Article 50 and sport: What triggering of Brexit process could mean for Britain's sport industry, from player transfers to stadium projects and intellectual property

 
Simon Leaf
Chelsea v Brentford - The Emirates FA Cup Fourth Round
Immigration laws are set to be tightened, potentially preventing British clubs from signing the next Cesc Fabregas (Source: Getty)

The highly-anticipated triggering of Article 50 is now upon us and, on Wednesday, the UK will begin the two-year untangling process from the European Union. But what impact will this have on the UK's sports industry which last year, according to the Department for Culture, Media and Sport, contributed more than £35bn to the British economy and employed 1.2m people?

Migration

One of the main arguments that dominated the Brexit campaign and its aftermath has been the impact of migration on the economy.

Read more: Article 50: Here's what will actually happen tomorrow

The government appears to have made curtailing the free movement of people a priority in the forthcoming negotiations and this will undoubtedly have an impact on the sports industry.

In particular, professional football, cricket and rugby union, our three most popular sports, rely heavily on EU migrants both on and off the pitch, as evidenced by the fact that over 400 European players were registered to play in the Premier League last season.

There is even a specific exception in Fifa's Regulations on the Status and Transfer of Players allowing international transfers of youth players within the EU – further encouraging the cross-border European movement of talent.

While there are stricter rules for non-EU professionals, many are able to rely on specific EU-wide arrangements, such as the Cotonou Agreement and the Kolpak ruling, to ply their trade in the UK.

Going forwards, if the same more stringent rules for non-EU migrants applied to EU sport professionals, some of the biggest names in the Premier League in recent years, such as Cesc Fabregas, Dimitri Payet and N'Golo Kante, would almost certainly have been denied entry.

On the other hand, this could encourage top clubs to invest more in domestic players, hopefully leading to an improvement in domestic talent and performance on the international stage.

English v European Law

We have all heard of the Great Repeal Bill that is due to transpose existing EU law into domestic law, before Parliament then decides on the laws to be removed.

There is much EU-specific legislation that presently impacts UK sport and it remains to be seen whether this will continue to apply in the long term.

Take EU state aid legislation, for example. This is one of the key pillars of EU competition law and essentially prohibits a member state from distorting competition by favouring one market participant over another.

In the sports sector, this has come up in the context of stadium developments, such as the allegation that the licensing of the Olympic Stadium to West Ham constituted unlawful state assistance.

Last year, the European Commission clawed back €18.4m from Real Madrid after the city's council transferred land to the club at a significant undervalue, while six other Spanish clubs were also found to be involved in similar breaches.

Given that there is currently no equivalent domestic law, this could be one of the first areas of legislation to be scrutinised.

If removed, this would potentially allow public bodies to subsidise more stadium developments and other major sporting infrastructure projects.

Commercial Contracts

Uncertainty as to the legal and regulatory framework that will exist after Brexit in March 2019 has led to volatility in the currency markets, with predictions that sterling may fall further in the months ahead.

The immediate commercial impact of this has been dramatic. For example, earlier this month Tottenham director Donna-Maria Cullen declared that Brexit had added around 20 per cent to the cost of their new stadium.

Read more: Beautiful designs depicting the football stadiums of the future

As a result, there will be a desire for more flexible contractual relationships. Those involved in sport will look for shorter-term contracts with the kind of sophisticated price adjustment provisions and clauses dealing with material adverse changes in the commercial environment typically found in lengthy facility and construction agreements rather than sports contracts.

The fall in the pound has also led to many UK sports businesses becoming more attractive to foreign investors.

There has been an increase in US and Chinese interest in iconic UK sporting brands, such as the recent acquisitions of Aston Villa and West Brom by Tony Xia and Lai Guochuan respectively, not to mention the recent transfer of players from English clubs, such as Chelsea's Oscar, to the Chinese Super League.

IP and Data

A large amount of the value attributed to British sport comes from our leading brands. From a legal perspective, this value is secured by putting in place intellectual property (IP) protections and licences.

At a basic level, those involved in international sporting trade will be keen to ensure that their business models are not disrupted by Brexit.

For example, many UK sporting licensees rely on licences restricting them to the EU or provide them with rights in respect of EU Trade Marks, which may not be as easy to obtain for UK organisations as it seems unlikely that businesses will continue to be able to obtain EU-wide trade mark protection from a single application to the EU's trade mark office.

However, the element of copyright law that is important to the big UK sporting professional leagues when it comes to selling broadcast rights is likely to remain unaffected by Brexit, which if anything may help these leagues, as they may be able to put in place stronger measures to prevent UK customers from accessing content intended for the rest of the EU.

The transfer of personal data is fundamental to many successful UK sporting companies, yet it remains to be seen whether these organisations will need to put in place additional burdensome measures to continue transferring data in the same way as before.

While many of these organisations are gearing up for the new EU General Data Protection Regulation, which the government has confirmed will come into force in May 2018 – part-way through the two-year negotiation period – much will depend on whether the UK can prove adequacy – in other words, that we will protect EU citizens' personal data as stringently as other EU countries.

Conclusion

It remains to be seen what the full impact of Brexit will be on UK sport.

Like the Brexit debate itself, both sides are unlikely to agree on whether the changes coming down the track will have a positive or negative effect.

However, from a legal perspective, those in the sports industry will be trying to ensure that their most important assets and contracts are appropriate for the new world that we face.

Simon Leaf is a managing associate at Mishcon de Reya specialising in sport and technology.

Related articles