February 7, 2022
European Professional Club Rugby, the governing body and organiser of the two premier club rugby union competitions in Europe (namely, the European Rugby Champions Cup and the European Rugby Challenge Cup), issued proceedings against RDA Television LLP for damages incurred as a result of the wrongful repudiation by RDA of a Media Rights Agreement the parties had made in May 2018 (MRA).
Under the MRA, EPCR licensed its media rights in the competitions to RDA for the 2018-19, 2019-20, 2020-21, and 2021-22 seasons. It was understood that RDA would sub-license the rights licensed to it by EPCR to sub-licensee broadcasters in the relevant territories and RDA would pay EPCR a minimum guaranteed payment. What was to be paid was set out in Schedule 2 to the MRA.
What was to happen in the event of a “Force Majeure Event” was set out in clause 26 of Schedule 6 of the MRA. What constituted such an event was defined in Schedule 7 as being:
“any circumstances beyond the reasonable control of a party affecting the performance by that party of its obligations under this Agreement including … epidemic …”.
By clause 26 of Schedule 6:
“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. Subject only to clauses 1.7 of Schedule 2 and 26.3 of this Schedule 6, neither party will be liable neither for any delay in performing its obligations nor for failure to perform its obligations under this Agreement if and to the extent that the delay or failure is caused by a “Force Majeure Event” affecting its performance of the relevant obligations.
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” and inform the other party of the steps which it is taking and proposes to take to do so.
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”.
Clause 1.7 of Schedule 2 provided that if an “Available Live Match” was cancelled or abandoned before the 20th minute and not rescheduled during the “Term” (defined as from the “Commencement Date” until the later of 30 June 2022 or one month after the final match in the 2021/22 season, unless terminated earlier in accordance with the MRA’s terms) and/or a match was wholly or partly not delivered by EPCR, in each case for any reason, including a “Force Majeure Event”, RDA was entitled to a pro rata reduction of its fees for that season calculated as a proportion of the total number of matches in that season, if it had suffered actual demonstrable losses as a result.
Pursuant to its obligations under the MRA, EPCR had scheduled the quarter finals of the 2019-2020 competitions to take place on 3 to 5 April 2020; the semi-finals to take place on 30 April to 2 May 2020 and the finals to take place on 21 to 22 May 2020, in each case within the 2019/2020 season, which ended on 20 June 2020.
On 11 March 2020, the World Health Organisation declared Covid-19 to be a global pandemic. It was common ground that the onset of the pandemic was a “Force Majeure Event” under the MRA, since “epidemic” includes a pandemic in the context of use of that word in the definition of “Force Majeure Event” and in any event 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 …”.
On 16 March 2020, the EPCR announced that the quarter finals of the competitions were being postponed. It also wrote to RDA informing it that it intended to announce the postponement of the Semi-Finals and the Finals of both competitions as well. It also said that it was exploring whether it was possible to reschedule the matches.
In the event, none of the postponed matches were re-scheduled before the 2019-2020 season ended on 20 June 2020 due to the Covid-19 restrictions. They were eventually played in September and October 2020 after the start of the 2020-2021 season.
On 5 June 2020, RDA purported to terminate the MRA on 14 days’ notice in accordance with clause 26.4 of Schedule 6. RDA also terminated its sub-licence agreements by reference to the same “Force Majeure Event”.
EPCR considered that this was wrong and that by purporting to terminate the MRA when it was not entitled to, RDA had wrongfully repudiated the MRA. It alleged that in those circumstances it was entitled to accept RDA’s alleged repudiation and itself bring the MRA to an end, which it did by a letter dated 22 July 2020.
EPCR then issued proceedings. RDA denied the claim and maintained that it was entitled to terminate the MRA relying on the force majeure clause. It counterclaimed for prepayments made for the period after the purported termination date of the MRA and for an adjustment of the sum paid for the season during which it had served notice of termination.
RDA’s case was that under clause 26 of Schedule 6 it was entitled to serve notice terminating the MRA at any time 60 days after 16 March 2020, when it contended the pandemic first started to “… hinder… or delay…[EPCR’s] … performance of …” its obligation under clause 13.1.2 of Schedule 6 to “… stage each Competition each season during the Term …” and/or its obligation under clause 13.1.4 to make the Available Live Matches “… available for Live Transmission each Season”.
EPCR submitted that RDA was not entitled to terminate because it too was a party “… affected by a “Force Majeure Event” …” under clause 26.3 of Schedule 6 and was therefore obliged to “… use all reasonable endeavours to mitigate and/or eliminate the consequences of such “Force Majeure Event” and inform the other party of the steps which it is taking and proposes to take to do so”. EPCR maintained therefore that RDA had committed a repudiatory breach of the MRA by purporting to terminate the MRA by its 5 June 2020 letter.
In particular, EPCR said that the effect of the MRA when read as a whole was that it was permitted to perform by completing the competitions in any following season as long as it fell within the “Term” (as defined) either by operation of clauses 1.7 of Schedule 2 and/or 26.3 of schedule 6. EPCR said that the effect of these provisions was that the 60-day period referred to in clause 26.4 never commenced running and had not commenced to run on 5 June 2020 when RDA served its notice under clause 26.4.
His Honour Judge Pelling QC rejected EPCR’s case because:
- under the MRA, EPCR had undertaken to stage each competition for 2019 to 2020 in the period between 1 July 2019 to 20 June 2020;
- by the time the 5 June 2020 notice was served none of the relevant matches of either of the competitions had been staged (or even re-scheduled) or made available for live transmission;
- EPCR had made clear in correspondence that the matches could not and would not be played or rescheduled before 20 June 2020 as a result of the pandemic;
- EPCR was wrong to say that the obligations and rights of the parties under the MRA became the obligations and rights set out in clause 1.7 of Schedule 2 and clause 26.3 when there was a “Force Majeure Event” that affected them, because a party’s right to avail itself of the protection of clause 26.2, which was concerned exclusively with the liability of a party for a failure to perform or a delay in failing to perform its obligations under the MRA caused by a “Force Majeure Event”, had no impact on the right of the counterparty to be able to terminate as set out in clause 26.4;
- in short, clauses 26.2 and 26.4 were concerned with entirely different issues: clause 26.2 provided the hindered party with qualified protection from liability for what would otherwise be a breach of contract caused by a “Force Majeure Event”, while clause 26.4 provided the counterparty affected by the other party’s non- or delayed performance with a contractual right to terminate subject to: (i) the disruption of performance having continued for a continuous period of 60 days before notice is given; and (ii) the notice period being 14 days.
HHJ Pelling also rejected EPCR’s submission that where both parties were affected (in different ways) by the same “Force Majeure Event” the effect of clause 26.2 was to deprive them of recourse to clause 26.4. Clause 26.2 was concerned with performance and the defence was available to each party in respect of any liability that party would otherwise have to the other for any failure or delay by that party to perform its obligations under the MRA.
It followed, HHJ Pelling said, that the opening words of clause 26.2 (“…Subject only to clauses 1.7 of Schedule 2 and 26.3 of this Schedule 6 …”) created a qualification to the general exclusion of liability provided by clause 26.2 for claims for breach of contract based on a failure to perform or delay in performance caused by a “Force Majeure Event”.
Clause 26.3 obliged the party in delay by reason of a “Force Majeure Event” to use all reasonable endeavours to mitigate and/or eliminate its consequences as a condition of benefitting from the protection otherwise afforded by clause 26.2. If the non-performing or delayed party failed to take such steps, then it was not able to take advantage of the protection afforded by clause 26.2. Clause 26.3 had to be read together with clause 26.2 and so read had no other effect, HHJ Pelling said.
As for clause 1.7 of Schedule 2, the reference to it in clause 26.2 was only to provide a carve-out from the defence that would otherwise be provided by clause 26.2. The availability of that remedy said nothing about the availability of the right to terminate, which depended on whether the conditions imposed by clause 26.4 were satisfied.
HHJ Pelling also rejected EPCR’s argument that RDA’s notice of termination was invalid because only the party not affected by the “Force Majeure Event” could terminate the MRA and RDA had admitted that it had been affected due to its sub-licensees refusing to pay their invoices.
HHJ Pelling said that the phrase “… the party not affected by the “Force Majeure Event” …” had to be construed in the context of clause 26 when read as a whole and in the context of the definition of “Force Majeure Event”. Clause 26 distinguished between a party whose performance was affected by a “Force Majeure Event” and the party who would be entitled to treat the non- or delayed performance as a breach of the MRA. This was clear from the opening words of clause 26.1, which defined its applicability to a party “… affected by a “Force Majeure Event” which prevents that party from performing its obligations under this Agreement”. Similarly, clause 26.2 provided the contractual defence to a party that would otherwise be liable to the other “… for any delay in performing its obligations nor for failure to perform its obligations under this Agreement if and to the extent that the delay or failure is caused by a “Force Majeure Event” affecting its performance of the relevant obligations”. The obligation to mitigate applied only to a party otherwise entitled to the benefit of the contractual defence in clause 26.2.
Finally, HHJ Pelling said that it was not open to EPCR to assert that notice was given prematurely by RDA because the season did not end until 20 June 2020. By 8 June 2020, the outstanding games had been postponed for well in excess of 60 days and EPCR had not informed anyone of the dates on which the outstanding games would be played. As at that date, it was impossible to fix them for any date before 20 June. In fact they were not fixed to be played before that date and the dates when they were fixed were notified to RDA only after the expiry of the 5 June notice and were for dates after the end of the 2019/2020 season.
As a result, EPCR’s claim for damages for wrongful repudiation by RDA failed.
As for the financial issues, HHJ Pelling found that as at the date when the clause 26.4 notice took effect (22 June 2020), RDA had, pursuant to the MRA, paid EPCR €750,000 as pre-payments for the 20/21 and 21/22 seasons. HHJ Pelling agreed with RDA that the effect of the termination was that EPCR had to re-pay half of this, i.e, €375,000, to RDA.
Under the MRA, the sum payable by RDA to EPCR as the May 2020 portion of the minimum guarantee payment was, as at the date of termination, €842,000. However, HHJ Pelling agreed with RDA that this should be adjusted to take account of the 14 matches that were not played or rescheduled before 22 June 2020. RDA was therefore entitled to a pro rata reduction of €672,662 making the May 2020 minimum guarantee payment payable to EPCR €169,338.
Therefore, overall, ECPR owed RDA €375,000 minus €169,338, which amounted to €205,662. (European Professional Club Rugby v RDA Television LLP  EWHC 50 (Comm) (26 January 2022) — to read the judgment in full, click here).