Tough regulation and increasingly lucrative commercial deals have allowed in-house lawyers to flourish in sport. Legal Business scouts out the most promising performances
Trying to pin down an interview with the in-house counsel at a sports organisation is like trying to tackle Eden Hazard in full flight. Despite repeated attempts, requests for interviews with legal counsel were rebuffed by a number of big Premier League clubs – with Chelsea, for example, stating that no-one except the club’s board, manager, assistant coach and the players speak to the media.
One general counsel (GC), initially enthusiastic, stopped answering the phone once the internal press team became involved. At one major sports governing body, the legal chief, after arranging an interview through their PA, became skittish on the allocated day, saying: ‘I can’t stick my head above the parapet right now. The chief executive is the only one talking to the press.’
Such is the profile of many sporting organisations that unlike financial services and energy sectors, for example, it is difficult for senior in-house counsel to establish a visible presence within the legal profession, although the work they do is often more complex, high-profile and business-critical than usual. Many sports bodies do not house an in-house team at all.
Manchester City FC GC, Simon Cliff, who became the club’s first-ever legal chief in 2009, observes: ‘The football industry has been unsophisticated in a lot of ways until recently. Clearly, it has an increasing amount of money and owners and chief executives are realising there’s real value added by taking a closer look at legal risk. It’s not just about what in-house lawyers are hired for – to reduce legal spend. We’re helping to shape the business and not just churning out contracts.’
Berwin Leighton Paisner partner Graham Shear, one of the most prominent sports lawyers in private practice, whose work includes handling the record-breaking transfer of Gareth Bale to Real Madrid from Tottenham Hotspur for £85m in 2013, says: ‘When I first became involved in sports-related work it was a developing area, which had only just begun to show the signs of evolving as an offshoot of the broader entertainment industry. Football often needs talented lawyers, as part of the foundation of the business rests on a variety of detailed short-term contractual arrangements, from player contracts to intellectual property (IP) issues and disciplinary matters. Consequently a number of the medium-to-larger clubs developed real in-house capability and are absolutely right to do so.’
Sport v Sport
There isn’t a long history of lawyers working in-house in sport and executives haven’t viewed law as an essential part of the business either. Legal decisions usually involved middle-aged men making decisions in smoke-filled boardrooms. Often if a lawyer sat on a club’s board, they would be drafted in to act as an informal adviser and they were typically fans of the club, volunteering their time and expertise.
But, increased levels of disputes, and the globalisation of businesses generating lucrative sponsorship packages, has created a shift in demand for a far more sophisticated legal piece.
One of the most noteworthy examples of this change in attitudes was the London 2012 Olympic Games. The event’s London Organising Committee of the Olympic and Paralympic Games (LOCOG) in 2006 enlisted GC Terry Miller – who had spent 17 years at Goldman Sachs – to set up the legal framework and act as its ethical compliance officer. She headed a 36-strong legal team, responsible for providing advice on all aspects of LOCOG’s operations, including implementation of sponsorship and supply contracts and protection of the London 2012 brand. Tasks included meeting the complex terms of the International Olympic Committee’s Host City Contract against tight deadlines and drawing up over 7,000 contracts with venues, hotels, commercial partners, contractors and suppliers.
Three years on from the Olympics, it is clear that those counsel at the corporate coalface are still predominantly present in football. The sport is more advanced in terms of commercial and regulatory imperatives, whether it be financial fair play, executive changes and bribery investigations at FIFA, or the way in which the Premier League has of late changed its formula for allocating TV bidding rights (see box, ‘The Premier League’s £5.14bn handshake’). And, of course, there is more money in the game.
‘There is sport and then there is sport,’ says DLA Piper sports partner Nick Fitzpatrick. ‘Those that generate huge amounts of cash will be “lawyered up”. If the funds don’t justify the lawyer, then the sport just can’t invest in an in-house team in the same way.’
Footing the bill
Indicative of this trend is the overhaul of the legal teams at Premier League clubs Manchester United, Manchester City, Arsenal, and Chelsea in the last ten years. This is unsurprising: in the recent January transfer window, in which Premier League clubs spent £130m, the biggest spenders were Manchester City, Arsenal, and Chelsea, which between them accounted for around half the total, according to Deloitte.
Also notable is the dramatic increase in the number of High Court cases launched by the Premier League (FAPL). Research by City firm RPC showed that there were seven times more High Court cases filed in 2014 (for the year end June) by the FAPL compared to 2013, primarily driven by moves against pubs and other venues for broadcasting football matches without an appropriate licence.
Heavyweight legal counsel to make a name for themselves include Patrick Stewart, director of legal and business affairs at Manchester United, who was hired in 2006 from TEAM Marketing, the marketing agency for the UEFA Champions League. Stewart has presided over big changes at the club, including an office opening in Hong Kong and a listing on the New York Stock Exchange in 2012. With a day-to-day focus on commercial rights issues mostly dealt with in-house, Stewart also deals with the club’s compliance and brand protection matters.
At Manchester City, former Shearman & Sterling lawyer Cliff says the club’s legal function has ‘changed quite rapidly’ in the last two years to coincide with the business’s international expansion. This included the $100m majority purchase of New York City FC in 2013; the acquisition of Australian club Melbourne Heart FC (now Melbourne City FC), and a minority stake in the Japanese J.League club Yokohama F.Marinos in 2014. The UK-based legal team now has two full-time lawyers (including senior legal and commercial counsel Nick Carter, Cliff’s ‘number two’) and two lawyers on secondment. While Cliff plays an executive role, sitting on the club’s management committee and supporting the board with legal advice, bulking the team to four helped develop specialised capabilities and bring legal closer to the business.
Arsenal has demonstrated similar commitment to legal with the hire of Svenja Geissmar, the former GC for MTV Networks Europe, as its first in-house lawyer in 2009. Geissmar has since added two to her team, including former Nabarro IP lawyer Anthony Downie in January. Late to the game was Chelsea FC, which appointed James Bonington, who previously headed legal at the Football Association, as its first-ever GC last summer.
The Premier League’s £5.14bn handshake
Premier League football clubs celebrated a major windfall in February after a competitive tender process saw media giants BT and Sky win live TV rights worth more than £5.14bn over three seasons. With the competition between the two driving the value to more than £10m per game and both sharing the rights to broadcast 168 live games annually from 2016, the deal gifted longstanding adviser DLA Piper the trophy instruction for the Premier League. Technology and media partner Nick West led on the deal, advising on strategic, commercial and media aspects, alongside competition partner Kate Vernon, who advised on the competition and regulatory issues. BT and Sky relied on their in-house legal teams during the auction, both eschewing external counsel.
Premier League broadcasting auctions have long been a highly lucrative business for external advisers. In 1992, Sky secured televised rights in a £191m deal – £600,000 per game. The next 23 years saw the broadcaster battle out fixed-term rights packages with other contenders, including Setanta, ESPN and BT.
In large set-piece projects like this, the consensus among interviewees is that specialist advice is usually needed but the typical set-up, where the in-house counsel will play a generalist role and external lawyers help to relieve some of the pressure, is still needed.
One in-house lawyer who knows this all too well is Angus Bujalski, head of legal for the Rugby Football Union, who says: ‘We send out discrete technical matters where we don’t have the expertise (such as property or construction) and it’s also largely capacity-driven.
‘Often we will know many of the sport-specific matters better than external law firms, so will keep this in-house; fundamentally the structure won’t change because we’re never going to have a legal department like Barclays or BP with a wide variety of specialists across all areas.’
Sharpen your game
Other areas of sport where there are increasing opportunities at in-house legal level include regulatory bodies. The Rugby Football Union (RFU) is a high-profile example, particularly as England and Wales prepare to host the Rugby World Cup. Last year, for example, the RFU hired Freshfields Bruckhaus Deringer corporate partner Tim Jones as GC to England Rugby 2015.
Headed by GC Karena Vleck, the RFU’s 16-strong team has a typical annual budget of £400,000, and serves both as a governance and legal function. Head of legal Angus Bujalski says sports governing bodies have faced governmental scrutiny in recent years and subsequently have had to become much more rigorous. ‘There is a bigger drive towards transparency with how a governing body rules and regulates the sport. So there’s a much bigger role for lawyers. We have undertaken several significant projects to reconfigure and redraw our game regulations as well as our corporate governance.’
For the British Horseracing Authority (BHA), there is a heavy emphasis on maintaining a solid integrity and governance function. Its director of integrity, legal and risk, Adam Brickell, says the BHA is a ‘market leader’ on implementing effective governance and the effective handling of anti-corruption procedures. The team is typically tasked with conducting investigations into breaches of racing rules, setting and enforcing common standards for British racecourses, monitoring real-time betting markets for suspicious betting activity, all while maintaining good relations with corporates in the gambling industry. And with a heavy hand taken to enforce industry discipline, DLA Piper-qualified Brickell says it helps being at the coalface. ‘You have a much deeper understanding of the business you’re advising. Generally, I would scratch the surface from private practice dealing with a number of clients. On the flipside, we still use external advisers because there’s a number of factors that make it prudent – risk, specialisation, resource issues, and just getting a second opinion.’
Erin Stephens, head of legal at Sport England (previously known as the English Sports Council), which serves as a lottery distributor for sport, has made sure her four-strong team has become responsible for a major proportion of the organisation’s legal needs with the exception of employment law. The team works with high-level contracts and capital projects, including funding agreements for the Olympics and 2014’s Invictus Games.
Stephens says: ‘A lot of organisations realise there are efficiencies to be made, not just cost savings, but building corporate knowledge and being able to advise on a more direct business level when you have an in-house team. Our organisation values that as opposed to just having an external firm you call as and when legal advice is needed.’
Further pressure on sports regulatory bodies to manage themselves better is coming from a Private Members Bill, ‘The Governance of Sport’, introduced in the House of Lords in June 2014. Drafted by Lord Moynihan, himself an Olympic silver medallist, the Bill proposes numerous measures to tighten governance in the industry, including increased accountability and transparency for governing bodies of sport which are in receipt of public funding and carry out quasi-public functions.
This issue of governance will continue to become more prevalent in sport – so housing a credible integrity function in particular is crucial to sports counsel. The furore that has enveloped FIFA in recent years over bribery and corruption at the highest level is a testament to this. However, few are calling for exponential growth in legal teams for major sporting organisations.
Fitzpatrick concludes: ‘I don’t think it will reach the stage, with few exceptions, where people will have huge in-house legal teams – like the US. You will see more hires and bolstering of integrity teams, particularly because of the proliferation of things like online gambling. This has provoked a realisation in sport that, like everything else, it has to be policed to make sure everyone is being honest.’ LB
sarah.downey@legalease.co.uk