High Court finds Covid-19 pandemic amounts to a force majeure event
European Professional Club Rugby v RDA Television LLP  EWHC 50 (Comm)
When will a force majeure clause be triggered, and can the relevant agreement be terminated if both parties are affected?
The key takeaway
The events which trigger a force majeure clause depend on the contractual interpretation of the relevant clauses.
European Professional Club Rugby (EPCR) is the governing body and organiser of the two European premier club rugby union competitions. EPCR and RDA entered into a Media Rights Agreement on 11 May 2018 under which EPCR licensed its media rights in the competitions to RDA for the 2018-19, 2019-20, 2020-21, and 2021-22 seasons (the Agreement).
The Agreement contained a force majeure clause at clause 26 of Schedule 6, and the definition of a Force Majeure Event was set out in Schedule 7 and included an “epidemic” as a force majeure event. As a result of the Covid 19 Pandemic (the Pandemic), EPCR wrote to RDA on 20 March 2020 confirming that the quarter finals of the competitions in the 2019-20 season were being postponed in the interests of safety.
On 13 May 2020, EPCR confirmed that the aim was for the postponed matches to take place at the beginning of the 2020-21 season. On 5 June 2020, RDA provided notice purporting to terminate the Agreement pursuant to the force majeure clause on the basis that “EPCR has been prevented, hindered or delayed from performing its fundamental obligation (for a continuous period of over 60 days as a result of a Force Majeure Event, namely the Covid-19 epidemic) to stage each Competition this Season in such a way as to not materially dilute the quality of, or materially devalue, the Licensed Rights as required”.
EPCR argued that the notice of termination was invalid on the basis that it too had been affected by a Force Majeure Event. As a result, EPCR issued a claim for the damages that it believes it has suffered as a result of RDA’s wrongful repudiation of the Agreement. RDA contended that the force majeure clause entitled it to terminate the Agreement and issued a counterclaim for prepayments made for the period after the date on which it purported to terminate and an adjustment for the amount paid for the season during which it purported to terminate.
The court concluded that RDA was entitled to terminate the Agreement by its notice made on 5 June 2020 pursuant to the force majeure clause. The claim was therefore dismissed.
In reaching this decision, the judge noted that the onset of the Pandemic was a Force Majeure Event, as defined in Schedule 7 of the Agreement. “Epidemic”, as contained within the definition, encompasses the Pandemic because it was a circumstance “beyond the reasonable control of a party affecting the performance by that party of its obligations under this Agreement”.
The court dismissed the submission that RDA was unable to terminate the Agreement pursuant to clause 26.4 on the basis that clause 26.4 gave the right of termination to the party who had not been affected by the Force Majeure Event and RDA was arguing that it had been. EPCR had been mistaken in its construction of this clause. The phrase “the party not affected by the Force Majeure Event” in clause 26.4 simply refers to the party owed the performance which had been prevented, hindered or delayed. The fact that RDA had been affected by the same Force Majeure Event in a general sense did not change anything.
The court also dismissed EPCR’s “absurd” submission that RDA could not take advantage of clause 26.4 on the basis that the notice did not expressly refer to clause 26.1. If this construction were true, the party in breach due to a Force Majeure Event could preclude its counterparty from serving notice under clause 26.4 by not serving a clause 26.1 notice. It was not a condition precedent that notice must be given under clause 26.1.
Why is this important?
This decision reiterates the importance of careful drafting of force majeure provisions to define the circumstances which may give rise to a right to terminate. It also confirms that, even if the force majeure event affects both parties, the right can still be exercised.
Any practical tips?
When drafting force majeure clauses, consider the circumstances which should trigger a
force majeure event, which party should bear the risk, the consequences of a force majeure event happening, and whether there should be any continuing obligations following a force majeure event.