Broadcasting agreements in the time of COVID-19

As the legal ramifications of the pandemic are starting to be spelt out by the courts, January saw not one but two cases that dealt with the impact of the pandemic on broadcasting rights agreements. These were of particular interest to our commercial team, as we often advise on these types of contracts for our sports’ governing body clients, as well as our other rights-owning clients. In this article, we briefly summarise the facts of the cases and the five take-aways we have learned from the cases.

FA v PPL

The first case (The Football Association Premier League Ltd v PPLive Sports International Limited [2022] EWHC 38 (Comm)) involved broadcasting footage of the Premier League in mainland China and Macau. The FA granted PPL the rights to broadcast this footage and clips of matches under the terms of two agreements for a rather eye-watering combined total of $709m for three seasons. The first of these seasons was impacted by COVID-19. Matches ceased on 3 April 2020. When they resumed on 17 June 2020, they looked very different: with no crowds, in empty stadiums, and matches occurring at greater frequency to make up for lost time. 

The FA continued to provide the relevant feeds of the matches to PPL, but PPL failed to pay the required fees. The FA eventually sought to terminate for non-payment of fees. PPL’s defence was that the pandemic resulted in a “fundamental change” to the “format” of the competition, which required the parties to renegotiate the level of fees owed, something that did not occur. 

The judge, Mr Justice Fraser, disagreed, finding in favour of the FA. The pandemic did not amount to a fundamental change in the format of the competition and so the FA was entitled to terminate the contract for non-payment of fees.

EPCT v RDA

The second case (European Professional Club Rugby v RDA Television LLP [2022] EWHC 50 (Comm)) involved a media rights contract relating to Premier Club Rugby Union competitions to be broadcast in certain territories. The EPCR decided to postpone the quarter-finals, semis and finals of the competition following the outbreak of COVID-19. After some to’ing and fro’ing, RDA (a media company) sought to terminate its media rights contract with EPCR by relying on the provisions of the force majeure clause contained within it. 

In contrast to the FA v PPL case mentioned above, the court found in favour of the media company: the pandemic did amount to a force majeure event under the contract and, accordingly, RDA did have a right to terminate the agreement. 

Learning points

1. Interpretation: a balancing act
   
   The written words used in a contract do not exist in a vacuum. Construing a contract is a "unitary exercise [which] involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated". In the FA v PPL case Mr Justice Fraser took PPL’s argued interpretation of the phrase “format of the game” (as including dates, times and frequency of matches and crowd size) and interrogated it against the language used in the contact and its factual matrix. In light of both elements, he found that the “[f]ormat of the competition does not include kick off times, the days when matches are played, or whether there are fans”.  Instead, it “refers to the way that the competition is undertaken between the 20 member clubs competing that season”. This was, he said, clear both from the language used in the contract and the rules governing the competition. 
   
   
2. Worked examples can be an easy way of bolstering a particular contractual interpretation
   
   In the FA v PPL case, the two contracts in dispute both included examples of events that would amount to a fundamental change to the format of the competition. These examples were “any change which resulted in: (i) the total number of Clubs being reduced to less than eighteen (18); and (ii) the Competition ceasing to be the premier league competition played between professional football clubs in England and Wales". Although the examples were not expressly stated to be exhaustive, the fact that they accorded with the FA’s interpretation of the relevant clause – that a fundamental change did not include changes to dates, start times or stadium capacity – added weight to that interpretation. A reminder of how effective worked examples can be: whether this will work for or against your organisation will depend on how closely they align to the circumstance it finds itself in.
   
   
3. Contracts are not meant to flex simply because the factual matrix is different
   
   There were two aspects to PPL’s argument that a fundamental change to the format of the competition had occurred. The first was that the season was interrupted. The second was that the conditions under which it resumed were very different to what the parties imagined when the contract was entered into (in 2017). Mr Justice Fraser was blunt in stating that this latter point does not matter. “The English law of contract does not require, or expect, contracts to be renegotiated or rewritten simply because events transpire differently to what is expected. This would lead to confusion and indeed chaos”. While he is of course right, this statement higlights how difficult it can be for parties to pre-empt and address situations they could not conceive of at the beginning of a contractual relationship. Force majeure clauses and material adverse change clauses are specifically included into contracts to address these “known unknowns”. However, as these two cases indicate, the simple fact that such clauses are included in a contract does not – in and of itself – mean that a party’s intended response to an unforeseen event will be guaranteed. As lawyers, we can help our clients by stress-testing these clauses, running scenarios against the wording used to see whether they clearly provide the outcome they would expect. 

4. Lessons on commonly used words and phrases in FM clauses
   
   EPCR came up with a number of rather creative arguments as to why RDA was not entitled to terminate the contract under the terms of the relevant force majeure clause. In addressing these, the judge provided some useful learning points on interpreting commonly used words and phrases in FM clauses.

a. The COVID-19 pandemic will often be caught by an FM clause

The judge in this case was quick to find the pandemic was caught the force majeure provisions. While the clause is question did not refer to pandemics per se, it was caught by the reference to “epidemics”, and because the pandemic was clearly a circumstance "...beyond the reasonable control of a party affecting the performance by that party of its obligations under this Agreement...".

b. Provisions in FM clauses protecting the “unaffected party” do not automatically preclude an affected party from benefiting

Here, the relevant clause provided that, if a force majeure event prevented, hindered or delayed performance for a continuous period of more than 60 days, “the party not affected by” the event could terminate the contract on 14 days’ written notice.

EPCR argued that RDA could not rely on this clause for protection because it, too, was a party affected by the pandemic. The judge, HHJ Pelling QC, said this was a misinterpretation of the relevant provision, with that phrase simply being a short-hand way of describing the counterparty to whom the obligation that was prevented, hindered or delayed was owed.

c. Failure to notify counterparty of an FM event does not preclude the other party’s ability to terminate

The clause in question required the party affected by the force majeure event to notify the other party “promptly” of the nature and extent of the event. EPCR had not served a notice expressly referring to the force majeure clause and said this meant RDA therefore could not take advantage of its terms, a construction the judge found was “absurd” when the clause was read as a whole. The ability to rely on the clause was triggered by the FM event continuing for a period of more than 60 days (which it was), rather than on notice of the event being delivered promptly. Prompt notice was designed to help the other party, not be a means by which the affected party could preclude a right of termination.

If you require further information about anything covered in this briefing, please contact David Morgan, Jane Randell, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2022