Real Madrid president Florentino Perez has reiterated that the 12 founding members of the ESL, including the nine clubs that announced they will no longer take part, have legally binding contracts preventing them from backing out of the heavily criticised league. If this statement is true, what barriers does Perez face with enforcing sanctions on the Premier League clubs? Where could the legal battle be pitched and how could it work?
By Santiago Graffigna, Commercial Litigation Associate at BLM
The announcement of the 12-team European Super League (ESL) proved to be one of most dramatic developments across all of sport in recent years, provoking an immediate and overwhelmingly negative response from fans, broadcasters, financiers, sports regulators and even governments worldwide. The backlash was fierce; UEFA, FIFA, Serie A, Premier League and La Liga were quick to state they would ban the clubs involved and their players from other competitions, threatening extensive legal action, whilst fans protested in their hundreds of thousands in an unprecedented show of solidarity. UEFA in particular have taken swift action, and according to media reports are gearing up to pursue severe disciplinary measures against clubs that signed up to the clubs yet to distance themselves sufficiently from the project, following a settlement with those that have abandoned the project.
There was particular backlash against the English clubs involved, with UK prime minister Boris Johnson vowing to do everything in his power to prevent its creation, the Premier League introducing a new owners’ charter and legislation to protect its ‘core principles’ and subject to significant sanctions if broken, all backed by the UK government.
Spanish courts took a decidedly different approach. The 17th Commercial Court of Madrid provided protection to the Spanish clubs involved, passing an official court order, which stated: “we prohibit adopting any measure that stops, restricts, limits or conditions in any way, directly or indirectly, the launch of the Super League…We also prohibit any sanction against the ESL clubs and their players.“
However, this certainly was not enough to stop the wave of anti-ESL sentiment. Ultimately nine of the founding clubs stepped away from the project within 48 hours of its announcement, with only Juventus, Real Madrid and Barcelona remaining.
Many believed this meant the saga was done-and-dusted, with even Juventus chairman Andrea Agnelli admitting it now “could not happen”, Real Madrid president and ESL joint-chair Florentino Perez has however since made a series of statements concerning the 12 clubs, essentially arguing that “binding contracts” mean they “cannot leave“. These claims have provoked further debate – how true is Perez’s statement, and could his club and others feasibly invoke any punishment on the departed Italian or English clubs?
As a starting point, we do not know the detail of the agreement reached between the 12 clubs, and it is possible that we never will. It would however be surprising if it turned out that the departed clubs would be forced to play ad aeternum (i.e. a specific performance of the agreement). If the agreement was binding and there was no means of “backing out”, there would potentially be a means of leaving at a cost, possibly through a liquidated damages or penalty clause in the agreement if this were enforceable. But that is a lot of assumptions, which may or may not be correct; any ambiguity will be seized upon by lawyers for the parties to any litigation. This is before the actual league has been formed and a competition has commenced, which now looks like a doomed project. In these circumstances, beyond the wasted costs of setting up the league, there would need to be an assessment of what costs the departed clubs could be responsible for, if that provision is absent in the agreement. Again, cue the lawyers and forensic experts who will be combing over the initial contract in fine detail.
If Perez is to go ahead and pursue recompense from the clubs which have backed out of the agreement, it will no doubt be strongly defended. As the ESL is registered in Spain, then subject to the terms of the agreement on governing law and jurisdiction, the Spanish courts are most likely to have jurisdiction, and these operate differently than English courts. The approach taken by the 17th Commercial Court of Madrid is a clear example. Enforcement of any judgment obtained in England may take much longer now that Brexit has materialised and the EU is yet to approve the UK’s accession to the Lugano Convention – the body which provides for the recognition and enforcement of a wide range of civil and commercial judgments between the EU and EFTA states.
However, it remains to be seen whether the Spanish courts would entertain enforcement of, for example, a penalty clause, even if entered unconditionally. Those defending the departed clubs would ask the court to view this as a textbook case of impossibility of performance. The Spanish law doctrine of “incumplimiento imposible” (“impossible fulfilment of an obligation”) also recognises this concept.
Otherwise, it would be “damned if you do, damned if you don’t” for the clubs that withdrew from the ESL, whose owners have taken full responsibility and paid the fines imposed by UEFA without delay.
Even if there is an argument for Perez and the remaining clubs that the frustration or impossibility of performing the contract was caused by the clubs withdrawing; and even if therefore they are obliged to compensate their departure from the ESL, this begs another question: is it worth the risk? Potential bans from the most iconic tournaments in European football, a ruined relationship with Europe’s other top clubs, and a PR war (which Real Madrid may, across Europe, lose) are all commercial points that must be considered before pursuing action. Even if Mr Perez had legal arguments to win, fans worldwide would rather see all the clubs playing and winning on the pitch and on their own merits.
Many of the legal assertions concerning the collapse of the ESL may or may not stand up to close inspection in a court room, but desperate times require desperate measures. In fairness to Perez and the clubs he represents, in this moment, he appears genuine in his assertions that Europe’s top clubs are in a financial crisis. Real Madrid, alongside many other clubs in Europe, has been in dire financial straits and this has been exacerbated immensely by the pandemic. More big money investors into the game have tipped the power balance against the traditional European powerhouses of Real Madrid and Barcelona, driving transfer fees up to a frankly unsustainable level and lacing Spain’s biggest clubs with seemingly insurmountable debts. You can understand why Perez is upset.
The ESL story is far from over, and it will be interesting to see what, if any, legal action is taken by the three remaining ESL clubs against the others, or whether this is just a war of words.