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Restraint of Trade and Footballers’ Image Rights

Many defenders have had the unenviable task of attempting to restrain the striking prowess of England star Wayne Rooney.  However last year it was the turn of Proactive Sports Management Ltd to attempt to restrain him; this time his right to exploit his image rights.

The case raised the familiar doctrine of restraint of trade in the slightly unusual territory of image rights and professional football.  The case received a degree of publicity at the time so the facts can be stated very briefly. Rooney, via his company ‘Stoneygate’, entered into an image rights representation agreement [“IRRA”] with Proactive in 2003.  At the time that the IRRA contract was signed Rooney was a mere 17, neither he nor his family obtained any independent legal advice at the time and were held to be unsophisticated in legal and commercial matters.  The contract was set to last for eight years. 

In 2008 Rooney fell out with Proactive and he and Stoneygate purported to terminate the IRRA.  Proactive brought legal proceedings claiming that the termination was a repudiatory breach and seeking commission on all arrangements of the type covered by the IRRA during the remainder of the eight year term.

In the High Court the IRRA was found to be unenforceable on the grounds of restraint of trade.  Factors leading to this decision included: the unusually long contractual term; Rooney’s age at the time of execution; the lack of independent legal advice; the fact that the IRRA was not in a standard form such that it might have been moulded by market factors; and the fact that this was not a negotiation between equals.

Proactive’s appeal raised a number of interesting points.  First given that Rooney’s trade was as a footballer, could the IRRA be said to have restricted his trade when it did not affect his ability to play but was simply a means of obtaining extra income, albeit significant extra income?  The Court of Appeal found the fact that an activity was ancillary might mean that restrictions on trading were insubstantial and therefore justifiable.  But, the fact that an activity was ancillary was not a reason to disapply the doctrine altogether.

The second point raised by Proactive was that there was no feature of the IRRA which made it unfair or oppressive and indeed all parties had enjoyed considerable financial returns from their involvement in the arrangement.  The Court of Appeal did not accept this argument.  They found that the High Court had considered relevant factors in reaching the decision and that when considered in combination those factors took the IRRA out of the range of normal commercial contracts imposing restrictions on a party’s ability to carry on business.  In particular, the absence of independent legal advice deprived the apparent acceptance by Rooney of any probative weight and highlighted the inequality of bargaining power between the parties.  Importantly, on the evidence Proactive had ignored advice that the agreement may be unenforceable and that the Rooneys should take independent legal advice.

As sponsorship and product endorsement is a major source of income, if not the main source, for many professional sportsmen and women, not to mention a lucrative field for agents and image rights consultants, ensuring that agreements do not offend the doctrine of restraint of trade is crucial.  Given the sums involved it is no surprise that the focus on IRRAs is often on the tax implications.  Obviously these cannot be underestimated and the interest from HMRC and the problems at Rangers are potent reminders of this side of the issue.  The conclusion has to be that before an agreement of this nature is signed both sides should seek independent legal advice to avoid the all too familiar frustration of penalties.
  
Related link:  Profile of Lydia Banerjee
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