Code-hopping in sports and the impact on contracts

Background

Denny Solomona had two years remaining on his contract with Castleford when he announced his retirement from Rugby League and subsequently, signed a three-year deal with Sale Sharks. Proceedings brought by Castleford against Solomona for breach of contract reportedly claim compensation of £500,000.

Similarly, Johan Goosen announced a return to South Africa to become a commercial director. His former club, Racing 92, has since launched proceedings alleging “blatant fraud” stating a career change to a position paying 10 times less than what he received playing rugby is inconceivable.

Breach of contract

Where code-hopping is concerned, it’s important for both parties - the player and the club – to be really clear about the details within the contract. This includes any get-out clauses and the length of contract. Any breach of contract claim will begin by looking at the obligations of the parties under the contract terms and any express representations made.

When players want to move, the terms or the breach of terms can dictate that the club is due remuneration. As Castleford and Racing 92 report in their case, clubs could look to claim:

• Loss of profits from early termination of their image rights
• Loss of the ability to book personal appearances by the sportsperson and/ or promotional activities that now only the new clubs can take advantage of
• Loss of a substantial transfer fee

It will be a question of how the contracts have been explicitly drafted, and how the terms can be interpreted, which ultimately dictates whether a player has breached the terms of the commercial relationship. And, even if a breach of contract is established, the knock-on effect must be established and losses proven.

Solomona and Goosen may contend that restrictive clauses that would prevent them from changing their career, i.e. by changing sport or work-type altogether, is in contravention of European Communities measures designed to promote the free movement of persons and trade.

For this argument to succeed, not only would an analysis of the legal principles in EU law be necessary but also the employment law principles which seek to preserve a person’s right to make a living.

Ultimately, should either Solomona or Goosen’s case reach a courtroom, I would look forward to a determination in this matter as code-hopping is likely to increase in rugby. A court ruling would provide a precedent and would likely have a profound effect on Rugby, just as the Bosman ruling did on football.

Faced with large costs and disruption, mediation can be a cost-effective solution to resolve any dispute. I envisage that all parties in these two high profile cases would prefer to mediate to reach a resolution and consider revising their contracts for future signings.