How to recover prize money from doping athletes: Lessons for event organisers from the Shobukhova case

Published 18 April 2017 | Authored by: Zane Shihab, James Thorndyke, Thomas Gibby

The case of Liliya Shobukhova provides a timely reminder for sporting event organisers. Having the necessary contractual mechanisms in place gives the best opportunity to recover appearance fees, prize monies and other bonus payments, given to professional competitors should they need to be recovered in future.

This article discusses the high-profile case between London Marathon Events Limited (“LMEL”) and Ms Shobukhova and explores ways to ease the challenges faced by rights holders when chasing athletes for recovery of monies post event.

Specifically, it looks at:

  • The Shobukhova case and legal proceedings

  • Contract formation

  • Must a form be physically signed for the rules to be incorporated?

  • Using contracts to protect rights-holders’ interests

  • Cheats are not welcome here” – Banning cheats

  • Reclaiming consequential losses

  • Other remedies

  • Staggered payments and/or shared liability?

  • Concluding thoughts 

Please note that Kerman & Co LLP acted for LMEL[1].

 

Shobukhova: a case in point

Shobukhova had enjoyed a distinguished athletics career that included two World Marathon Major series victories, triumphs in both the Chicago and London Marathons and national representation at two Olympic Games and World Championships. Her personal best time of 2:18:20 hours put her as the second fastest female marathon runner of all time. This time has since been annulled[2]

On 29 April 2014, the Russian Athletic Federation (RAF) announced that it had found “abnormal haematological curves” in Shobukhova’s biological passport (essentially, an individual e-document collating all data for a specific athlete, based on the monitoring of selected biomarkers over time). Such results differ from detecting performance-enhancing drugs (which are detectable only whilst they remain in an athlete’s bloodstream) because they are designed to measure an athlete’s biomarkers over time, and detect deviations from those norms that could only be explained by doping[3]. Consequently, the RAF:

  1. imposed a retrospective two-year suspension (beginning 24 January 2013) pursuant to International Association of Athletics Federations (“IAAF”) Rule 40.2; and

  2. annulled all of Shobukhova’s race results since 9 October 2009 pursuant to IAAF Rule 39, 40.1, 40.8 and 40.9[4].

Shobukhova did not appeal the RAF’s decision. On the basis that the RAF’s decision was imposed on Shobukhova pursuant to the IAAF anti-doping rules, the IAAF appealed the RAF’s decision to the Court of Arbitration for Sport (“CAS”) on the grounds of aggravating circumstances (IAAF Rule 40.6), arguing that Shobukhova should have received a greater suspension of up to four years (instead of two). 

According to the World Anti Doping Agency (“WADA”), Shobukhova settled her dispute with the IAAF in August 2015, agreeing to a greater suspension of three years and two months. This suspension was reduced by seven months by WADA as a result of Shobukhova’s “Substantial Assistance[5] in line with the provisions of the WADA Code. However, all race results since 9 October 2009 remained void.

 

Legal proceedings

On 28 August 2015, LMEL the event organiser and rights holder for the Virgin Money London Marathon, issued legal proceedings against Shobukhova in the High Court (London) seeking repayment of all sums paid to her for her participation in the 2010 and 2011 London Marathons (estimated at over £375,000 plus interest). In July 2016, LMEL obtained judgment in default against Shobukhova following her failure to file a defence to the claim.  Shobukhova was therefore ordered to repay to LMEL all appearance fees, performance bonuses and prize monies she had earned for competing in those races. LMEL is now seeking to enforce its award against Shobukhova in Russia.

 

Contract formation

In its simplest form, a contract will exist between a competitor and the event organiser when a competitor enters, and competes in, any sporting event (the “Contract”). Sporting events to which this article will particularly apply will be any events undertaken by individual competitors, including swimming and cycling races, any form of track or field based athletics, long-distance running events, tennis tournaments and gymnastics (each an “Event”).

Typically, the Contract will comprise:

  1. the entrance form (the “Form”); and

  2.  any codes of practice or ethics guides for athletes (the “Code”) issued by the Event organiser, the relevant governing body and/or anti-doping agency for the sport (a “Relevant Authority”). 

In the case the of the six major world marathons, the Abbott World Marathon Majors’ (“WMM”) Code of Conduct also applies[6].

 

Must a form be physically signed for the rules to be incorporated?

All competitors are normally required to complete the Form accurately and in full as a condition of entry. In practice, such forms are often completed by the federation or team represented by the athlete, which bind the athlete to them. However, the leading case of Modahl[7] confirms that simple participation in the Event is enough to bind the athlete both to the Event’s rules, and the rules of any other Relevant Authority, such as WADA and/or the IAAF. An athlete competing in an Event agrees (as implied by conduct) to be bound by, and subject to, the Event’s rules and the Relevant Authority’s rules.

The Code will typically contain a section of rules binding the athlete to a duty of good faith, and to compete honestly and ethically in all events to which the Code applies in order to uphold the integrity of both the sport and the Event. In a range of European and common law jurisdictions, this duty is often implied (in the absence of any express term to the contrary).

The Code and the Form will create the Contract that exists between the athlete and the Event organiser, and athletes are legally obligated to comply with all terms (whether express or implied) contained therein.

 

Using contracts to protect rights-holders’ interests

Event organisers can word the Contract in specific ways to protect their interests against those athletes who cheat in their Events.

Firstly, the Form should clearly state that, if the athlete breaches the Contract by failing a drugs test, all prize money (including appearance fees and timing or placing bonuses) will be forfeited and must be returned to the Event organiser immediately. The Contract can also state that interest, calculated at a prescribed rate, can be added to such amounts. It is recommended that the Form clearly states that an athlete will be in breach of the Contract whether a positive drug test result is returned either via in-Event-related testing, in tests conducted outside of the Event, or through subsequent reviews of an athlete’s biological passport.

Secondly, the Form should include express warranties given by the athlete stating that they agree: a) not to take any performance-enhancing drugs when training for, or competing in, the Event; and b) not to do or take anything prohibited by the Code relating to banned substances when competing in the Event.

Any failure by the athlete to comply with these warranties will give the rights holder a direct contractual remedy against the athlete if the athlete is subsequently found guilty of doping or otherwise be found to have abnormal indicators in their biological passport.

Additional protection can be obtained by requiring the athlete to indemnify the Event organiser for losses arising from any breach of the Contract. Indemnities are stronger than contractual warranties as, although they arise from a contract, they exist as a separate primary obligation and provide the Event organiser with the right to recover under the indemnity as a debt recovery action. The significance of this status is that, with debt recovery matters, there is a significantly reduced duty on the recovering party (i.e. the event organiser) to incur administration time and operational costs in mitigating their losses.

 

Cheats are not welcome here” – Banning Cheats

To protect the integrity and reputation of the Event, Event organisers may wish to ban athletes who cheat from competing in the Event in the future (whether permanently or temporarily). Event organisers are largely free to impose such bans or other restrictions, subject to anything to the contrary expressed in the relevant governing body’s regulations applicable to the Event.

However, any ban or suspension must:

  1. be proportional to the offence – this is primarily to mitigate against the defendant raising a successful counter-argument on the grounds that any ban is an unlawful restraint of trade; and 

  2. not exceed the maximum period permitted by the Code or Relevant Authority’s rules. 

To do this, the Form should initially contain a section listing “eligibility requirements”. These will create initial compliance hurdles which will sift out those athletes who the Event organiser wishes to bar from entering the Event. IAAF Rule 40(14)(a)[8] provides additional protection for Event organisers by stating that, for an athlete to regain eligibility after a ban or suspension, the athlete must repay “any and all prize and appearance money” received from participating in Events since the date of the commission of the anti-doping rule violation. Event organisers should however recognise that this rule may not act as the same deterrent on those athletes at the end of their careers.

The Form should require the athlete to state that they: a) have not previously breached any Contract they have in place with the Event organiser or with the organiser of any similar event anywhere in the world at any time; b) have not tested positive for any banned substances either in the Event rules or as specified by the Code; c) have not gained, or sought to gain, a competitive advantage by illegitimate or unlawful means whilst competing in the Event (or similar events) at any time; and d) are not subject to a suspension issued either by the Event organiser (or other Relevant Authority) subsisting at the time of the Event. Additional wording to incorporate IAAF Rule 40(14)(a) can be included, but will be implied if the Event is under the IAAF’s jurisdiction.

Furthermore, for certain Events (such as cycling, gymnastics or track and field athletics), an additional clause can be placed into the Form to state that the athlete will not compete in the Event either on the behalf of, or to represent, any team, nation or federation which is subject to a subsisting ban issued by any Relevant Authority. Doing so will expressly incorporate IAAF Rule 22(1)(a) into the contract between Event organiser and athlete.

 

Reclaiming consequential losses

Athletes who are found guilty (or who are suspected) of doping in an Event can damage the integrity and reputation of the Event, the Event organiser and, often, the sport itself. In the most extreme cases, this can reduce the demand for athletes wishing to compete in the Event (and, indeed, participants wishing to participate at all levels of the sport), reduce the number of spectators who want to watch the Event (both at pitch or track-side and at home) and may cause a reduction in the amounts that sponsors and broadcasters are willing to pay for association with the Event (ultimately causing consequential losses to the Event organiser). Conversely, it could facilitate an environment whereby amateur sports men and women are encouraged to push boundaries to gain a competitive advantage[9].

Under English law, any contracting party is entitled to recover reasonably foreseeable losses arising from a breach of contract. Losses will be calculated to put the affected party into the position they would have been had the contract been properly performed. However, liability for indirect and consequential losses can be, and often is, excluded by contracting parties. This provides certainty so that contracting parties know what they could be liable for in advance, allowing them to adequately insure against such risks. Given the nature of the contract that exists between athletes and sporting Event organisers, terms in the Form and the Code are offered to the athlete (largely) on a “take it or leave it” basis, with little or no room to negotiate. Therefore, if no such liability limitation or exclusion clause is drafted into the Contract, the relevant athlete could be pursued for these further sums.

 

Other remedies?

Where an event organiser seeks to recover funds paid out to an athlete who is subsequently found guilty of doping, under English law they could, in principle, seek to pursue claims against the defendant athlete on the grounds of unjust enrichment, misrepresentation (under the Misrepresentation Act 1967), and deceit. As these are common law remedies, they do not require a written contract in place between the event organiser and an athlete.

The former simply requires a benefit to have passed (unfairly) to the defendant, at the expense of the claimant. If the claim is successful, the outcome will only restore the relevant benefit to the claimant based on its value at the time it was received (rather than compensate the claimant for their loss under breach of contract). Any benefit received by a defendant as a result of their own wrongdoing is generally considered to be unjust.

For the event organiser to be successful in proving the latter, a false representation must be made knowingly which causes loss. In these circumstances, the athlete’s representation that they will compete fairly and honestly, in accordance with any applicable anti-doping rules or regulations at all times is the representation. The athlete must be aware that they have sought to gain a competitive advantage through unlawful means and intended to deceive the event organiser by letting them compete in the event. Any loss must also flow from the representation.

 

Staggered payments or shared liability? 

In order to give Event organisers some protection from having to incur the cost of seeking to recover prize monies from athletes, a pragmatic approach would in the authors’ view be to stagger payments made to successful athletes in their Events. For example, WMM, who oversee the world’s six leading marathon events, have adopted this approach. Athletes who are entitled to receive prize monies from WMM are paid over a course of five years instead of all at once[10]. A deeper discussion of the implications of this approach in athletics and in other sports is however beyond the scope of this article. Retaining part of the prize money would also allow the Event organiser to pass payments on to those athletes who are subsequently deemed winners by default.

Another potential protection for Event organisers could be to make the relevant athletics federations, or the athlete’s agent(s) jointly and severally liable to repay prize monies if their athlete subsequently tests positive for banned substances. As yet, no leading federation has amended their rules to reflect this approach, but we understand there is increased support for a move in that direction.

 

Conclusion

Drafting the Contract appropriately is entirely a matter for the Event organiser and their professional legal advisers. The Contract should be seen as the primary mechanism for the Event organiser to record their rights and remedies, and impose competition rules and other compliance obligations on each athlete with a view to protecting and upholding the integrity of the Event, and the wider sport in general.

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About the Author

Zane Shihab

Zane Shihab

Zane is an Associate Partner in the Sports Department and provides commercial advice to global brands, international sporting bodies and events and high-profile individuals.

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James Thorndyke

James Thorndyke

James is a dispute resolution solicitor with particular expertise in resolving sports disputes. He represents sports individuals and governing bodies and has extensive experience in resolving contractual disputes in a variety of sports including motorsport, football, athletics, cricket and rugby union.

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Thomas Gibby

Thomas Gibby

Thomas is a Solicitor in Kerman & Co’s sports team. Thomas is predominantly a commercial contracts lawyer who advises the team’s biggest sporting clients and major event organisers on a range of their commercial issues, including working in-house at The All England Lawn Tennis Club, Wimbledon. His experience includes advising on data and consumer protection, IT/software development and procurement contracts.

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