The Corporate & Commercial Law Society Blog, HNLU

Category: sports

  • Extra Cover: The Case for Regulating Sports Agents in Cricket

    Extra Cover: The Case for Regulating Sports Agents in Cricket

    BY SIMONE AVINASH VAIDYA, SECOND-YEAR STUDENT AT MNLU, MUMBAI

    Introduction

    The past two decades have witnessed an unprecedented boom in the commercialisation and commodification of Indian sport. An athlete’s horizon is no longer limited to the playing field, with production sets, brand shoots and promotional appearances routinely featuring as aspects of their professional obligations. It is common for A-list athletes to engage the services of Sports Agents or Agencies to manage their commercial ventures, and it is becoming increasingly prominent for upcoming sportspersons to sign with agents for this purpose. This practice has especially permeated the cricket pitch. This agreement comprises endorsements, team affiliations, compliance with regulatory guidelines and other brand ventures, with the agent essentially becoming the athlete’s manager.

    Indian sports are largely unregulated by the State in the absence of a comprehensive sports law and agency contracts in cricket are especially ad-hoc in their functioning. While other jurisdictions or authorities generally have codified laws or regulations pertaining to sports agents, India and the Board of Control for Cricket in India (‘BCCI’) do not prescribe comprehensive or even adequate guidelines for the same. Documentation and registration are the first steps in such regulation, and the BCCI has yet to implement even an accreditation system.

    This article seeks to establish the case for the regulation of agency contracts in cricket. While the rationale is applicable to all sports in India, the researcher focuses on the cricket field, shedding light on the virtual free hand given to player agents and managers. This article is structured along the same lines as Aditya Sondhi’s 2010 paper arguing the need for cricket legislation.

    Prognosis

    In the context of the dearth of laws and regulations for such agency relations, the Indian Contract Act, 1872 (‘ICA’) serves as the governing statute. The enforceability of sports agency contracts flows from Chapters I, II and X of the ICA. The foundation of any sports agency contract is the agency-principal relationship, which is governed by Chapter X of the ICA, starting with Section 182. The multi-billion dollar valuation of the industry amplifies the high stakes as cricket agency contracts operate in a league of their own.  The ICA is a general law failing to meet the unique needs of these situations. It is insufficient to address every aspect of cricket agency contracts, and there are multiple reasons for the same.

    Firstly, the fervour around cricket in India is unparalleled, heightening financial and emotional stakes. Given this massive commercial landscape, sports agents wield significant power in managing business deals. With such high stakes, the potential for conflicts of interest becomes a serious concern. Agents often negotiate across multiple interests, including franchises, sponsors, and the athlete’s commercial rights, which may not always align with the player’s best interests. Cricketer Kamran Khan’s story garnered media attention, with reports of his agent demanding 25% of his IPL contract money. This was not the only instance of such exploitative practices coming to light- Zaheer Khan’s legal dispute with Percept D’Markr, a talent management agency, was decided by the Supreme Court in 2006. It was held that the agency’s Right of First Refusal clause was void on the grounds of restraint of trade, under Section 27 of the ICA.

    Similarly, there is a substantial risk of loss and hardship caused due to category locking. This refers to the practice of restricting an athlete’s ability to endorse products from competitors of their existing sponsors. While this practice is common in sports contracts, it can often lead to an unfair restriction on the athlete’s freedom to choose endorsements. This risk is prevalent in the light of an agent’s often unbridled authority to negotiate and enter into brand deals on behalf of the athlete.

    Secondly, the athlete’s personality rights stand the risk of being misused. Personality rights refer to the right of a person to control the commercial use of their identity, including their name, image, likeness, and other personal attributes In India, while there is no dedicated legislation governing personality rights, athletes increasingly face challenges in protecting these rights from unauthorized commercial exploitation. Sports agencies have substantial power in this regard since they facilitate such agreements and transactions.

    Thirdly, the Mudgal Committee, constituted by the Supreme Court after the 2013 IPL Fixing Scandal, acknowledged the nefarious role played by some agents in its 2014 Report. Although the Report didn’t comprise an in-depth investigation of the same, it addressed the unethical conduct of these agents, and how they often serve as the bridge between the athlete and the bookie. This concern was also reiterated in the Lodha Committee Report, wherein the unscrupulous backgrounds of player agents were brought into question. The agent shares a fiduciary relationship with the athlete and is in a position of power while influencing them. This poses the risk of athletes being pressured by agents to engage in illicit and illegal activities, with younger or less experienced sportspersons being especially vulnerable to such influences.

    Furthermore, the culture of nepotism, non-accountability and excessive discretion in the cricket industry makes athletes reluctant to approach the courts for the redressal of their rights. The observation of favouritism at multiple levels of the cricket set-up also exacerbates the disinclination of athletes to speak up against potentially powerful sports agencies. In light of these varied considerations and interwoven complexities, it is evident that unregulated sports agencies are likely to become the malaise of the commercial world of cricket. The ICA is insufficient to meet the needs of such a uniquely dynamic landscape, and there is a pressing need to introduce- legislation for sports law at large, and rules for agency contracts in particular.

    Global Best Practices- France and the US

    France and the United States have enacted statutory regulations for sports agents, recognizing the need to effectively respond to the various challenges and exploitative practices in the industry.

    France has enacted the Code du Sport for this purpose. Sports agents in France must be licensed by the relevant sports federation, such as the Fédération Française de Football (‘FFF’) for football agents. To obtain a license, agents must meet educational and professional criteria, pass an exam, and adhere to ethical standards set by the federations. One of the key features of French sports law is its focus on transparency and athlete protection. Agents are required to have a written contract with the athlete, which must clearly outline their duties and the financial terms. The Code du Sport also imposes limits on the commissions agents can charge, typically capping them at a percentage of the athlete’s earnings. This prevents exploitation and ensures that athletes are not overcharged for agent services. Additionally, French law includes strict provisions on conflicts of interest and agent conduct. Agents cannot represent conflicting parties in the same deal, such as both a player and a club. Violations of these regulations can result in penalties, including fines, suspension, or revocation of an agent’s license.

    In the US, the Sports Agent Responsibility and Trust Act of 2004 (‘SPARTA’) and the Uniform Athlete Agents Act of 2015 (‘UAAA’) are in force to protect the duties of student-athletes signing with sports agents, in addition to the various state-specific laws. SPARTA delineates the duties of the agent, revolving around truthfulness and transparency. This creates an additional layer of obligations for sports agents, with unfair or deceptive acts being treated as violations of the Federal Trade Commission Act, subject to civil penalties. The UAAA in turn, is a model state law that provides for standardization, registration and certification of agents representing student-athletes. It also mandates express written contracts which include specific clauses, as stipulated under S. 10. Violation of the UAAA results in civil, as well as criminal penalties. However, it is to be noted that the SPARTA and UAAA are solely applicable to student-athletes, thereby excluding other professionals from its purview. There is no doubt that the SPARTA and UAAA suffer from several deficiencies, including their limited applicability. However, it cannot be said that this weakens the case for the regulation of cricket agents in India, which is negligible at present- the flaws in the application of a certain law cannot overshadow the need for regulation in another jurisdiction. 

    The Way Forward and the BCCI’s Prerogative

    Since the need for separate regulation of cricket agents has been clearly established, it is important to devise an effective and sound implementation system. Such a structure must account for accreditation, conflict of interest complications, transparency and ethical conduct. Currently, the BCCI is recognised as a private body registered under the Tamil Nadu Societies Registration Act. In BCCI v. Cricket Association of Bihar, the Supreme Court asserted that while the BCCI might be a private body, it discharges public functions with the tacit recognition of the State. The Court also observed that it possesses “complete sway over the game of cricket”, making it incumbent upon the BCCI to operate in the interests of justice and fair play. Therefore, the onus of introducing such regulations is on the Board itself due to its monopoly status in the field and Court-imposed responsibility of transparency and probity. These rules must be in the best interests of cricketers and must include several core regulatory measures. 

    Firstly, agents should be accredited as per the Lodha Report. It would not be unsuitable to prescribe certain qualifications for such agents and require them to pass licensing examinations. Though the BCCI announced an agent accreditation scheme in 2014 to regulate agents in cricket, there is little evidence of its implementation. According to news reports, the BCCI has failed to enforce the scheme effectively, and there is no information available about its actual enforcement, leaving cricketers vulnerable to unregulated agents. A major concern in the sports agent industry is the risk of conflicts of interest. Rules must explicitly prohibit agents from representing multiple parties with conflicting interests in the same transaction. A mandatory code of ethics should govern all accredited sports agents.

    Secondly, incorporating the American and French mandates of express written contracts is also a viable solution to ensure standardisation. The role played by agents in Indian cricket is vastly different from that of American or French agents since negotiations with clubs or franchises generally do not feature as a part of the agent’s functions in Indian cricket. Such global practices are effective when they are adapted to Indian standards. Agency contracts should clearly outline the duties, services, duration and financial terms, including commission rates. This provision would protect both athletes and agents by providing a legal framework for disputes. 

    Thirdly, all financial dealings between agents and athletes should be documented and subject to regular audits by an independent authority such as a Committee constituted by the BCCI for this purpose. A European Commission Report on Sports Agents identified the pressing need to ensure transparency in all financial flows between athletes and their agents. The link between financial crimes such as money laundering, and sports leagues has also been well-established, therefore exacerbating the threat of mismanagement and unscrupulous conduct. External auditing is a suitable mechanism to deter such activities, and this has been pinpointed in a 2021 study that incorporated a law and economics approach. 

    By making such agreements compulsory, athletes, especially young or inexperienced ones, will have a clear understanding of their relationships with agents and avoid exploitation or ambiguous commitments. To ensure compliance, the law must incorporate strict penalties for violations by sports agents, including fines, suspension, and license revocation. The BCCI must also constitute a forum for the investigation and redressal of such complaints and disputes. Encouraging Alternate Dispute Resolution mechanisms is a more athlete-friendly measure, considering the fiduciary relationship between the principal and agent, as well as the surrounding pressures of the cricket world. 

    Conclusion

    The current reliance on the ICA is insufficient to address the complex and high-stakes nature of agency contracts in cricket. As sports agents wield significant power in managing an athlete’s endorsements, sponsorships, and other commercial ventures, the absence of regulatory safeguards leaves players vulnerable to exploitation, unfair contractual terms, and conflicts of interest. 

    Through proactive regulation, it is possible to safeguard the interests of its cricketers, promote ethical conduct among agents, and elevate the professionalism of sports management. This, in turn, will foster a fairer, more accountable system that protects the rights and careers of athletes, ultimately ensuring that the business of cricket aligns with the values of integrity and fairness.

  • ESL v. UEFA: Federation(s) Actions Transgress Principles of Competition?

    ESL v. UEFA: Federation(s) Actions Transgress Principles of Competition?

    By Shubham Gandhi, third-year student and Tanish Gupta, second-year student at Dharmashastra National Law University, Jabalpur

    Introduction

    The furore surrounding the proposed breakaway European Super League (“ESL“) has yet again spurred with the issuing of joint statement canned by the three so-called European giants i.e. Barcelona, Real Madrid, and Juventus bolstered up the ESL keeping the faith of the league alive. This came in the aftermath of a preliminary ruling dictated by the Madrid Commercial Court on 20 April 2021 holding the league to be in violation of EU competition law.

    The idea of Super league, much of its disgrace, has posed a serious question to the world of sport. The author(s) in this manuscript will give readers the premise of the formulation of ESL, how the league is in contempt of the EU Competition law, and also distil the legality of the statement made by the Union of European Football Association President (premier governing body for football in Europe) barring the players’ from participating in the domestic league and world cup. 

    Instaurating European Super League

    The European Super League has been in talks for over the years. As early as 1988, a similar move, a two billion deal was signed to establish a new league of elite, surfaced in the world of football, famously known as  Project Gandalf . The ESL President Mr. Florentina Perez who is also chairman of Real Madrid C.F on Sunday, 18 April 2021 trumpeted to the world the newly formed Super league consisting of 20 teams with a total of 15 clubs as founding members and with 5 spots left for other clubs to earn through promotion. For Mr. Perez the league formation was quintessential in order to revivify the TV rights by recuperating the losing interest of fans towards  football and also to provide indispensable financial assistance to the clubs.

    The founding members (European giants) approached by the ESL, will bring exuberance of watching big star studded matches on every midweek, resurrecting the interest of football fans, making the league popularized. The ESL will also provide the clubs necessitated financial stability, by sanctioning 200 million euros every year.

    UEFA right to forswear

    The presence of Article 49 (3) of UEFA statutes grants the federation to intrude in the formation of the ESL. The statues read as: –

    “International matches, competitions or tournaments which are not organised by UEFA but are played on UEFA’s territory shall require the prior approval of FIFA and/or UEFA and/or the relevant Member Associations in accordance with the FIFA Regulations Governing International Matches and any additional implementing rules adopted by the UEFA Executive Committee.”

    The Article accords UEFA and FIFA as the premier body to grant ratification to any new league, planning to engage in football across Europe. Connoting that the ESL were to take prior permission from UEFA for its formulation, perverse to that, the ESL was devised in silence and publicized, as surprise, not to the world but to the players and manager of the clubs as well.

    The riveting point is that many members were part of both the federation this includes Mr. Andrea Agnelli, chairman of Juventus F.C and chairman of European Club Association (“ECA“) who later resigned on the very day when the proposed ESL came into reality. His participation in two opposing federations casted doubt of potential sharing of confidential information for advantage of ESL formation, giving UEFA right of action, based on breach of confidentiality.

    Delving into Competition law

    The European courts have time and again precedented that sports and activities are dictated by competition law. The ECJ in Klaus Hofner and Fritz Elser v. Macrotron GmbH held that the football clubs are termed as “Undertaking” which are capable of affecting competition within Article 101 (1) of Treaty on the Functioning of the European Union (“TFEU”). Also, the ECJ in Meca Medina v. Majcen decreed that competition law does apply to sporting events in relation to economic activities. 

    It renders every restrictive (cartel) agreement as a violation of competition law, but subject to exceptions i.e. if the federation pursues a legitimate objective, are inherent to these objectives, necessary and proportionate.

    The ESL principally infract the principle of equality between the clubs which was endorsed by the courts around Europe. In the Bosman decision of 1995, the court in para 106, summarised the test as “the aims of maintaining a balance between clubs by preserving a certain degree of equality and uncertainty as to results and of encouraging the recruitment and training of young players must be accepted as legitimate”, similar ruling was dictated in the UEFA Champions League decision of 2003. It is safe to say that the ESL being a close league, with 15 members guaranteed spots regardless of their performance, will fail to stand the test of legitimate objective.

    It is to be borne in mind that ESL being a new competition, will gamble upon the existing system and will diminish the financial interest of UEFA, as they are the only federation regulating football in Europe, holding a dominant position.

    The UEFA could be prohibited by virtue of Article 102 i.e. Abuse of Dominant position, from exercising its dominant position by prohibiting other leagues and favouring their  league which is Champions and Europa league. The same be held in Motoe case adjudged by ECJ.

    UEFA’s incongruous statement banning players

    The other wrangle in the brawl between ESL and UEFA is the statement made by UEFA President suspending the players from domestic teams and national teams. The legality of this statement can be posited by Article 102 of TFEU, which declares action taken while holding dominant position as void. The Munich court criticized Fédération Internationale de Basketball (“FIBA“) rule of banning athletes from club and nationals teams, taking part in competition other than the one staged by FIBA. The court while demeaning this rule of FIBA, held them accountable for abusing the dominant position.

    In a much recent case, the EU court in International Skating Union Case 2020 held that International Skating Union (national governing body for the sport of figure skating in the United States)rules regarding blanket ban on players from national teams who are participating in tournaments not accredited by ISU are not proportionate to the legitimate objective as per Article 101(1).

    Moreover, a decision rendered by the regional court of Frankfurt held that, if the federation announces the selection of players for the national team not on the basis of sporting merit, then it will be deemed to be a decision based on abuse of dominant market position.

    Likewise in the German Wrestling League case, the Nuremberg court of appeal while citing the ISU case held though federation are allowed to take measures in order to protect their own economic interest against the competitive organisation but banning players is against the principle of EU and German competition law.

    This in clear terms implies that the announcement threatening to ban all the 12 clubs and players from participating, will not hold a grasp on the courts. The vogue of courts upholding players autonomy is a strong inference that if ESL ever to approach the court, the ruling can be in their favour, same be affirmed by ESL Chairman.

    The banning of players will also stand in violation of the principle of ‘restraint of trade’ as players are free to move, as enshrined in the common law system. The creation of ESL has resulted into a much serious breach of duty on part of the club as the planned league carried out without letting the players know, which is in violation of rules of domestic leagues i.e. to abide by the rules of UEFA and FIFA. This in turn will give the right to players to repudiate the contract on grounds of breach of duty and contractual obligation.

    In the present case all the disputes arising out of ESL, the ban on teams from domestic leagues and the ban of players from playing in the world cup is likely to have breached any law or regulation for the time being in force, will likely be referred to CAS.

    Conclusion

    It will be interesting to watch out how this tale of world football develops in the coming months. The EU courts, while deciding the legality of ESL, also have to set out measures hinting whether TFEU licenses a competitive league ever to be formed finer than ESL or UEFA will continue to hold the dominant positions, concerning all small footballing activities played out in Europe.

    It is safe to say that the decision banning players from all the competition will not hold strong in court and the actions of UEFA will, in turn, violate Antitrust law as insinuated by the court through various precedents.