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The Court grapples with impact of Covid-19 on European rugby

News / / London

As we approach the second anniversary of Covid-19 being declared a pandemic by the World Health Organisation on 11 March 2020, a number of judgments are coming out of the English Courts which are providing useful guidance on how the English Courts are treating claims concerning Covid-19, especially in a force majeure context.

A recent judgment from the Commercial Courts in European Professional Club Rugby v. RDA Television LLP [2022] EWHC 50 (Comm) centres on the disruption to European rugby competitions as a result of the onset of Covid-19, but the lessons coming out of it apply equally to parties negotiating or seeking to rely on force majeure clauses in any sector.

Background

European Professional Club Rugby (“EPCR”), the governing body and organiser of the European Rugby Champions Cup and the European Rugby Challenge Cup (the “Competitions”), licenced its media rights for the Competitions for four seasons (commencing with the 2018/2019 season) to RDA Television LLP (“RDA”) by way of a media rights agreement (the “MRA”).

EPCR had scheduled the quarter finals, semi-finals and finals of the 2019/2020 Competitions to take place throughout April and May 2020. The date for the end of the season was 20 June 2020.

On 16 March 2020, EPCR announced that the quarter finals were being postponed due to the onset of the pandemic. In mid-May 2020, EPCR set out its intention to schedule all the remaining matches during September and October 2020.

RDA gave notice of termination on 8 June 2020, asserting that it was entitled to do so in accordance with the force majeure mechanism in the MRA.

EPCR did not agree and considered that (by purporting to terminate the MRA) RDA had wrongfully repudiated the MRA. By way of a letter dated 22 July 2020, EPCR accepted this as bringing the MRA to an end.

The Agreement

Under the MRA a force majeure event was defined as “any circumstances beyond the reasonable control of a party affecting the performance by that party of its obligations” and was specifically stated toinclude an “epidemic”.

The force majeure provision, which RDA sought to rely on as grounds for termination, stated:

“26.1. If either party is affected by a Force Majeure Event which prevents that party from performing its obligations under this Agreement, the affected party shall promptly notify the other of the nature and extent of the circumstances in question.

26.2. ….

26.3. If either party is affected by a Force Majeure Event, it shall use all reasonable endeavours to mitigate and/or eliminate the consequences of such Force Majeure Event ….

26.4. If the Force Majeure Event prevents, hinders or delays a party’s performance of its obligations for a continuous period of more than 60 days, the party not affected by the Force Majeure Event may terminate this Agreement by giving 14 days’ written notice to the affected party.” (emphasis added)

The Decision

The Court found that the pandemic was a “Force Majeure Event” under the MRA by virtue of the reference to “epidemic” and because the pandemic was a circumstance “beyond the reasonable control of a party affecting the performance by that party of its obligations under this Agreement.”

RDA argued that it was entitled to terminate at any time 60 days after 16 March 2020, when it contends that the pandemic first started to “hinder…or delay… [EPCR’s] performance of …” its obligations under the MRA to “stage each Competition each season during the Term”.

EPCR submitted that:

  • RDA was not entitled to terminate because RDA was also a party affected by a “Force Majeure Event” and was therefore obliged to “use all reasonable endeavours to mitigate and/or eliminate the consequences of such Force Majeure Event…” (Clause 26.3); and
  • the purpose of RDA serving the notice of termination was to pressure EPCR into varying the financial terms.

Given it had not been alleged that the operation of the force majeure clause was subject to any implied terms that qualified the ability of either party to take advantage of the force majeure machinery, the Court held that even if the impact of the pandemic was not the true reason for serving the notice of termination (and RDA saw this as a means of inducing EPCR to re-negotiate terms) this did not matter (and would not render reliance on the force majeure machinery invalid, ineffective or a repudiation) if, on a true construction of the agreement, RDA was entitled to serve notice terminating the MRA.

As a matter of construction, the Court held that RDA was entitled to terminate the MRA (which meant that RDA succeeded with its counterclaim). In reaching this conclusion, the Court:

  • …did not accept EPCR’s submission that where both parties are affected (in different ways) by the same Force Majeure Event, the effect of clause 26.2 is to deprive the parties of recourse to clause 26.4”;
  • did not accept EPCR’s argument that RDA’s notice of termination was invalid because only “…the party not affected by [the] Force Majeure Event may terminate this Agreement…”. It was held that “the phrase does not have the effect of depriving a party in the position of RDA of the benefit of clause 26.4 simply because it has been affected in a general sense by the same Force Majeure Event that has prevented hindered or delayed the performance by the other party (in this case EPCR) of its obligations under the contract”;
  • similarly, did not agree that RDA was under an obligation (pursuant to Clause 26.3) to use all reasonable endeavours to mitigate and/or eliminate the consequences of the force majeure event. The only controls imposed on RDA in exercising its right to terminate under Clause 26.4 were that (i) the disruptions must have continued for 60 days before the notice can be given and (ii) the notice period must be 14 days;
  • found that EPCR did not, based on the terms of the MRA, have a right to complete the Competitions during the course of the following season;
  • was satisfied that by the date that the notice of termination was given, the outstanding games had been postponed for well in excess of 60 days, EPCR had not informed anyone of the dates on which the outstanding games would be played and it was impossible to fix them for any date prior to 20 June 2020 as at that date; and
  • rejected EPCR’s submission that RDA could not exercise a right to terminate because of force majeure because EPCR had not served a force majeure notice expressly referring to Clause 26.1. Such a construction would mean that a party in breach by reason of force majeure could preclude its counterparty from terminating under Clause 26.4 simply by not serving a notice under Clause 26.1.  

Comment

This case turned on the specific wording of the force majeure provisions (as most disputes concerning force majeure do). However, this judgment provides helpful guidance on how the Court may tackle circumstances in which both parties are affected by the same force majeure event (albeit in different ways).

It is also worthwhile noting that, in the absence of it being argued that implied terms should apply to the operation of the force majeure mechanism, the Court placed little weight on RDA’s motivation for terminating the contract. The Court was also critical of EPCR seeking to rely on its own failure to properly notify its counter party of a force majeure event.

Parties should take care when negotiating force majeure provisions, especially in relation to the intended scope of such provisions. Indeed, although the definition of “Force Majeure” in this contract expressly referred to “epidemics”, the definition was widely drafted so as to include “any circumstances beyond the reasonable control of a party affecting the performance by that party of its obligations”, which meant that the impact of Covid-19 would have fallen within the “Force Majeure” definition in any event.

David Choy

David Choy Managing Associate

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