Tag: sports law

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Sports disciplinary tribunals should have fair structures, clear rules, and separate judicial and prosecutorial functions

RichardFarndale_NeerajThomas_disciplinaryprocess_sports.jpgThe appointment of a three-member panel to look into spot-fixing in the Indian Premier League gives us an opportunity to reflect on the strength of disciplinary processes in sport. Two Glasgow-based sports lawyers from the law firm of Burness Paull, Richard Farndale and Neeraj Thomas, gave us some perspective on what constitutes a fair and robust disciplinary process.

Increased importance of a fair structure

Mr. Farndale said that with increased codification of what amounts to fairness in disciplinary processes and greater judicial attention to that question, sports bodies have found it difficult to keep up with these rules. “That is why it is important that disciplinary bodies adopt a structure that gives them protection against the entire body of rules that is building up in the courts.”

The most important rule is the right of a party to be heard and that is ultimately where tribunals need to be careful. “What is essential is that they have every opportunity to present their case. By providing a structure, a sporting body is able to ensure that it provides people with an opportunity to be heard.”

SportsLawSpecialisedProgramme_SuarezHe said that the issue of fairness of disciplinary processes was actually a subset of the issue of power. Courts will interfere with a tribunal’s decision only if the tribunal goes outside the scope of its powers. Sports organisations are limited by contractual agreements that define its powers and it is when they step outside these limits that they come into trouble. By acting unfairly, a tribunal will automatically go outside the scope of its powers. “Twenty years ago, sports organisations may have got away with making certain decisions in certain ways. I don’t think it happens any more and such decisions get challenged much more frequently.” In Scotland and England and Wales, Mr. Farndale said, courts will always be prepared to listen to a challenge if the tribunal has not acted according to the principles of natural justice.”

Certainty

One of the big problems is that somebody can go to a tribunal and not know what is going to happen to them. A body of rules will give some certainty over a process that requires the work of different sets of people to come together. Mr. Thomas said that a clear set of disciplinary rules is important. “Sometimes in the past, the underlying rules have been too general.”

Conflict of interest

It is very often the case that the in a sporting organisation, the person who is prosecuting the rules is very often an employee. It is important that even in a case where the prosecutor is an employee, he or she has to be given independence to make their own decisions about the justifiability of the prosecution, without interference from the people involved in the governance of the sport. To demonstrate independence, it is increasingly important that there is a separation between the prosecutor and the tribunal. A lot of disciplinary processes today don’t have that separation and that potentially gives rise to a challenge. It is essential to set up a separate body that prosecutes cases. We have acted in a case called Fotheringham where the Scottish courts have recognised that a sporting body is a relatively small body and that there has to be some scope for relaxation of the rules. Separation is still very important and it comes down ultimately to how the bodies are structured.

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State aid to Spanish football clubs cannot be justified using the Market Economy Investor Principle

SudiptoSircar_mylaw.netRecently, the European Commission (“the Commission”) commenced an investigation into the funding of seven Spanish football clubs. The Commission Vice President in charge of competition policy, Joaquín Almunia said, “Professional football clubs should finance their running costs and investments with sound financial management rather than at the expense of the taxpayer. Member States and public authorities must comply with EU rules on state aid in this sector as in all economic sectors.” The Commission will investigate the tax privileges of four clubs including Real Madrid and Barcelona, assess a widely reported land transfer between the City of Madrid and Real Madrid, and examine guarantees given by the state-owned Valencia Institute of Finance for loans that were used to finance the three Valencia clubs while those clubs were seemingly undergoing financial difficulties.

Sport and competition law in the EU

Sport has a significant role in the European Union’s economy. According to the European Commission (“EC”), it represents 3.7 per cent of the EU’s GDP and employs fifteen million individuals. Football constitutes the major chunk. It should not come as a surprise therefore, that the Union of European Football Associations (“UEFA”) and the clubs affiliated with it are no strangers to competition law investigations.

A number of concerns have occupied these investigations and final judgements. The joint sale of sports media rights was at issue in the U.E.F.A. Champions League, the F.A. Premier League, and the Bundesliga decisions, while the joint acquisition of sports media rights came under scrutiny in Eurovision I  and Eurovision II. The European Court of Justice has confirmed that the commercial exploitation of sporting events is covered by E.U. competition rules (the MOTOE case), and in the Meca Medina Case, the Court finally held that the compatibility of sporting rules with EU competition law should be examined on a case-by-case basis.

State aid in EU competition law

The Treaty on the Functioning of the European Union (“TFEU”), under Articles 107 to 109, provides the Commission with the power to deal with aids provided by member states to their domestic industry or enterprises, which could distort competition in the internal market.

Article107TFEU_stateaid

The second and third clauses of Article 107 provide for the situations that the Commission shall and may respectively, consider as compatible with the internal market. Article 108 provides for the procedure for monitoring any state aid and the consequence for any state aid that is incompatible with the internal market. Council Regulation 659/1999 and Commission Regulation 794/2004 were framed under Article 109. Commission Directive 2006/111/EC on “the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings” is also relevant to this discussion.

Why is state aid a problem?

To understand why this investigation is in progress today, we must turn to a report on the financial health and status of professional football clubs, Club Licensing Benchmarking Report Financial Year 2008, published by the UEFA in 2008 during Michel Platini’s term as President.

Sports-LawAccording to the report, most professional football clubs were facing recurrent losses. It warned of a dire financial outlook for European clubs and blamed it on the constant increase in players’ salaries, which amount to more than sixty per cent of a club’s expenses. The most important leagues — for the sport and for the economy — were (ironically) the ones with the greatest aggregated debt. The report advocated “financial fair play”.

Many clubs were registered as companies and shareholder contributions and other sponsorship helped, but several clubs survived on public intervention. State aid appeared in several guises including direct subsidies, sponsorship under non-market conditions, non-collection of tax or social security debts, and aid for the construction of sports infrastructure. Some of the allegations made by the Commission in relation to the Spanish clubs, paint exactly such a picture.

Therefore, this is a much-delayed investigation and has probably been triggered by public sentiment following the financial crisis. In fact, the present investigation is not unprecedented. In March 2013, the Commission had opened an investigation into the public funding of five professional Dutch clubs, including PSV Eindhoven.

MEIP

Subject to a caveat that it is a prima facie opinion based on the facts already available in public domain, the Commission does seem to have a case. At the time of writing, the E.C. was negotiating confidentiality issues with the parties.

Salaries of players account for a large share of a Spanish football club's expenses.
Salaries of players account for a large share of a Spanish football club’s expenses.
(Photo above is from Jan SOLO’s photostream on Flickr. Image alone published under a CC BY-SA 2.0 license.)

Under E.U. competition law, one of the principles for the justification of state aid is the Market Economy Investor Principle (“MEIP”), according to which public interventions in favour of market actors that carry out economic activities can be considered free of state aid within the meaning of EU law when they are made on terms that a private operator would have accepted under market conditions. If the MEIP is not respected, the public interventions will constitute state aid within the meaning of Article 107, because they confer an economic advantage on the beneficiary that its competitors would not have. I find it very hard to justify the measures and subsidies in favour of these clubs under this principle. Strictly on economic terms, the clubs should have either downsized or closed down a long time ago. It is quite possible however, that the clubs and the Commission will choose to settle any penalties and work out a formula for the gradual withdrawal of state aid.

(Sudipto Sircar, an Advocate at the Delhi High Court is the founder of the Indian Competition and Anti – Trust Blog. You can reach him at sudiptosircar@outlook.com)

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“Just because you organise a cricket match does not mean you own it” – Conversation with Udit Sood about the Delhi HC judgment on Star’s media rights and the “hot news” doctrine

UditSoodpodcast2Idea Cellular and other mobile providers recently resisted the claim made by Star India Private Limited (“Star”) that they had “misappropriated” Star’s “quasi-property rights” in real-time cricket scores. Star’s claim was that its arrangement with the Board of Control for Cricket in India (“BCCI”) gave them some rights over real-time scores. In a six-year deal, Star had paid the BCCI Rs. 3851 crore for exclusive media rights, including “mobile rights”.

The mobile service providers had captured real-time cricket scores and updated their subscribers through text messages. Star now wanted the Delhi High Court to restrain mobile service providers from sending out real-time cricket scores. A Division Bench of the Delhi High Court recently overturned the opinion of a Single Judge and rejected Star’s claim.

Sports-LawUdit Sood was part of Luthra and Luthra’s team of intellectual property lawyers who acted for the mobile service providers before the Delhi High Court. In a brief conversation with him, he explained the basis of Star’s claim, the history of the “hot news” principle in the United States of America, and the implications of the judgment for the organisers of live events, including sporting organisations.

(Aju John is part of the faculty at myLaw.net.)

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Political parties and the BCCI walk into the Right to Information Act

The definition of “public authority” in Section 2(h) of the Right to Information Act, 2005 (“RTI Act”) is elastic. Every now and then, its boundaries are stretched to bring yet another body within it. A recent order of the Central Information Commission (“CIC”) did exactly that when it directed political parties to appoint Central Public Information Officers and Appellate Authorities to respond to RTI applications. The Board of Control for Cricket in India has received a temporary reprieve, but the CIC may still decide whether the top governing body for cricket in India fits within those elastic limits.

First, let’s take a look at Section 2(h).

““public authority” means any authority or body or institution of self- government established or constituted — (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other law made by State Legislature; (d) by notification issued or order made by the appropriate Government, and includes any — (i) body owned, controlled or substantially financed; (ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government”

Figuring out whether a particular case fits into the boundaries of statutory language is at the heart of the judicial process. Often, the answer is obvious, like the 2010 judgment of the Delhi High Court, which said that the Chief Justice of India came within the meaning of “public authority”. The case of political parties was trickier. The CIC admitted as much, when it said that they did not fit into clauses (a), (b), (c), and (d). After all, in spite of their role in the political process, political parties were quite clearly “not-government”.

Eventually, the CIC went beyond the notions of governmental origin and control and resorted to the term “substantially financed” in clause (ii). It relied on the expansive interpretation given to the term “includes” in a 2011 judgment of the Punjab and Haryana High Court, which said that non-Government organisations substantially financed by government funds was an independent category of “public authority”, distinct from those established or constituted by law made by the centre or the state.

CPIM_Congress_BJP_BCCI_PublicAuthority

When it interprets Section 2(h), the CIC is deciding on its own jurisdiction. That gives us reason to treat those interpretations with suspicion, but the provision itself is probably the clearest indication of the legislative intent to recognise a far-reaching right to information. In this context, the CIC referred to a similar provision — the definition of “state” under Article 12 of the Constitution — and said that the Section 2(h) net was intended to catch a lot more. It held that the Congress, the BJP, the CPI(M), the BSP, and the NCP have been substantially financed by the Union government. The Commission took note of the fact that all these parties had received land from the government at well below the market rate and that they could advertise for free on Doordarshan and All India Radio during election campaigns. The argument that government financing was not substantial was dismissed. “Substantial financing”, the CIC said, need not mean “majority financing”, just “not-trivial financing”. The crucial role of political parties in a democracy, and in particular, their powers under Schedule X of the Constitution, was also considered, but these were only secondary factors in arriving at the final conclusion.

The BCCI receives tax waivers, and until recently, was exempted from customs duty on the import of sports goods. Electricity and security at cricket stadiums is often subsidised, but it is not clear whether all this will amount to substantial financing. The CIC however, may not have to resort to clause (ii) of Section 2(h) because some BCCI operations can be controlled by the government. For instance, the Union government can use its power under Entry 10 of Schedule VII of the Constitution to make law on “foreign affairs; all matters which bring the Union into relation with any foreign country” and restrict the BCCI’s ability to represent India at international competitions. It can also restrict the BCCI’s ability to use the term “India” while referring to its team, under Section 3 of the Emblems and Names (Prevention of Improper Use) Act, 1950.

Sports-Law On the other hand, autonomy from government is a prized virtue for sport, and the Olympic movement is unlikely to take kindly to a judicial determination that cricket’s top governing body in India is controlled by the Indian government.

 

(Aju John is part of the faculty on myLaw.net.)

Images above are from Wikimedia Commons and the first three (from L to R) have been published here under CC BY-SA 3.0, CC BY-SA 2.0, and CC BY-SA 2.0 licenses respectively.

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Sports lawyer Daniel Geey analyses UEFA’s Financial Fair Play Regulations

DanielGeey_FinancialFairPlayRegulations_BlogClick here to listen to sports lawyer Daniel Geey speak about UEFA’s Financial Fair Play Regulations, which compel European football clubs to live within their means.