A Commercial Court judgment involving the high value rights to broadcast Premier League football matches in China, handed down last week, highlights some of the dilemmas many commercial contracting parties continue to face in the wake of the COVID-19 pandemic and the importance of having clear contractual rights which can be enforced to protect their position. As the judge in the case described, "The pandemic has impacted the lives, livelihoods and activities of almost everyone on the planet."
In one of the first decisions of 2022, the Football Association Premier League Ltd (the Premier League) successfully obtained summary judgment against PPLive Sports International Limited (PPL), a Hong Kong-based media rights and broadcast company, for non-payment of significant contractual sums.
In 2017, the Premier League and PPL had entered into contracts to allow PPL the rights to show live and delayed Premier League football matches and "clips" on television in mainland China and Macau for three football seasons, the first of which was to run from August 2019 to June 2020. The contracts combined were worth in excess of US$ 700 million.
As most will remember for a long time to come, the 2019/20 season was severely disrupted by the COVID-19 pandemic in March 2020. However, PPL continued to broadcast the remaining 92 matches of the season (following a suspension of the season for 10 weeks between April and June 2020) without paying two contractual instalments. The first for US$ 210.3 million; the second for US$ 2.7 million. The Premier League sued for these sums and sought summary judgment in what, it was argued by the Premier League, was essentially a debt claim. After the end of the 2019/2020 season, the Premier League terminated the contracts.
PPL complained that the 2019/2020 season was interrupted, and that the conditions under which it resumed were very different to what all imagined when the contracts were agreed. These conditions included matches being played in empty sports stadiums, without fans present, the compression of the remaining fixture list into a five week period rather than nine weeks. Many matches were also re-scheduled from weekends to weekdays, and kick-off times were changed such that broadcast times moved to the early hours in China, which affected viewing numbers.
This was a summary judgment application i.e. this was not a trial with full evidence and disclosure, but an application to court under Civil Procedure Rule 24. In such applications, the judge decides whether the defendant has any real prospect of successfully defending a claim or issue, and considers whether there is any other compelling reason why the case or issue should be disposed of at a trial.
In this context, despite obvious disruption to the football season caused by COVID-19, and despite PPL's argument that summary judgment against them would result in unjust or different treatment in comparison to other media partners of the Premier League (the details of which are beyond the scope of this update) this application was determined (as one would expect in a summary judgment application of this nature) by reference to the contractual construction of the relevant agreements. The Court adopted the now settled approach to contractual interpretation laid down by the UK Supreme Court in Wood v Capita i.e. what do the words the parties actually used in the written agreement mean, taking in the factual matrix and the context in which the agreement was reached.
The key issue of construction in this case was whether the disrupted season could be characterised as a "fundamental change" to "the format of the competition" such that PPL could rely on a commitment given by the Premier League in the contracts to then enter into a good faith renegotiation on price.
The judge decided that the changes were not changes to "format" at all. Examples of changes to format were actually set out in the clause, such as changes to the number of clubs (to a number below 18) or the competition ceasing to be the premier league competition. Because of the nature of a summary judgment application, everything hinged on this point of construction and whether there was any real prospect of success in defending the claim. The court decided there was not.
Interestingly, given the COVID-19 context and the timing of the relevant decisions, neither party contended that the pandemic represented a force majeure event in the context of the contracts between them.
This judgment is another reminder, even where the COVID-19 pandemic has changed significant aspects of the commercial underpinning of a contract, that obtaining proper protection of a party's position by way of a clear written contract, and understanding the implications of the actual contract in play is paramount (starting with the "words on the page"). Properly drafted, even very large sums of money are susceptible to summary judgment rulings before the English Court, and the benefit of this to a commercial party (provided they are on the right side of the drafting) is obvious.
As the judge commented, "In many commercial contracts events may transpire other than as anticipated by one, or even both, contracting parties. That does not mean that the court will re-write the parties' bargain and impose different terms upon them to suit those later events. That is not the function of the law of contract." The ability to protect their position, and manage risks (known and unknown), is increasingly in the hands of the parties to a contract and there is real merit in anticipating at the outset of a new relationship (or when revisiting an old one) what will happen in the event that things go wrong.
If you have any questions regarding this article, please contact Emma Carr, or Sean Adams.