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Can Governing bodies really govern?
Last year was a turbulent year for governing bodies. The “sporting exception”, i.e. the principle acknowledged by the European Union that member states should treat sport as “special” due to its unique cultural, social and economic benefits, took something of a battering.
The first blow came from the corporate sector. Adidas challenged the Grand Slam Committee’s (“GSC”) ability to impose its own rules at Grand Slam tennis tournaments. In particular adidas objected to the GSC’s decision to apply their dress rule, which restricted the size of manufacturer’s logos on tennis apparel, to the adidas 3 stripe design. Adidas claimed this amounted to an infringement of European Competition law as it discriminated against adidas’ distinctive design. The GSC’s view was that it was discriminatory against the other brands NOT to apply the rules to a design which in their view clearly promoted the brand.
The dispute was ultimately settled in October with an increase agreed in the size allowed for all manufacturers’ logos.
Another broadside to the “sporting exception” came from the European Court of Justice (“ECJ”). In a case concerning two swimmers who appealed their ban for doping violations, the ECJ overturned the lower court’s finding that anti doping rules were “non economic and ethical in their objective” and hence outside the scope of EU law. The ECJ held that sports disciplinary rulings were subject to competition law and should be scrutinized to ensure they are acceptable and penalties proportionate.
It’s too early to determine what effect this will have on sports governing bodies, but it seems that those disaffected with a sports disciplinary decision will now find it easier to contest their governing body’s authority.
Tour de France rides into a storm
As so often is the case, the Tour was caught up in controversy in the build up to this July’s event - but this time in addition to the ongoing issues with doping, gambling posed problems.
The Tour banned the Unibet sponsored cycle team from this July’s competition claiming that the French Civil Code prohibits foreign betting companies from advertising in France. However it has not gone unnoticed that one of the largest sponsors of the Tour is PMV, the government-run horse racing monopoly which takes bets on the event.
Objections to the ban have come from all quarters including the International Cycling Union, race teams and the European Union.
On the face of it the ban seems discriminatory as both the Belgian and French National Lotteries back teams competing on the Tour whilst the green jersey is sponsored by PMU, the French horse racing collective.
The case has highlighted France’s potentially protectionist advertising legislation. The European Commission is making aggressive noises and formal challenges to the French Civil Code are expected shortly.
Directors Beware – Companies Act 2006
The Companies Act 2006 brings in important changes, amongst other matters, to the duties of company directors with effect from 1 October 2007 (general duties) and from 1 October 2008 (conflict of interest duties).
Prior to the new Act, director’s duties had evolved in a piecemeal manner through case law and fiduciary duties to act in good faith. Nowhere were director’s duties set out in a codified manner. The new Act not only seeks to codify existing director duties of, amongst other things, (i) using skill and care, (ii) acting in the best interests of the company, (iii) avoiding conflicts of interest, and (iv) not making a secret profit, but also makes a number of changes to those existing director duties.
The most significant changes are: (1) the requirement for directors in promoting the success of a company to consider the following, amongst other things, in good faith (i) the likely long-term consequences of any decision; (ii) the interests of the employees; (iii) the impact on the community and environment; (iv) maintaining the reputation of the company; and (v) acting fairly between the members of the company; and (2) allowing independent directors to authorize a director’s conflict of interest.
It is essential that directors make themselves aware of the changes in the law as otherwise fines, disqualification, voidable transactions and shareholder claims may result.
Third party ownership of football players
The phrase “third party ownership of football players” has been strewn across the media in recent weeks, but what does it actually mean? Does it really mean that a third party investor can own a player in a way almost akin to slavery!?
The Premier League Regulations do not expressly state that a third party may not own a football player. They do however state that “a third party may not have material influence over the policies of the club or the performances of its teams” (U18 Premier League Regulations).
The terms on which West Ham purchased Tevez and Mascherano from 4 offshore funds was found to breach U18. More particularly, the terms on which the players were acquired “left the possibility” that a third party could determine when the players would be sold by the club and for what tranfer fee and, it is rumoured, as and when they should play. It was this as well as West Ham failing to act in good faith by not disclosing the underlying transfer documentation that resulted in: (i) a £5 million fine being levied on West Ham, (ii) a change to the Regulations requiring all third party ownership documentation to be disclosed, and (iii) Sheffield United continuing to consider legal action against West Ham and the Premier League after an arbitration hearing in front of a Premier League commission proved unsuccessful, and (iv) the long-running dispute between West Ham and the so-called owner of Tevez in the High Court in connection with Tevez's transfer to Manchester United.
Despite all this, it would appear that third parties may take “ownership” of a player and derive revenue from the activities of that player provided the level of control over its investment does not amount to a third party having “material influence over the policies of the club or the performances of its teams”. Whether an investor is willing to invest on this permitted basis is clearly an individual decision but third party control/influence over the club through rights over the player is the actual test rather than ownership.
Aussie Rules
Aussie Rules legend Ben Cousins has been making a mockery of the Aussie Rules Drugs Code, and illustrated how important it is for governing bodies to ensure their Rules and Regulations are water-tight to avoid accusations of double standards and unnecessary conflicts of interest.
The Australian Football League (“AFL”) has a ‘three strikes’ Drugs Code with an emphasis on rehabilitating offenders. The players, clubs and the AFL are only alerted when a player fails a drug test for the third time. Then he faces a maximum penalty of a twelve match suspension.
Cousins has admitted to ‘substance’ use and has recently been treated for addiction in California. However despite fourteen tests, he has not tested positive once. It would therefore appear that, on the face of it, the AFL’s drug policy can’t identify or discipline a self-confessed drug addict. He was, nevertheless suspended by his club, the West Coast Eagles, and required to agree up to twenty conditions before he returned to action. It has been reported that one of those conditions states that if he tests positive in the future he waives rights of confidentiality and his contract will be terminated. This was all overseen by the AFL and Cousins had to pass a final assessment by AFL medical commissioners before getting the all clear to play.
The club is now at risk of points deductions for any future indiscretion by Cousins. Most interestingly, whilst the player has not breached the AFL Drugs Code, he could play alongside a team mate who has tested positive twice and who faces no greater threat than a tribunal hearing and a twelve month ban. One positive test from Cousins, his first, and he will be lost to the game for good.
Design protection in the fashion industry
In the past twelve months, the fashion industry has witnessed a growing trend of high-value fashion items and accessories being replicated and sold on a cut-price basis by mass-market retailers. This phenomenon has led directly to a series of high-profile claims in the UK, for example by Chloe against Kookai and Topshop, Monsoon and H&M against Primark, and Jimmy Choo against Marks & Spencer, all of which were settled out of court for undisclosed amounts. The proliferation of cases of this nature highlight the fact that designers and other rights-owners in the fashion sector have become increasingly aware of the protections afforded by the design right legislation.
In view of the fast-changing nature of the fashion industry, designers generally do not deem it to be cost-effective to register fashion designs as registered designs, even though EU registered design protection can last for up to 25 years.
Instead, since March 2002, designers and fashion houses in the EC have been able to rely on the Community unregistered design right which is granted automatically as soon as a given design is first made available to the public within the European Union. However this unregistered right has its limitations in that the holder of an unregistered design right can only prevent third party copying of the design for a period of 3 years from the date that the design was first made publicly available.
To be successful in an unregistered design right action, a claimant designer needs to show both that it owns unregistered design rights in the relevant design, and that those rights have been infringed. To demonstrate that it owns unregistered design rights in the relevant design, a claimant designer will need to prove that its design is "novel" and that it has an "individual character". In general terms, whether a design is “novel” or has “individual character”, will be judged by reference to designs that were available to the public before the designer’s item and accordingly a claimant designer may have difficulty proving its case if the defendant can show that there are other items on the market with a similar design or style.
To date, no case involving a claim for a European unregistered design right has proceeded to full trial before the UK High Court, so it is difficult to assess the scope of the protection provided by this right and the precise threshold needed for a design to be “novel” or have “individual character”. That said, the increasing availability in the high street of low-price replica garments suggests that a test case will not be long in coming. Watch this space! |
