High Court finds Covid-19 pandemic did not trigger a material adverse change clause in a contract

A recent High Court decision shows that whether or not a material adverse change clause will be found to be triggered by Covid-19 is a highly fact-dependent question which will depend on the wording of the clause and the relevant context: The Football Association Premier League Ltd v PPLive Sports International Ltd [2022] EWHC 38 (Comm).

Although set in a non-financial context, the decision will be of interest to financial institutions considering the ongoing impact of the pandemic as it shows how important it is for such clauses to be drafted carefully to ensure that risks are allocated in accordance with the parties’ intentions – but how difficult it is to do so when (by definition) the clause is meant to cater for unforeseen events.

In this case, involving contracts for the rights to broadcast Premier League football matches in mainland China and Macau, it was held that the clause was not triggered despite the significant disruption to the 2019/20 season due to the Covid-19 pandemic. The clause in question was only triggered if there was a “fundamental change” to the “format” of the Premier League competition – which, as construed by the court, did not include the timing of matches or whether there were fans present. The court therefore did not have to consider whether the changes that had occurred had had a “material adverse effect” on the exercise of the rights.

For a more detailed discussion of the decision, please see our litigation blog post.