The Situation: The European Super League faced significant criticism when it was announced on 18 April 2021. Some governments in Europe-particularly the United Kingdom-even threatened new laws intended to target the new league, its member clubs and their players.
The Result: Following the hostile public reaction, most of the Super League clubs have announced that they have abandoned it. Had the United Kingdom acted against the clubs in a significant manner, it may have found itself being sued by some of the club owners under international law. The owners of only a few of the clubs involved might have been able to initiate actions under international treaties; other club owners were unlikely to be protected by any international treaty.
Looking Ahead: Even in low-risk states and industries, it is prudent that businesses consider their investment structures to ensure they provide political risk protection against regulatory change.
The European Super League was announced on 18 April 2021. It was reported that 12 clubs from England, Italy and Spain had agreed to take part in an exclusive league to which only the founding members and eight other clubs would have access.
The announcement of the Super League attracted immediate criticism, including from fans, the Union of European Football Associations ("UEFA"), the Football Association, England's Premier League, Spain's La Liga, the Italian Football Federation and several European governments.
Among the many statements made against the Super League was the possibility of introducing new laws targeting it. The UK prime minister stated he would drop a "legislative bomb" to stop the Super League. The UK culture secretary said that if UEFA and national associations were unable to act, then "we will" and that "we will put everything on the table to prevent this from happening". The chairman of the House of Commons' Digital, Culture, Media and Sport Committee said that the government could restrict work visas for Super League players or introduce a windfall tax on clubs.
Within three days of its announcement, the Super League appeared largely to have been abandoned.
Political Risk Protection Via International Treaties
When the actions of a government-even if nominally well-intentioned-cause injury to a foreign investor or its investment, international investment law can provide protection as well as effective means of recourse against the state. This body of law limits the lawful ways in which governmental actions are allowed to impact foreign investors.
There is a global network, in excess of 3,000, of international treaties that offer protection to foreign investors and their investments. These treaties usually take the form of an investment treaty between two states and provide a set of broad protections, including a guarantee of fair and equitable treatment, a prohibition against discriminatory measures and a requirement to compensate for an expropriation. Crucially, these treaties provide investors with recourse to international arbitration if these standards are breached by a state and the investors may be entitled to compensation.
This system of law has come under criticism from numerous stakeholders and is under reform, but a significant majority of states still have these investment treaties in place.
While the Super League appears to be no more, it raises the interesting issue that, had the government imposed a windfall tax, visa restrictions and other measures, only some of the owners of the affected clubs could have initiated investor-state arbitrations against the United Kingdom under an applicable international treaty. Whether a claim against the UK government would have been successful would depend entirely on the regulatory measures ultimately enacted, but the types of measures proposed by the UK government have previously given rise to claims under international treaties.
This Commentary does not seek to address the merits of any potential claim in the present circumstances; rather, this well-publicized event provides a topical reminder to investors of the importance of structuring investments in foreign countries in order to protect against political risk.
Why Is It That Only Some Club Owners Would Have This Protection?
The United Kingdom has 90 treaties in place with other states. If it has not negotiated an investment treaty with a particular state, then the protection will not exist. It is necessary to identify who the "investor" would be and the "nationality" of that investor; for this purpose, we have considered the nationality of the ultimate owners of the club. It is possible that the nationality of an intermediary company in the corporate structure could also have a claim. The following provides further details:
- The United Kingdom has a treaty with both the United Arab
Emirates and Russia, which means that Super League clubs owned by
citizens of those countries would potentially have the option of
initiating an investment treaty arbitration against the United
- The United Kingdom has no treaty with the United States, which means that all of the protections contained in an investment treaty would not be available to the Super League club owners from the United States.
Two Key Takeaways
- Investment treaties can be a useful tool in providing an additional level of political risk protection. Investors should assess whether their foreign investments are already protected by an existing investment treaty.
- If there is no existing investment treaty that provides protection, investors may wish to consider restructuring their investments to ensure that they are suitably protected. Restructuring should be done prior to any dispute arising, but can occur after the investment was made.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.