Coronavirus and the current impact on football
Football in England has today been suspended until 3 April 2020 as a consequence of the on-going impact of Coronavirus (COVID-19) with a number of clubs having players either tested or placed in isolation following suspected/confirmed cases.
When (or if) the season resumes will be a decision reached by the government/Premier League/EFL/clubs in due course as matters develop over the coming weeks. The suspension of football in England is not at this stage at the direction of the government (who at the time of writing are content for large-scale gatherings to continue), but for the protection of players and staff (as well as for practical reasons resulting from isolation) as clubs face their own Coronavirus cases internally. It remains to be seen whether further suspensions of football could follow if the government changes its advice as matters progress. That raises the prospect of an extended period of suspension to English league football.
The postponement of games creates a number of practical and financial issues for clubs, which individual clubs will need to mitigate as best they can. Below we try to explore a few (but sadly not all!) of the issues clubs may face.
For a large number of clubs, particularly in the EFL, match day revenue forms a significant part of their commercial income. This income comes from a number of sources, including ticket purchases, catering contracts and commercial advertising while the club will also have various expenditure commitments such as match day staff (both security and leisure).
Given the uncertainty as to if and when the season will recommence and whether any future fixtures will be behind closed doors, clubs should not rush to make decisions on fan tickets. They should, of course keep fans updated but the hope is that such fixtures can and will be re-arranged.
Commercial sponsorship deals are largely agreed based on the likely exposure to fans (both in person and through media platforms) and likely income. Advertising such as those seen on boards around the perimeter of the pitch and in fan areas. Equally, catering contracts will likely involve an external catering company providing catering services at the club (and, most likely, a share of revenues) for fans during match days. Deals such as these were of course agreed based on the club participating in fixtures in the usual way.
Clubs should consider the terms of these contracts. Most, if not all, will inevitably contain some form of force majeure clauses, which effectively mean that the club cannot be held to be at fault (and therefore liable under the contract) for something outside of their control which prevents the performance of the contract. Whether Coronavirus will constitute such an event will likely turn on the wording of the clause in the relevant contract and a variety of different factors. There will be some uncertainty about this at this stage. Given this uncertainty, while clubs should identify any force majeure clauses now, they should also liaise with the other parties to agree a practical strategy moving forward before resorting to any legal options.
However, it is likely that if clubs want to rely upon a force majeure clause, they are required to give their contractual partners notice of events that they consider meet this clause. Therefore, clubs should consider the contracts carefully and make sure they comply with any time limits or other requirements associated with a force majeure clause (the usual position will be that the club needs to notify as soon as reasonably practicable) so as to protect their position long term.
In addition to the obligation to pay player wages, clubs should also be alive to the prospect that they may be required to play matches beyond 30 June 2020. This the date on which player contracts will usually expire. Clubs will need to be alive to the possibility of having to extend the contracts of some players to cover this eventuality, even if it is only for a relatively short period while in terms of recruitment of players, the opening and closing of the transfer window may be subject to change.
There will of course be concerns about the health and well-being of players (and staff) in playing matches. Given the current suspension of English and European football, it appears unlikely that clubs will be required to play any club matches. If that does become an issue, however, early dialogue with the competition organisers and the opposing team is recommended, followed by a formal request for suspension of the match if required.
At the time of writing, a number of international fixtures remain scheduled to take place at the end of March 2020, although an increasing number have been postponed. If an international fixture is to proceed, clubs are obliged under FIFA regulations to release their players. However, clubs should again begin early dialogue with national associations to raise genuine concerns. If this does not alleviate concerns, we are able to provide further advice on the options available.
Cash Flow & Insurance
An immediate issue for a number of clubs is likely to be cash flow. The revenue a club expects to receive from match days will have been accounted for in the club’s financial projections at the start of the season. Inevitably, clubs will have expected this revenue would meet on-going expenses, such as player and staff wages and utility bills. Therefore, the absence of match day revenue is going to cause a significant number of clubs, particularly in the EFL (where media and broadcast payments to clubs are much lower), real cash flow difficulties. It is unknown, at this stage, whether the Premier League or EFL are contemplating any adjustments to financial fair play.
Clubs will likely have a number of general and standalone insurance policies that they may look to make a claim against should circumstances dictate. Whether a club is covered for loss of revenue from cancelled events (such as fixtures) will depend on the wording of the policy itself. In some circumstances, businesses may be covered for loss of revenue as a consequence of a notifiable disease. The government has confirmed that COVID-19 is now a notifiable disease, although clubs should make sure that in any future policies, insurers do not seek to exclude COVID-19.
This pandemic is unchartered territory for both clubs and insurers and there is likely to be some delay in insurers meeting liabilities under these policies if clubs are able to make a claim against them. Clubs should not, therefore, look to rely upon the possibility of insurance payments to assist with cash flow. It is sensible, however, to keep any and all documentary evidence of losses suffered to assist if a claim is made. Clubs may wish to consider consulting with their professional advisors about what their policies cover, the excesses that will apply and any requirements they place on the club (such as the obligation to notify insurers) to avoid having the policy voided for failing to comply with its requirements.
Clubs should consider taking steps to revise cash flow forecasts as far as they can and ascertain where, if possible, they can make savings, defer payments or terminate non-crucial supply contracts early if there is no penalty. Clubs may also need to consider further funding arrangements. If a club is likely to suffer real cash flow difficulties, they should consult with professional advisors as soon as possible.
At this stage, it is difficult to anticipate what comes next. Football in England has been suspended until at least 3 April, with the prospect that it may last much longer.
Inevitable questions arise regarding the ability to complete the league season, and if so, whether fans will be able to attend matches. This is, however, a situation that is developing very quickly and it is impossible, at this stage, to anticipate how matters may play out.
The overriding message is that clubs should engage in discussions with third parties as early as possible to seek constructive solutions to problems they may face, seeking advice of professional advisors as it becomes necessary.
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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