CLUB SPONSORS GET SHIRTY
Court cases on the cards if this season runs on into summer
PREMIER League clubs are facing a series of complex negotiations and potential legal battles with sponsors over bonus payments and kit deals worth hundreds of millions of pounds due to the prospect of this season carrying on into the summer.
Sportsmail has been told that agreements between clubs and their kit suppliers and commercial partners do not contain clauses enabling either party to unilaterally extend or cancel. That leaves negotiated settlements or court cases as the only way to resolve disputes if the campaign continues beyond the term of the existing contracts, as appears increasingly likely.
A summer of considerable churn in the commercial world is now threatening to descend into chaos,
New Balance want to be on Liverpool’s shirt if they lift the title ... not Nike
with lawyers likely to be the only winners.
Liverpool, Newcastle and Watford are all coming towards the end of existing kit deals with New Balance, Puma and adidas respectively, five Premier League clubs are due to have new shirt sponsors next season and another five are searching for new sleeve sponsors as their current deals will expire this summer.
Newcastle are looking for new partners in all three areas, which, given the state of the market, could leave them increasingly reliant on Mike Ashley’s Sports Direct.
Liverpool’s impending move from New Balance to a new £70m-a-year deal with Nike is by far the most significant and valuable. The former contract expires on May 31, by which time the Premier League season is unlikely to have been completed.
Liverpool’s relationship with New Balance has already been tested by an acrimonious legal battle, with the club winning a High Court case last October which enabled them to switch to Nike on the basis that the latter’s greater marketing budget made it a more attractive deal. They now face the prospect of a three-way negotiation over which kit Jurgen Klopp’s players will wear if the season carries on into the summer.
The value of having the iconic pictures of Jordan Henderson and his teammates celebrating Liverpool’s first championship for 30 years in their kit is incalculable for New Balance. The company will not give that up without a fight, although in contractual terms it seems clear that Klopp’s players should be wearing Nike shirts from June onwards.
Sportsmail has learned that Nike’s global contracts are signed in Amsterdam for tax reasons and the company’s intellectual property rights and logo are registered in Holland and therefore subject to Dutch law.
A negotiated settlement between Liverpool, New Balance and Nike appears the best way out of the impasse, although any of the parties could take their claim to court if they are not satisfied with the outcome.
In Holland, force majeure clauses (unforeseeable circumstances that prevent someone from fulfilling a contract) do not entitle either party to damages or the right to alter or cancel a contract, as Dolph Seegar, an Amsterdam-based partner at CMS Law explains.
‘Under Dutch law, force majeure does not entitle one party to claim damages, nor does it unilaterally adjust the agreement with the party that does not perform because of force majeure,’ he says. ‘This party may suspend its obligations towards the other party until the situation of force majeure ends, but the contractual obligations will revive at that moment unless the agreement has been dissolved or been altered to the new situation.
‘Since in most contractual relations between parties it is not a preferred option to dissolve the agreement, a contractual party confronted with force majeure will be primarily focused on having the agreement altered. The easiest solution is to have the parties enter into negotiations and to agree to make changes to the agreement that bring their performance obligations in line with the new situation. The reasons to change the agreement are based on reasonableness and fairness. It is unreasonable to keep one party obligated to the full agreement when the other party — due to force majeure — is not able to perform in full what had originally been agreed between them.’
Liverpool will seek to honour their long-standing commitments to New Balance by staying in the kit they have worn since the start of the 2015-16 season until the end of the campaign, but they are unable to guarantee this until a resumption date has been agreed.
There is also an acceptance at Anfield that this stance is unlikely to hold indefinitely. Nike may be willing to see Liverpool kitted out in New Balance gear for a handful of games in June but the company’s position will be different if the 2019-20 campaign carries on until later in the summer or autumn.
If they lose out, New Balance could withhold bonus payments due to Liverpool for winning the Premier League, as well as seeking a rebate of payments already made. Nike sources have indicated to
Sportsmail that they are prepared to play hard-ball by insisting Liverpool honour their contract by making a swift switch, not least because they have hundreds of thousands of the new kits in warehouses ready to go on sale.
The design and production of such kits is an 18-month process which has largely been completed.
Now, with global demand for leisurewear dropping significantly due to the coronavirus crisis, all manufactures are eager to make new product lines available for online retailers as soon as
possible. Similar discussions are being held throughout the Premier League, with several clubs checking the small print of contracts with prospective new suppliers and partners. Newcastle and Watford have yet to announce who will take over from adidas and Puma respectively, but replacements will already have been lined up.
The biggest change in shirt sponsorship this summer will take place at Chelsea, where mobile phone network Three are due to replace Yokohama Tyres in a three-year deal worth £120m.
The club have already cancelled a launch planned for next month and it is unclear when Frank Lampard’s players will wear the new shirt for the first time, a situation similar to that at Aston Villa, Bournemouth, Crystal Palace and Newcastle who will all have new sponsors next season.
In terms of sleeve sponsors, Aston Villa, Brighton, Everton, Manchester City and Newcastle are all coming to the end of existing deals, while Tottenham and Watford were close to agreeing new partnerships, having never previously had a sleeve sponsor.
The decisions on when to launch products and switch strips will come down to individual negotiations between the clubs and their old and new partners, some of which may be dictated by practical considerations such as stock levels and the state of their distribution and supply networks.
It seems likely many clubs will extend the tradition of giving fans an early glimpse of next season’s kit before the end of the existing campaign — whether they like it or not.