [2022] EWHC 50 is available here.

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