In January this year Choongadunga Limited, a company majority owned by English footballer Jordon Ibe, filed a claim against his former club AFC Bournemouth alleging that the club failed to pay to the company amounts contractually due in relation to an image rights agreement for the last 12 months of his four-year deal with the club.

Bournemouth had granted Ibe the payments on top of his playing contract, linked to his commercial appeal such as additional shirt sales and marketing appearances, when the winger signed for the south coast club from Liverpool for a club record £15 million back in 2016.

Ibe, who is now 26, made his Liverpool debut aged 17, and was 20 when he joined Bournemouth. He began brightly but was in and out of the team after manager Eddie Howe said he lacked consistency.

In 2019 his career began to nosedive after he crashed his £130,000 Bentley into a coffee shop in south east London and was arrested after failing to stop at the scene.

Ibe was convicted the following year, receiving a 16-month driving ban and £7,500 fine, and he revealed he was in rehabilitation to improve his mental health and become a better person after “making poor judgements.” Bournemouth had also disciplined him after allegedly turning up for training in an unfit state.

Ibe was released by Bournemouth when his contract expired in June 2020. After a brief spell with Derby County, where he played just three minutes of football the following season, he then suffered a broken leg while training alone, and in January this year he joined Turkish second tier club Adanaspor on a three-and-a-half-year deal.

Bournemouth’s stance sparks controversy

It is understood that Bournemouth are basing their decision to withhold the image rights payments on two key points: firstly, that Ibe’s conduct meant he no longer had a demonstrable commercial appeal.

Secondly that they cannot make the payments until they are satisfied they wouldn’t be in breach of HMRC regulations.

On the first of these points, James Arnold, associate at law firm Cooke, Young and Keidan, which specialises in commercial disputes, says whether Ibe’s actions off the pitch during his final year at Bournemouth can be seen to justify the club’s position may come down to the player’s image rights agreement made with the club, in particular “whether a set fee was agreed or whether it was to be a percentage of the total commercial income generated from those image rights.”

Philippa Lombardi, a director at Lombardi Associates, which advises football clubs and players on a range of legal matters, agrees, saying “it would be interesting to see what exactly the image rights contract provides for and if there are provisions for the reduction in value of the image and how that can be measured.”

She adds that with shirt sales included, “then at least that aspect should be presumably quite easy to calculate.”

The second of the points made by Bournemouth concerning HMRC’s position on image right payments has sparked far greater controversy, with strong views on the stance taken coming from a number of sports lawyers and tax advisers.

Among them is Rhys Linnell, a tax adviser in the sport & entertainment team at Saffery Champness.

He declined the opportunity for an interview with Off The Pitch, but in a post shared on LinkedIn in January, he wrote:

“Once they've entered into an image rights contract, clubs refusing to make the payments until they've "made sure HMRC are happy" is absolute nonsense. It’s like refusing to make the monthly payments on your car because you're not really using it ... can't see that the car company would be too happy with that! Not surprised that Ibe is taking legal action!”

Tax efficiencies for player and club

Image rights agreements have become increasingly common among Premier League players, with many setting up companies to exploit their rights.

The expansion of the practice has brought with it increased pressure on HMRC due to the tax efficiencies that an image rights deal can bring for both player and club.

While Premier League players are likely to be paying the top rate of income tax – 45 per cent – on payments in relation to their playing contracts, significant savings can be made by transferring their image rights to a company, where corporation tax – currently 19 per cent for UK companies – is payable on the net profit.

Test case rules against Hull City

James Arnold notes that this principle was highlighted in the case of Hull City AFC (Tigers) Ltd v HMRC in 2019.

The Brazilian midfielder Geovanni, who played for Hull between 2008 and 2010, was paid a proportion of his earnings as an image rights payment via an offshore company that was subject to a tax evasion investigation by HMRC. The payments were purported to be for exploitation of his image rights outside of the UK.

The tribunal decided that payments made to Geovanni’s offshore company under an image rights contract were employment income and not consideration for licensing his image rights.

“This case provided guidance on how tax tribunals approach the question of whether image rights payments constitute a player’s taxable earnings,” Arnold explains.

“The tribunal ruled that the image rights payment to the offshore company had no true commercial purpose as Hull had neither the intention nor capability to exploit Geovanni’s image rights abroad where they had commercial value.”

He adds: “These payments were treated as part of a sham transaction to evade tax. A player’s image rights must have a commercial value that a club can utilise for image rights payments to be made.”

However, he points out that if it goes to court Ibe’s case would be the first to centre around the question of whether image rights payments should still be made to a player whose commercial value to the club has dramatically declined.

A convenient excuse for Bournemouth?

Arnold notes that Bournemouth may simply be citing concerns about breaching HMRC regulations as a convenient way of justifying their decision to withhold the payments. “The sceptic in me does say this could possibly just be an excuse for Bournemouth to put forward,” he says.

However, he stresses that if the case does proceed it is likely to bring greater clarity over HMRC’s views on when the payment of image rights can be justified.

“The principles that could come from this case could be very interesting because they may lead to a clear set of rules for both the player and the club around some of the commercial aspects of their contract negotiations. At the moment it is very murky water.”

And with clubs eager to snap up young talent at an ever earlier age, he believes there could be more cases like the one involving Ibe. “Signing a younger player has a higher risk, so I predict that cases like the one with Ibe are going to be more and more likely as not every single player can fulfil their potential.”

Reviewing contracts to protect players

Lombardi adds that whatever the outcome of the case, it will most likely lead to additional clauses in players’ deals in the future.

“No doubt even the fact that this is being brought to the attention of the courts means that many lawyers will be reviewing contracts to ensure clients are protected in case there is a perceived fall in the value of the image,” she explains.

She observes that the Jordon Ibe case is also notable because while the use of a third-party company for the payment of a player’s image rights does provide advantages around tax, Premier League clubs are now placing greater focus on how such an approach can exploit a player’s commercial appeal most effectively. 

“I believe high-level clubs have moved past the use of image rights companies as essentially a tax planning scheme and recognise that commercial revenue can be made through the exploitation of specific players’ image rights,” she says.

Bournemouth have only had image rights contracts with two players – Ibe and one other – “so they do not appear to be reckless in this area, and employing the tactic of using agreements with image rights companies to reduce tax burdens and pay higher remunerations as a modus operandi,” she adds.

“Until now, the test cases reported by HMRC are cases in which HMRC are trying to limit the use of image rights companies, so this is unusual that a club seeks to rely on HMRC to limit payments to a player. If Bournemouth are successful I believe that this would be an important case for the development of the use of image rights.”

Off The Pitch contacted AFC Bournemouth about the legal action being taken by Jordon Ibe but they declined to comment.

The Executive Director of the World Players Association, a representative body which brings together 85,000 professional athletes from over 60 countries, tells Off The Pitch about his comprehensive blueprint for the reformation of global sport’s system of justice, which he says will embed human rights into sport law and culminate in the creation of a new dispute resolution chamber at the Permanent Court of Arbitration.  

Brendan Schwab says his new strategy paper, “Ensuring Access to Effective Remedy – The Players’ Strategic Pathway to Justice”, has been under development for years, but that the implementation of its findings has started to take shape.

The paper focuses on the longstanding failure of global sport to prevent and address harm and injustice so that victims can finally access meaningful and effective remedies.

Schwab says that the system of sport law that has developed over the last century has not kept pace with the evolution of common law, and has failed to put human rights at its heart

“In the last four or five years, there's just been a huge awareness of the intersection between sport and human rights,” says Schwab.

“And for many years, sport has tried to regard itself as being different as being special, as something that should be governed in accordance with its own rules and its own norms.

“For almost time immemorial, we've had this challenge between the reality of the lived experience of an athlete - that it is work, that they are human beings, that they do have rights - with a sporting structure, which has developed its own set of norms.”

Benign but outmoded

Schwab says that his paper and its six recommendations aim to reconcile this gap between the lived experience and the structure of sports law.

“I think that the system is actually benign in many ways,” he says.

“If we take a step back and say, ‘Well, what is it?’ Sport has succeeded in developing an internationally enforceable set of rules, not just on the field, but off the field, which governs it legally, economically and politically. That potentially is a wonderful thing, provided it is used in a way which is good.

“Unfortunately, what we are seeing is it's being used too often to embed the power structure and not actually further the very purposes for which it was established, which of course, are things such as protecting the people that make sport possible, the integrity of sport, and so on. There's no doubt that the reason that's occurred is that there's a lack of accountability in the way in which sport is governed globally.

“Unlike what we see in professional leagues where a lot of the matters, such as dispute resolution, are collectively bargained so that the players have an equal say, when we're getting to the global level, the ability of the players to impact that becomes more and more marginal. And so therefore critical notions such as independence and legitimacy and a rules-based system are compromised.

“Through that, the promulgation of regulations by international sports bodies, coupled with sports justice system, principally the use of arbitration under the Court of Arbitration for Sport has actually succeeded in developing a global system of sports law, which is binding and which can prevail over the rights of the people who are affected by it.”

Extreme situations

Schwab points to examples where the prevalence of sporting norms over what would be accepted under common law, has in some case created extreme situations where athletes have suffered greatly.

Here, he says, “the cultural norms of sport have prevailed, but they're actually harmful.”

In the US, an horrific abuse scandal in gymnastics saw hundreds of women come forward with allegations of sexual and emotional abuse that brought the sport to its knees. 

Schwab points out that the independent reports into those cases said that gymnastics had created its “own set of norms in which pain and suffering was normalised as an ordinary price of sporting success.”

“Sport needs a system of justice now, which isn't based on its own peculiarities, its own specificities, which is based on internationally recognised human rights and which places the people who are most affected by sport, principally the athletes, but also the many others who make sport possible, at the centre of sports justice system.”

Six point plan

To this end he has developed six essential reforms so that sport can ensure and deliver justice.

This says his colleague FIFPRO Secretary-General Jonas Baer Hoffmann, a Vice President of World Players, will “deliver a human-centered approach global sport needs to finally place athletes and many other people making the delivery of sport possible at the heart of its business.

This means urgently addressing well-known gaps to access to justice and remedy for victims of human rights abuses.

To protect the people and to safeguard the industries’ license to operate we are committed to working with all actors to make sure this happens.”

CAS failures

Football, says Schwab, generally has good legal mechanisms in place, much of which it owes to the input of the European Commission. But he adds that this only goes so far.

“Football is more advanced than the Olympic Movement more broadly. It has in relation to the employment of players, a very sophisticated system that starts with the dispute resolution chamber at FIFA.

"But it has been undermined somewhat through appeals to the Court of Arbitration for Sport, which doesn't have the same bipartisan structure, which is very much under the control of the International Olympic Committee.

The evidence shows, he says, that this “brings about a very manifestly unjust outcomes and impacts for many, many athletes.”

Parallel avenues

Schwab says that the new dispute resolution mechanism won’t be an alternative of the Court of Arbitration for Sport (CAS), but can “run in parallel” with it. He says that CAS falls short because it doesn’t provide a system “which is compliant with the human rights of the people that are affected.”

“What sport tries to do, of course, is to say you must exclusively go to our system or whatever system sport's imposed,” he says.  “They like to impose penalties on athletes who seek to take matters into the national courts or the European Court.”

“But sport can't do that. It's unlawful for sport to be acting in that way. And there will certainly be some very important cases where there could be a contested jurisdiction as to whether a matter should belong at the Court of Arbitration for Sport or whether a matter should belong in another forum.”

He says that individual sports sometimes lack a willingness to look beyond their own game, when sometimes an obvious answer is looking them in the face in another sport.

“I think if we look at the basketball arbitration tribunal, it's a really good example,” he explains.

“It's been running for about 20 years, set up by FIBA (International Basketball Federation). It's only available to players and clubs that voluntarily opt into the system. And now it provides, like the FIFA dispute resolution chamber, access to remedy for clubs and players to resolve disputes that have an international dimension. In its first year, I think it had a couple of cases. It now has several hundred cases every year.”

Field of dreams

Schwab’s ideas have been put forward in a strategy paper, but how realistic are they? Will we see them in place in months? Years? Even this decade?

“The paper's been in development for many years, and a lot of the issues that we've been working on are at an advanced stage,” he says.

“One of the things which we think is very important is to develop a new international arbitration and dispute resolution system for sport and human rights.

In recent years, we've received technical support in this respect from the Permanent Court of Arbitration at The Hague, which is the legitimate body for international dispute resolution through arbitration and which has experience in handling international matters in relation to business and human rights.”

That work “is there and is ongoing”, he says, and “we're now starting to see some very important institutions within the international sport and human rights community commend some of the recommendations.”

“I think with this strategy, it's a bit like that lovely baseball film Field of Dreams, ‘If you build it, they will come’,” he adds.

“What we have to start doing is leading this strategy. The vehicle already exists with the new sport and human rights dispute resolution mechanism under the auspices of the Permanent Court of Arbitration, and it's available to hear some of the really complex sport and human rights cases, be they around athlete freedom of expression, be they about the dispossession of local communities to make way for the construction of stadia for the Olympic Games or the World Cup.

“We will be active. We will certainly be uniting our resources behind those athletes who have the courage to take a stand not only for their own rights, but in order to change the system of sport so that it respects the rights of everybody for generations to come.”