The Impact of the COVID-19 Pandemic on Sports Law and Contracts

Like many industries, the world of sports has not been spared from the global COVID-19 pandemic. The cancellation (Wimbledon 2020, Australian Grand Prix), suspension (Ligue 1, Top 14), or postponement (Roland Garros, Tokyo 2020 Olympic Games, and Euro 2020) of national and international competitions has disrupted both the sporting and financial projections of all stakeholders in the sports industry.

Athletes, sports agents, clubs, federations, as well as economic players such as sponsors, advertisers, and sports event organizers have all been affected by COVID-19.

Beyond the challenges of maintaining sporting fairness, the uncertainty surrounding lockdown measures implemented worldwide has led to the suspension of numerous contracts in professional sports, bringing with it a host of legal issues. For instance, as seen in recent football news, a sponsor may argue that its brand is no longer being promoted due to the absence of sporting events and may decide—albeit at the risk of future litigation—to suspend related payments.

In practical terms, legal professionals must carefully analyze the contracts binding the parties.

The first step is to determine the applicable law, as sports contracts often have a transnational nature and may be governed by foreign legal systems.

If French law applies, parties may attempt to invoke Article 1218 of the French Civil Code on force majeure, which allows a party to suspend or even terminate a contract when an unforeseeable, external, and irresistible event prevents its execution.

Can Force Majeure Be Invoked in Sports Contracts?

The sports industry is no exception.

If the parties cannot agree on how their contract should be handled in light of COVID-19, the courts will have to interpret whether the pandemic qualifies as force majeure. The Colmar Court of Appeal recently ruled that the COVID-19 pandemic constitutes a force majeure event (CA Colmar, March 12, 2020, No. 20/01098). However, past epidemics have not always been recognized as such by French courts, which considered that their effects were known and/or not severe enough (e.g., bubonic plague, H1N1 flu, dengue fever, and chikungunya cases).

Given that COVID-19 is a variant of SARS, which affected several countries between 2002 and 2004, will French courts make a distinction between an epidemic and a pandemic when determining force majeure? Beyond the pandemic itself, government measures—including those implemented by sports federations and national leagues—may, in some cases, meet the criteria for force majeure, as they directly impact the continuation of economic activity, including sports.

While the COVID-19 pandemic is unprecedented in terms of its global scale and the exceptional lockdown measures implemented by various states, it does not exempt parties from adhering to contractual formalities and obligations of loyalty and good faith.

Since Article 1218 of the French Civil Code is not a mandatory provision, parties may contractually define the cases and modalities of exemption related to force majeure.

Another key consideration is the date of the contract’s conclusion. Any sports contract signed after the pandemic was declared will prevent parties from invoking force majeure, as they would be deemed to have accepted the "risk" of entering into a contract despite the ongoing crisis. However, if unforeseen new measures were later introduced due to the pandemic’s evolution, it could be challenging—but not impossible—to argue force majeure.

Legal professionals and courts will likely use March 12, 2020—the date the French state of emergency was declared—as a reference point, much like the government’s March 25, 2020, orders. However, this date may vary depending on the type of event and its capacity restrictions, given that bans were introduced progressively.

Legal and Practical Consequences of Force Majeure in Sports Contracts

According to Article 1218 of the Civil Code, the contractual consequences depend on whether the sporting event is canceled, suspended, or postponed:

1. Suspension or postponement of an event – The hindrance may be considered "temporary," meaning contractual obligations are only suspended. However, if the suspension lasts too long, it may render performance meaningless, effectively nullifying the contract.

2. Cancellation of an event – The hindrance may be considered "permanent," leading to automatic contract termination.

In any event, the wording of sports contracts is decisive: is the contract linked to a precisely identified sporting event and/or has it been concluded for a fixed term? Depending on the date on which the event is postponed, it may fall outside the scope of the contract, leading to very different contractual situations depending on whether or not the parties have envisaged such a scenario.

In cases of suspension or termination of a sports contract, compensation issues may arise. Although force majeure generally exempts a party from its obligations without any liability, the complexity of modern sports contracts may lead to alternative contractual mechanisms, such as:

• The reimbursement of expenses and penalties, especially if costs were incurred for an event that was later canceled.

• The suspension of financial obligations (e.g., broadcasting rights payments) at the debtor’s risk.

• Good-faith renegotiation clauses for bonuses or performance-based payments.

Additionally, sports event contracts are often complex and involve multiple parties at various levels. Some parties may attempt to invoke Article 1186 of the French Civil Code, which states that when the execution of multiple contracts is necessary for a single operation, and one contract disappears, others that depend on it may become void.

The interpretation of contractual terms establishing links between agreements, as well as the information disclosed at the time of contract signing, will determine whether multiple contracts related to the same sporting event are affected.

Lastly, insurers are in the front line when it comes to sporting events, given the economic stakes involved in sport today. They may have included in their policies a number of mechanisms designed to limit their exposure through the insured's participation (extension of cover, obligation to make prior declaration, implementation of safety measures, etc.). Some insurers may have excluded all coverage in the event of an epidemic/pandemic in their insurance policies; here again, a precise and detailed analysis of the general and special conditions will help prevent insurers from evading the implementation of their insurance guarantees.

Faced with this unprecedented situation, we anticipate that the parties will decide to sit down around a table to renegotiate the terms of their contract in good faith, by determining the reality of the impediment invoked by one of the co-contracting parties. In addition to force majeure, when the economic equilibrium of a contract is upset by unforeseeable circumstances but its performance is not called into question, article 1195 of the French Civil Code allows for the renegotiation of contractual terms. This mechanism, which gives the contract a degree of flexibility in the face of an unforeseen change in circumstances, presupposes that the parties reach an agreement on how the contract should be adapted, unless they refer the matter to a judge, who may adapt the contract or order its termination.

Should these renegotiation attempts fail, a careful reading of each contractual situation is therefore essential to identify the strengths and weaknesses of each party's arguments; our team is at your disposal to assist you in this analysis, in order to determine the chances of success or the exposure associated with taking legal action.