The Supreme Court of the Republic of Latvia made a ruling, in the capacity of cassation instance, on the contract of an athlete (signed by the parents) with a “sports development agency”.
The first round at the Supreme court was reviewed in 2020.
This article will cover the judgment of 2020, which has been made publicly available for the public.
Aftermath since then
As per this 2020 judgment, the case returned to the Riga region court that same year. It was heard by Appellate court for the second time in early 2021. The judgment has not been made publicly available yet. It is known that the claim was rejected during this second time at the appellate court.
The case is currently with the Supreme court for the second round of cassation hearings. Should this judgment be publicly available at some point, if and when, we will try our best to cover it. Meanwhile, please be invited to get acquainted with the below
The full judgment is available in Latvian at the site of the Court: https://at.gov.lv/lv/tiesu-prakse/judikaturas-nolemumu-arhivs
Sportslaw.lv will summarize below the key arguments and findings of the judgment.
Supreme Court of Latvia on applicable principles
On 16 January 2020 the Civil cases section of the Supreme court ruled in case Nr. SKC-18/2020 that the regional appellate court.
The Supreme Court, in essence, did not agree with the Riga region court on the interpretation of the agreement between the sportsman and the agent.
It was ruled that the consumer protection laws had to be taken into account.
The contract under the dispute
The contract was signed in 2009, during the global financial crisis that had hit Latvia and its sports&entertainment industry the hardest during years 2008-2010.
Parents of then-minor athlete and the agency were parties to the contract.
The agent acted through a limited liability company (Ltd) and had undertaken to provide a limited scope of services in exchange for unlimited fees, to be calculated depending on the actual earnings of the athlete in next 15 years.
Not only the commission from earnings was agreed, but also specific limitations as to the choice of future clubs and other sports-related matters were subject of the agreement. In case of the athlete not obtaining a written approval from the agency, the agent would be entitled to some thick penalties.
The list of penalties offered amounts from EUR 5’000 to EUR 500’000 per breach.
Unfair practice of the agent
It was known in public that the agent had signed contracts with numerous most talented basketball players having the same content:
- 15 years of influence over all sports related decisions
- athlete subjected to paying 10% from all earnings
- top penalty of 500’000 euro
The obligation of the agent? To promote the player into being a high class athlete, whatever that might mean, as well as providing opportunity to apply for certain services within a capped amount.
In the dispute at hand, the player had actually not received the whole list of services.
The whole scheme was ruled by the Supreme court to be contrary to the consumer protection law. Not only the Latvian Law as it stands, but also viewed in the light of the European Union Consumer protection Law.
The Latvian sports journalists at that time had obtained a copy of the sample contract and published certain excerpts of it. While the agent basically admitted the contract was extremely harsh and one-sided, as well as completely unbalanced, it offered (by announcing this proposal in the reader comments section of web portal) to mitigate the damage done to the young athletes by waiving its rights to EUR 500’000 penalty claim. The basketball players, if they wished to benefit from this generous offer, had to apply within a certain deadline.
The court dispute at hand was initiated by the agent in 2014. The respective athlete had not exercised the right to exit the agreement as per the announcement in comments section of the sports news site. Thus, the agent considered it is entitled to the penalties and also the 10% of all earnings.
Both parties claimed to have “won” the case:
- the player’s attorney bragged abut the EUR 500 000 penalty being ruled illegal, while per the consumer rights were applied as per court’s own initiative and not the actual arguments raised by the defense.
- the agent considered that the 10% of all earnings was maintained
The court did not specifically raise this, though, it can be mentioned that the “personal development services” was created and offered by the respective agents during the financial crisis when many of the young athletes (through their parents being exposed to unemployment, reduced or late salaries&other earnings) were extremely vulnerable.