We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Wed 28 Jan 2009 04:00 AM

Font Size

- Aa +

Crime and punishment

The recent terror attacks in Mumbai have shocked the world. In addition to the grave loss of human life, Arjun Aiyar points out the broader commercial implications of the attacks on sports broadcasting.

The recent terror attacks in Mumbai have shocked the world. In addition to the grave loss of human life, Arjun Aiyar points out the broader commercial implications of the attacks on sports broadcasting.

One of the fallouts of the terror attacks has been the cancellation/postponement of cricket matches to be held in the month of December, with the most notable cancellations/postponements being in relation to the England cricket team's tour of India and the inaugural twenty-twenty ("T20") Champions League tournament.

It is not the first time that sporting events have been cancelled/postponed due to security concerns or terrorist acts and, given the state of the world, it is unlikely to be the last occasion when something like this occurs.

While well drafted 'force majeure' provisions and properly constructed contracts for the delivery of rights can cover the possible postponement of an event due to a terrorist act, these provisions would only offer limited protection when it comes to cancellation of an event or a series of events (as is the present case with the English cricket tour to India).

The question is, what is the impact of cancellations/postponement of sporting events on sports broadcasters and what can be done to mitigate losses that may be suffered by sports broadcasters as a result of such a cancellation/postponement?

Usually, sports broadcasters will buy or obtain a license to broadcast sporting events from the owner/promoter of a sporting event (usually referred to as the ‘rights holder'). The key document in such a deal is the broadcast licence agreement between the rights holder and the broadcaster.

While entering into these types of agreements, it is critical that due care and attention is paid to the clause pertaining to ‘force majeure' and to the insurance provisions in the contract. Similarly, these provisions need to be reflected (in a back to back manner) in subsequent agreements with sponsors and advertisers.

The literal translation of the words ‘force majeure' is ‘superior force' and its use in a legal contract is generally with reference to events which may cause the parties to a contract to be unable to carry out their obligations under a contract due to reasons which are beyond their reasonable control.

These events usually include riots, civil disturbances, strikes etc... After 9/11, acts of terrorism were also generally included in the definition of a force majeure event under a contract and it is important, especially in light of recent events, that broadcast licence agreements make mention of this in the definition of such events.

Usually, when an event of force majeure occurs, the obligations of the parties to agreements are suspended for as long as the event exists and once such an event ceases, the contract continues to operate as normal between the parties.

Things, however, get more complicated when the broadcast licence agreement is in respect of a series of sports events and not just with regard to a one off sports event.

While dealing with a series (like the recent T20 cricket series mentioned), it is important to specify that the term of the contract will only end after a certain number of matches or games are delivered.

Similarly, agreements with sponsors and advertisers should specify advertising slots/sponsorship opportunities will be provided in relation to a certain number of games/matches.

If agreements are drafted in this manner and a series of sporting events or part of a series of sporting events are postponed due to a terrorist act then the question of short delivery by the rights holder or the broadcaster does not arise since the obligation is to deliver sponsorship/advertising opportunities in relation to a number of games/matches rather than in respect of a particular time period.

While well drafted ‘force majeure' provisions and properly constructed contracts for the delivery of rights can cover the possible postponement of an event due to a terrorist act these provisions would only offer limited protection when it comes to cancellation of an event or a series of events (as is the present case with the English cricket tour to India).

When sporting events or a series of sporting events are cancelled, the parties to agreements related to these events (whether they are broadcasters, rights holders, sponsors or advertisers) can in the first instance look to have a cancellation provision in their agreements to cover for a total or partial refund of monies in the event of cancellation.

It is worth considering such provisions at the stage when the contract is being negotiated itself and while no one enjoys talking about the non occurrence of an event that everyone hopes will happen, it would be prudent to consider such an eventuality at this stage itself.

Sometimes however parties to such agreements are understandably reluctant to talk about the cancellation of such events in an effort to get parties interested in investing in the sporting event in question. In such circumstances insurance is a critical matter to be taken into consideration.

Sporting events and sports broadcasting insurance products are usually highly specialised products and it is always advisable to seek insurance from an insurer who has a proven track record and experience in such industries.

That said, irrespective of the expertise offered by the insurer, it is crucial that "insured events" under the policy a sports broadcaster may buy covers acts of terrorism.

Generally speaking, the premiums for insurance cover for acts of terrorism which result in loss to a sports broadcaster are higher than the norm but usually this is well worth the additional expense given the large sums of money that are being paid for broadcast rights for sporting events these days.

Sports broadcasters should also try and ensure that the insured event, being terrorism, covers not just direct acts of terrorism that may result in the cancellation of an event but also a proximate act of terrorism.

For example, in Mumbai, while no bombs went off at the ground during a match, matches were quite understandably cancelled by the teams due to security concerns that arose as a result of the terrorist attack.

A bomb going off during a game would be a direct act of terrorism under the policy but cancellation (and subsequent loss of revenue) on account of security concerns raised by the attacks would be a proximate cause.

The insurance policy should cover such an eventuality and should extend to any losses that the broadcaster may suffer including the loss of the licence fee due to the rights holder and any monies that may become due, by way of compensation, to sponsors or advertisers.

Sports and sporting events are a celebration of humanity and the human spirit. Unfortunately, we live in times when that spirit is under threat like never before.

While we all hope that ultimately terrorism is defeated, in the interim, the major stakeholders in sport need to do all they can to make sure that sport survives and thrives even in these difficult times.

Over the past three decades, the primary source of revenue for sport has come from broadcasters. Ensuring that broadcasters are properly protected is the key to ensuring the continued good health of sport and the human spirit.

For further information, go to www.therightslawyers.com.

Arabian Business: why we're going behind a paywall

Real news, real analysis and real insight have real value – especially at a time like this. Unlimited access ArabianBusiness.com can be unlocked for as little as $4.75 per month. Click here for more details.