Member Article

STATUS QUO (ON MARCH 18, 2020)

The Europe-wide spread of the coronavirus (COVID-19) is now also directly affecting the professional sports sector. As a consequence, there are not only games that are being played without fans and soccer leagues suspended from the Bundesliga all the way down to the 3^rddivision, but even entire remaining seasons (including of the German Ice Hockey League and the German Volleyball League) have been canceled. The restrictions that are yet to be imposed on teams and associations cannot be fully assessed at present. It is possible that clubs, such as most recently Hannover 96 or London’s Chelsea F.C., will have to send their entire professional team squads into quarantine, which will render their continued participation in competitions virtually impossible. In addition, UEFA has decided to postpone Euro 2020, which was to be held in 12 different countries, until 2021. These restrictions give rise to additional legal questions for teams, for which they must be prepared.

MAINTAINING CONTACT WITH THE COMPETENT AUTHORITIES

It is generally recommended for teams to be in constant communication with the competent authorities to keep their ability to act. Where cancelations of events have not been issued already, this may occur at any time in accordance with Section 28(1) sentence 2 German Protection against Infection Act. Depending on the ordinances of individual German states, the municipal health authorities will be responsible for any such bans.

EFFECTS ON SPONSORING CONTRACTS

Playing games without fans or the cancelation of entire matchdays can have drastic consequences for teams in relation to their sponsoring partners. Ad space on jerseys and pitchside advertising boards is of particular importance, since advertising values are impaired when games are played without fans, but particularly when they are canceled. It is undisputed that the main purpose of an advertising contract is for the advertising to be noticed by the stadium crowd and, in particular, by TV viewers. Game cancelations therefore lead to interference with the basis of the transaction (Section 313 German Civil Code), so that teams are advised to enter into negotiations with their contractual partners in such situations. Sponsors will, however, have no general unilateral right of termination based on the provision in Section 313(3) sentence 1 Civil Code, unless express contractual provisions have been made in this respect. Additionally, teams may argue that the advertising value will rather be increased in case of freely accessible Bundesliga simulcasts as announced by current rightsholder Sky.

Where teams have assigned their advertising rights to sports marketers, the contractual arrangements between the parties will have to be examined, in particular as to who will have to bear the risks in the event of game cancelations.

IMPAIRMENTS FOR SERVICE PROVIDERS

Legal issues will also arise for teams in relation to other contractual partners and service providers such as catering or security companies. Those services will no longer be needed to the same extent in cases of games without fans and cancelations where security and catering services are no longer required on matchdays. It must then be reviewed to what extent contractual arrangements have already been made for such situations and who ultimately bears the “business risk.” Aspects of insurance law may also play a key role.

WHAT IS THE FATE OF BONUS AGREEMENTS?

The spread of the coronavirus may also entail consequences in relation to players. Once matchdays are canceled, the question arises as to how to deal with playing, goalscoring, points, or season objective bonuses.

Will players and coaches continue to be entitled to received bonuses from their teams in case of cancelations? Could such claims be based on the legal concept of Section 162 Civil Code? Teams will argue in particular that, at least as far as playing, goalscoring, and points bonuses are concerned, there is no entitlement to playing in a game to begin with and that players were not prevented from playing by the teams in breach of trust according to Section 162 Civil Code. Players’ basic salary will remain unaffected, however, so that even in cases of game cancelations, they will be entitled to receive payment of their basic salaries.

SHORT-TIME WORK AS A SOLUTION? OR EVEN DISMISSALS?

From a team perspective, the possibility of short-time work could be considered to mitigate the financial consequences of the coronavirus. Due to the lack of ticket sales, teams in the 3^rdand 4^thdivisions in particular will be hard hit economically as ticket sales accounts for a much larger proportion of their budgets than for teams in the Bundesliga and 2^ndBundesliga. The possibility of (operational) dismissals cannot be ruled out as the ultima ratio. Alternatively, teams may consider amicable contract adjustments to reduce salary costs.

ADJUSTMENTS IN THE LICENSING PROCEDURE?

Ultimately, the question also arises as to whether it is possible to finish the current season or whether it may have to end prematurely. In this case, solutions must be found not only for the promotion and relegation of teams, but it must also be examined in particular to what extent an adjustment of the licensing procedure will be necessary, since the budgeted economic parameters will change permanently once games are canceled or seasons ended.

SEASON EXTENDED BEYOND JUNE 30, 2020?

The postponement of Euro 2020 offered the Bundesliga and 2^ndBundesliga divisions the option of continuing the currently interrupted season beyond June 30, 2020, if necessary. In this event, however, the following points need to be observed: Where player contracts are expiring by June 30, 2020 but the current season continues beyond June 30, 2020, those expiring contracts should be extended for a limited period of time so as not to thin out the team squad prior the end of the season. The limitation of such players’ contracts until, for example, July 31, 2020 or August 31, 2020 would be possible in accordance with Section 14(1)(4) Part-Time Work and Fixed-Term Employment Contracts Act. Continued employment as a licensed player beyond June 30, 2020 would not be possible without a valid employment contract. Where, contrary to expectations, a licensed player should not agree to a limited contract extension, it would have to be examined whether the player contract is ultimately limited to the end of the season – and not to the specific date of June 30, 2020. If the German Soccer League were in fact to extend the current season beyond June 30, 2020, this would also lead to a later end of the fixed-term employment contract in this case. Additionally, it would have to be examined whether both parties to the contract had intended to agree a term of the employment contract until the end of the season. If, prior to the conclusion of the employment contract, the parties had expected that the German Soccer League might postpone the end of the season, they would already have included an appropriate contract adjustment. This serves to infer the licensed player’s secondary obligation to agree to a corresponding contract adjustment due to the end of the season being postponed.

SALARY DEFERRALS OR WAIVERS?

Amicable arrangements might be made with the professional players as regards the deferral or waiver of their salaries to compensate for financial bottlenecks caused by the lack of income from league matches. In the event of deferrals, the due dates may be postponed, so that salary payments would only have to be made at a later date when soccer seasons are continued. The teams would then generate the necessary TV income to meet their contractual obligations.