Football in court – the conclusion


FOOTBALL used to be a very simple game for amateurs. Not any more. Today it’s a global industry and it has become very complicated. Never in the mind of its creators would they have imagined a scenario where two Argentine players would be the subject of intense litigation as discussed by American lawyer Sohrab Daneshku continued from last week.

“Remoteness in addition to the breach being an effective cause of the loss, a defendant’s loss must not be too remote as a matter of law. In contract, the starting point for a consideration of remoteness of damage is the 19th century case of Hadley v Baxendale.

“In that case, the court held: ‘Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it’.

“More recently, in The Heron II, Lord Reid considered that what had been meant in Hadley v Baxendale was that ‘a result which will happen in the great majority of the cases should fairly and reasonably be regarded as having been in the contemplation of the parties’, but not one which, though foreseeable as a substantial possibility, would only happen in a small minority of cases. The test in contract is higher than the ‘reasonably foreseeable’ test in tort.

“The test is framed at the time the contract was made, not by reference to what the parties may have contemplated at the time of the breach. When was the contract made in the Tevez case? Most likely in summer 2006, when Sheffield United were promoted to the Premier League, which already included West Ham. The loss suffered must have been of a kind or type the parties that would reasonably have contemplated.

In the context of the Tevez award, we do not know what heads of damage were claimed, but they are likely to have included loss of television income as a result of relegation, reduced payments as a result of a lower final league position as well as reduced sponsorship and ticket revenue.

“It is submitted that a recovery for breach of contract is open to criticism on the grounds of remoteness of damage. It is a bold step to say that in summer 2006, the clubs can be taken to have considered that a breach by West Ham of the Premier League regulations would be liable to result in the loss of revenue attendant upon Sheffield United’s relegation the following summer.

“The FA Tribunal award related to liability only. A hearing on quantum was to be heard in March 2009, but the clubs settled the quantum issue shortly before the hearing.

Third party influence “In the context of the FA Premier League rules, what was offensive about the Tevez and Mascherano agreements was the ability of a third party to influence a club’s performance. In the light of the Tevez controversy, The Federation Internationale de Football Association (Fifa) incorporated a new rule in its Regulations on the Status and Transfer of Players, Article 18, which provides: ‘No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams’. This is similar to the FA Premier League former rule U18 (of which West Ham fell foul), now rule V20. The FIFA rule catches third parties as well as a club’s counterparty to a contract.

“Under both the Fifa and the Premier League rules, the ownership by third parties of economic rights in players is not banned per se, but the Premier League has also introduced new rules L34 and L35, in a section titled ‘Prohibition on Third Party Investment’. In summary, these rules only permit transfer payments to selling clubs, their guarantors, authorised agents and the football authorities, where applicable. Rule L35 permits a buying Premier League club to buy out the interest of an economic rights holder, if the holder already has an agreement with a player or his selling club that the holder will be paid when the player is transferred.

“Difficulties continue, in England at least, with third party rights holders. One such is the Hero Global Football Fund, based in Jersey, backed by a Dubai bank and with advisers including Alan Hansen. The Hero Fund’s objective was to invest in European and other clubs in return for a cut of young players’ transfer fees when the players are sold on. Precise details of what the fund wished to do are not public, but the FA Premier League concluded that the fund’s business model would be in breach of rules L34 and L35.

“As is well known, third party ownership of a player’s economic rights is common in South America, where many clubs do not have the resources to pay large transfer fees. Regardless of the economic realities elsewhere, however, the Premier League has clearly signalled its scepticism towards arrangements of this type.

Claims by other parties“Once the decision of the FA Tribunal was known, a stream of other parties suggested they may bring claims against West Ham. These include current and former Sheffield United players and the club’s previous manager, Neil Warnock. Two other clubs were also reportedly considering their positions, Fulham FC and Leeds United. Fulham would have received a greater payment from the Premier League in 2007 had West Ham been deducted three points (since in those circumstances Fulham would have finished above West Ham United). Leeds sold players such as Rob Hulse and Matthew Kilgallon to Sheffield United, with additional contingency payments included in the transfers: these presumably would have become operative had Sheffield United retained its Premiership status in 2007.

“West Ham moved quickly to try to quash such claims: the club said it would do all it could ‘to stop this matter ending in a form of legal anarchy’. Might these parties have a sustainable cause of action? Fulham, being a Premier League club, would be able to bring a claim in contract. In the other cases, the cause of action is more difficult to discern. It will be difficult to establish that West Ham owed the other parties the duty of care necessary as part of a claim in negligence.

“The economic torts may also be avenues of attack, but here too there are difficulties. Procuring a breach of contract carries a high evidential burden of intention on the part of the defendant. In the tort of causing loss by unlawful means, the unlawful means themselves (here, presumably breach of contract, misrepresentation or deceit) must have been actionable by the defendant.

“The former players, etc, had no contract with West Ham, and West Ham would argue that any misrepresentation or deceit was not made or carried out with the intention that it should be acted upon by the defendants, or classes of person including the defendants. The details will need to be examined, but at this stage it appears that while there may be a degree of unrest, legal anarchy seems unlikely to result from the Tevez affair.”