Esports’ transfer agreements – can a player be barred from joining certain team based on a contractual clause between transferring clubs?

As usual, the pre-season in League of Legends provides fans across the world a solid dose of emotions especially due to upcoming transfer window. Social media and all kinds of network portals of all kinds are full of rumours about upcoming team rosters changes. Recently, provisions of the transfer agreement concluded by G2 Esports and Cloud9 were revealed, which directly concerned the transferred player – Luka „Perkza” Perković. According to disclosed data, G2 and C9 agreed on a clause preventing aforementioned ‘mid laner’ from joining a British esports organization – Fnatic. Although Riot stated that the agreement does not violate the internal regulations of League of Legends games, it raises the question of whether such agreements are permissible under general law.

What was agreed in a contract between G2 and C9?

The exact wording of the clause and the contract itself remains unknown to the public. What has been revealed is purely a journalistic report and it may slightly differ from exact legal meaning of concluded provisions. Some other legally vital clauses also remain unrevealed. According to published provisions, C9 was obliged to refrain from transferring “Perkz” to Fnatic during the 3-years period. It was also forbidden to release „Perkz” from his contract in order for him to join the British team. What is important, the obligation arose from a contract binding two teams – G2 and C9, while “Perkz” was not a party to that agreement. It is likely that the matter came to light when Fnatic tried to get the player for their team, but any negotiations were refused due to the provisions of the contract with G2. The upshot of the situation was that Fnatic filed a complaint with Riot’s legal office, which however found no violation of their internal rules. Although it did not investigate the matter in terms of potential EU or domestic law systems.

Is such a clause legally valid?

Although Riot confirmed that such clause is not contradictory to their own internal esports regulations, it is not unambiguous in terms of general law provisions, especially European Union’s legal system. Football fans have probably heard of a rule commonly known as a “Bosman ruling”. Long story short, European Court of Justice judged that a situation when a player is bound by a contract for an indefinite period of time (or when the contract is for a fixed period of time but later transforms into a contract for an indefinite period of time) with no easy way to withdraw from the agreement, restricts their rights granted in EU legal system, in particular the right of free movement of workers between EU countries. As a result, footballers in Europe nowadays sign only fixed-time contracts and are able to sign a new one with any other team as little as six months before their current contract expire. As you can see, all kinds of freedom or rights granted to workers are taken seriously in the European Union, which creates a significant risk that a clause similar to the one stated in transfer agreement between G2 and C9 could be declared null and void. On the other hand, the agreement was concluded between an European and North American team so it is not certain whether the EU legal system shall apply. Parties could have chosen American law provisions as binding, which is generally allowed, unless they have chosen a law of a country where neither party has it’s registered office. In such case, even though that third country law applies, mandatory law provisions cannot be circumvented, including EU and German law (Germany is where G2 has its registered office). The information disclosed so far does not allow us to clearly determine whether the contract is valid. The case will also probably not be clarified by any court, because – according to repeated rumours – „Perkz” has already found a new team in the top European league.

Can teams or players enter into such agreements in the future?

Even though Riot stated that contractual provisions of transfer agreement between G2 and C9 were admissible in scope of Riot’s internal regulations, they have announced at the same time that they will amend the regulations to prevent such situations in the future. Riot confirmed that such practices are generally contradictory with values they want to spread in esports. It is also rumoured that there could be simultaneously implemented provisions allowing teams to loan players for a fixed period of time, which is now disallowed in League of Legends. Considering abovementioned facts, teams should avoid concluding any clauses limiting players’ ability to freely choose their future organizations. It should also be added that in the European Union such a clause could be considered an act of unfair competition.

What could teams and players affected by a similar clause could do?

Since it seems to be only a theoretical problem now, it is still worth considering what could “Perkz” and Fnatic do in the described case. The first step should be to file a complaint to Riot’s legal office, what has been correctly done by the British organization. If Riot decides to create an arbitration court aiming to settle disputes between professional LoL players and teams, or accepts a jurisdiction of an already existing arbitration court (for example Court of Arbitration for Sport in Lausanne), then any claims shall be filed to that court. As long as there is no arbitration court appointed, any claims shall be filed to a competent domestic court of law. There is no single rule which country has jurisdiction over a certain case. It always depends on contractual provisions and legal systems of parties concluding an agreement. What is also important, choosing an applicable law of a certain country does not always imply a jurisdiction of courts in that country. By way of example, it is possible that a Spanish court will resolve a dispute on the basis of German law provisions. If a court of any of EU countries is competent to hear a case, then it can lead to referring the matter to European Court of Justice, similarly to a Bosman case. If a clause is declared null and void, the player will be able to freely move to a team of his choosing. There is also a high chance of obtaining damages and imposing unfair competition penalties against the parties concluding such a restricting clause.

Summary

Clauses restricting players from transferring to certain teams should either agreed with be a player himself (although it is still controversial if such clause would be valid anyway) or not entered into at all. Teams should always make sure their contractual provisions are in accordance with any applicable regulations, especially since the player is usually more protected party in a contract. It is also important to make sure there are no premises to penalise the organization for breaching the fair competition regulations. In there is any doubt as to whether a contractual provision is valid, disputes can be resolved through the competent courts.

Author: Mateusz Witkowski