Editor’s Note: Shervine Nafissi (@SNafissi) is a Phd Student in sports law and teaching assistant in corporate law at University of Lausanne (Switzerland), Faculty of Business and Economics (HEC).

Introduction

The factual background

The dispute concerns a TPO contract entitled “Economic Rights Participation Agreement” (hereinafter “ERPA”) concluded in 2012 between Sporting Lisbon and the investment fund Doyen Sports. The Argentine player was transferred in 2012 by Spartak Moscow to Sporting Lisbon for a transfer fee of €4 million. Actually, Sporting only paid €1 million of the fee while Doyen Sports financed the remaining €3 million. In return, the investment company became the owner of 75% of the economic rights of the player.[1] Thus, in this specific case, the Portuguese club was interested in recruiting Marcos Rojo but was unable to pay the transfer fee required by Spartak Moscow, so that they required the assistance of Doyen Sports. The latter provided them with the necessary funds to pay part of the transfer fee in exchange of an interest on the economic rights of the player.

Given that the facts and circumstances leading to the dispute, as well as the decision of the CAS, were fully described by Antoine Duval in last week’s blog of Doyen vs. Sporting, this blog will solely focus on the decision of the Swiss Federal Supreme Court (“FSC”) following Sporting’s appeal against the CAS award. As a preliminary point, the role of the FSC in the appeal against CAS awards should be clarified.

Scope of the Federal Supreme Court’s review as for the international arbitral awards

Since the CAS has its seat in Lausanne, Switzerland, it has adopted its procedural rules in accordance with the 12^th chapter of the Swiss Private International Law Act[2], which provides a general legal framework for international arbitration in Switzerland. Under the relevant provisions of the Swiss PILA, arbitral awards are final upon their notification and can only be challenged before the Swiss Federal Supreme Court on a very limited number of grounds in order to prevent the parties to arbitrate again the dispute before a state Court.[3] Besides, in Swiss law, there is only one level of appeal against an international arbitration award before the Federal Supreme Court.[4] Thus, the FSC “ensures a uniformity in the review of arbitral awards and the development of a consistent court practice” be being the only one instance for appeals.[5] In this way, “arbitral awards are always reviewed by the same State court, ensuring consistency”.[6]

Setting aside the award may only be possible where the sole arbitrator has been improperly appointed or where the arbitral tribunal has been improperly constituted, where the arbitral tribunal has wrongly accepted or denied jurisdiction, where the arbitral tribunal has ruled beyond the claims submitted to it, or failed to decide one of the claims, where the principle of equal treatment of the parties or their right to be heard in an adversary procedure has not been observed, where the award is incompatible with public policy.[7] In casu, the examination of Sporting Lisbon's claims is based on the incompatibility of the award with public policy within the meaning of Art. 190 para. 2 let. e PILA.

As a reminder, an award is inconsistent with public policy if it disregards those essential and broadly recognized values which, according to the prevailing values in Switzerland, should be the founding stones of any legal order.[8] “An award is contrary to substantive public policy when it violates some fundamental principles of the law applicable to the merits to such an extent that it is no longer consistent with the notions of justice and system of values; among such principles are, in particular, the sanctity of contracts, compliance with the rules of good faith, the prohibition of abuse of rights, the prohibition of discriminatory and confiscatory measures, as well as the protection of incapable persons. (…). If it is not easy to define substantive public policy positively and to set its boundaries with precision, it is easier to exclude one item or another from it. The entire process of interpreting a contract and the legal consequences logically drawn therefrom are excluded; so is the interpretation of the statutory provisions of a private law body by an arbitral tribunal. Furthermore, it is not sufficient to show incompatibility with public policy – a concept more restrictive than arbitrariness – by showing that the evidence was wrongly assessed, a factual finding manifestly wrong, or a rule of law clearly violated”.[9]

Thus, the examination of this international arbitral award by the FSC is limited to the question of the compatibility of the said award with public policy, a notion more restrictive than arbitrariness.

The judgement of the Federal Supreme Court of Switzerland - the merits

Sporting Lisbon’s defence

First, the Portuguese club tried to demonstrate that the CAS award violated material public policy by giving effect to one-sided and usurious contracts including excessive restriction.[10]

The claim is based on figures from the ERPA contract. Considering that Doyen Sports invested €3 million at the beginning, the company managed in all cases with 12.36% of minimum return insofar as it activated the Put Option, or 40% if the company requested payment of the Minimum Interest Fee. These two scenarios did not take into account the possibility that the player concerned by the ERPA be transferred with a capital gain, thus enabling Doyen Sports to get an investment return of about 400%, as was the case for the transfer of Marcos Rojo to Manchester United.

Sporting Lisbon compared this investment return to its own, as it would only be left with €1 million, i.e. the 5% of the transfer fee once the 75% for Doyen Sports’s share and the 20% for Spartak Moscow’s share deducted. Therefore, according to the Portuguese club, the ERPA, which it describes as a partiary loan[11], infringes the provisions on usury, would be a one-sided contract and, accordingly, would be null and void under Swiss law.[12]

Secondly, Sporting Lisbon explained that it gave up its freedom of action in an unacceptable manner under and art. 27 of the Swiss Civil Code (protection of one’s legal personality against excessive restrictions).[13] Indeed, some clauses of the ERPAs required Sporting Lisbon to accept a transfer offer deemed sufficiently high, if not Sporting would be forced to pay Doyen Sports 75% of the proposed transfer fee without receiving any fee, precisely because of the absence of any transfer.[14] According to the Portuguese club, Doyen Sports was not only in a position to ask Sporting Lisbon to transfer Marcos Rojo even if the club preferred to keep the player in its squad for purely sporting reasons, but also to require the club to make its best efforts to transfer the player before the end of his employment contract. Sporting Lisbon further underlined that the ERPA is made up of clauses stipulating that the club, conscious of the harshness and the severity of the consequences of certain clauses, takes the commitment to consider these clauses as fair and a necessary condition to Doyen’s interest in the player’s economic rights.

Thirdly, the club considers that the award of the CAS violates material public policy because it gives effect to contracts that seriously disregard the personality rights and the fundamental rights of the players. ERPA contracts would seriously undermine the players by putting pressure on the club by various clauses, including a clause obliging it to pay to Doyen Sports a minimum amount of €4.2 million (the Minimum Interest Fee) in the event that Marcos Rojo is not transferred to another club before the end of his employment contract. Such a clause would force Sporting to do everything possible to encourage the player to leave the club before the expiration of the employment contract. Thus, the player, even though he is not a party to the contract, would see his right to free economic development restricted, if not annihilated, in particular his ability to take the appropriate decisions for his sporting career and to freely choose the club for which he intends to play.[15] As regards fundamental rights, Sporting Lisbon argues that the ERPA-mechanism allows a third party to indirectly decide whether the player concerned by the ERPA must continue to play for his club or whether he must accept the conclusion of a contract with another club. Such a situation would violate the prohibition of forced labor set out in Art. 4 para. 2 ECHR and, more generally, human dignity.[16]

Finally, according to Sporting Lisbon, there should be a shared conception of moral standards in the field of sport in general and football in particular. These standards should not only prevent players from becoming an object of speculation, but also prevent investors to take advantage of the financial difficulties of the clubs. By taking advantage of clubs in financial difficulty, investors make indecent profits, while the clubs lose control of the situation from the sporting point of view. The standards would help to strengthen contractual stability, which is a cardinal principle of the transfer system.

The FSC’s Decision

The FSC first considered the figures provided by Sporting Lisbon with regard to the calculation of the minimum return of 12.36% (insofar as the Put Option is activated) and 40% (in case Doyen requests payment of the Minimum Interest Fee), and found that these figures were based on a calculation over three and five years respectively. Consequently, if the calculation of the investment return was made over one year, this would have given interest rates lower than 15%, which would be lawful under Swiss law. In addition, the arguments based on Doyen Sports’ investment return of about 400% with the transfer of Rojo were considered as irrelevant. These figures cannot be qualified as interests, but only as a kind of remuneration of the lender, which depends on the amount of the transfer fee, thus being similar to a partiary loan paid by giving a share to the lender on the profit realized by the borrower in a subsequent transfer operation.[17] Therefore, assuming that the relationship between the two parties is a lender-borrower relationship, the fact that Doyen Sports could acquire 75% of the future transfer fee of the player for whom it had initially financed the transfer at Sporting Lisbon for an equivalent share (i.e. €3 million out of €4 million), is not an usurious, one-sided contract, nor immoral.

Finally, the particular aspect of this type of contract relates to the enormous capital gains that can be made with the transfer operation, in casu about 400%. Nevertheless, the FSC considers that this capital gain depends on predominantly random elements.[18] The fact that Marcos Rojo played well at the 2014 World Cup, and that the Argentine selection reached the final of this competition, could not be foreseen. Thus, the sudden increase in his value on the transfer market is totally uncertain and cannot be invoked as a claim against Doyen Sports.[19] Moreover, the FSC recalled that the opposite situation was also possible, i.e. a drastic loss of the value of the player based on his performance in selection and club. These elements can therefore not be objectively taken into account by the parties. At the end of its reasoning on this issue, the FSC took the liberty to criticize Sporting Lisbon by saying that the club would not have been offended by such capital gain if it had been the sole beneficiary of the transfer fee.[20]

Secondly, the FSC analyzed the argument put forward by Sporting Lisbon that the ERPA contract would seriously undermine its freedom under Art. 27 CC. It should be kept in mind that, according to case-law, a breach of that provision does not necessarily mean a violation of public policy. Such a violation is instead conceivable only in case of a blatant and grievous violation of a fundamental right.[21] It must be considered in this respect that a contractual limitation of economic freedom is disproportionate within the meaning of Art. 27 (2) CC only when the debtor submits to someone else’s arbitrariness, gives up his economic freedom or restricts it in such a way that the foundation of his economic existence is jeopardized.[22] In casu, the FSC recalls that Sporting Lisbon is not inexperienced in the sharing of economic rights insofar as Marcos Rojo was not the only Sporting player affected by this type of contract.[23] It was the club that took the initiative to contact Doyen Sports to request its financial assistance. The conclusion of the contract was also preceded by lengthy negotiations during which the club was assisted by experts and lawyers. Finally, the dispute with Doyen Sports concerning Marcos Rojo was not in itself able to deteriorate the club’s financial situation, and thus preventing it from pursuing its economic activities.

Thirdly, the FSC examined the claim concerning the personality and fundamental rights of the players concerned by an ERPA.[24] The judges considered that the club limited itself to purely theoretical reflections without, however, demonstrating in concrete terms how the ERPA contract would seriously undermine the aforementioned rights. To the extent that the FSC has limited power to review international arbitral awards, it is hardly theoretical arguments that will demonstrate that a CAS award violates public policy according to Art. 190 para. 2 let. e PIL. Moreover, Sporting Lisbon’s argument concerning the personality and fundamental rights of Marcos Rojo is incompatible with the fact that the club has used the TPO mechanism for several other players. Again, the FSC questioned the sincerity of this argument had Sporting Lisbon received the full amount of the transfer fee. Furthermore, although the FSC recognizes the quality of the club to report a violation of the player’s personality rights[25], it is not established by the judges that the players themselves have complained of any such violation. On the contrary, when he signed for Manchester United, Marcos Rojo would have welcomed the fact of joining one of the best clubs in the world. Marcos Rojo, who was earning the equivalent of €1.14 million in Sporting Lisbon, currently earns about €4 million per year at the English club. Therefore, it is somewhat bold on the part of Sporting Lisbon, according to the FSC, to put forward the prohibition of forced labor or the violation of human dignity in such circumstances.

Finally, The FSC did not want to admit a notion of moral standards in the field of sport in general, and football in particular, in relation to the definition of the concept of material public policy.[26] Apart from the fact that it seems difficult to determine what is a moral standard in football, to adapt the concept of material public policy in relation to a particular activity and, more importantly, to a particular branch of the activity concerned - in this case, sport or football - would in some way soften the force and reduce the scope of the concept by leaving to FIFA the task of defining the notion of morality proper to football. The result would be a dilution of the notion of material public policy and, consequently, an increased difficulty in defining the contours of this concept, not to mention the formation of a casuistry that is not favorable to the predictability of the law.

In conclusion, the FSC recalls that the high mobility of professional footballers and their frequent transfers are caused by FIFA regulations, in particular the rules relating to the maximum duration of an employment contract binding a Player to a football club and the conditions of a subsequent transfer of that same player to another club, but also by the manner in which the transfer system is applied.[27]

For all these reasons, the Federal Supreme Court rejected Sporting Lisbon’s appeal against the CAS award of 21 December 2015.

Conclusion

Following the award of the CAS, the FSC confirmed the validity of the ERPA contracts under Swiss law. The mechanisms that make up the agreements signed by Doyen Sports and other companies that invest in the player transfer market are based on traditional legal instruments, including the assignment of future receivables. Thus, from a Swiss legal point of view, TPO agreements do not undergo the same moral reprimand administered by the highest football bodies, such as FIFA, UEFA or FIFPro.

Consequently, the legal battle that resulted in a victory for the “pro-TPOs” and the model proposed by the third parties, challenges the legitimacy of FIFA regulations and, more specifically, Art. 18^ter RSTP. The arguments used by Sporting Lisbon to justify the early termination of the ERPA contract are very similar, or even identical, to those presented by FIFA to justify the formal ban of the TPO in May 2015.

Nevertheless, the fact that Swiss contract law is quite liberal does not exclude the invalidation of an ERPA for material public policy reasons. As we have seen with Football Leaks, the TPO mechanism can constitute a definite threat to the financial situation of clubs, such as FC Twente. It all depends on the case brought before the courts. Indeed, the case of Sporting Lisbon was not necessarily the best opportunity to challenge the validity of the contract, as the action of Art. 21 CO was time-barred (as mentioned in the previous blog on the initial CAS award) and the player joined, voluntarily, one of the best clubs in the world.

I believe that Art. 21 of the Swiss Code of Obligations (unfair advantage) as well as Art. 27 CC and 28ss CC (personality rights) may, depending on the case before the CAS, be a legal basis for the invalidation of the contract. To the extent that a dispute arises between an inexperienced club and an investment company, the application of Art. 21 CO is not totally excluded. In addition, if a player whose economic rights have been assigned to a third party is obliged to leave the club against his will or even join a club for whom he does not wish to play, the provisions on personality rights may find an echo at the CAS.

All eyes are on other courts where ‘TPO-cases’ are pending. Most importantly, the CAS should soon issue an award in the Doyen Sports and FC Seraing United v. FIFA case. As a reminder, in January 2015, the Belgian club and Doyen Sports concluded an ERPA contract despite the FIFA ban being enacted in December 2014. As a result, the FIFA Disciplinary Committee sanctioned the Belgian club with a transfer ban (for four complete and consecutive registration periods) and a fine of CHF 150.000 for breaches relating to the third-party ownership and third-party influence. The CAS is therefore seized of an appeal against a disciplinary sanction imposed by FIFA and will be obliged to take Art. 18^ter RSTP into consideration and to judge whether the sanction is justified. It remains to be seen whether the arguments based on EU law by Doyen Sports and FC Seraing United will be taken into consideration. Indeed, both parties also filed a complaint, based on EU law, before the Belgian Courts to challenge the TPO ban.[28] For now, all these procedures have failed. It will be interesting to see how the CAS will judge the Seraing case that relates to the same mechanism although the two cases are fundamentally different. The Rojo case dealt with a contractual dispute before the ban, while the Belgian club and Doyen Sports challenged a sanction issued by FIFA and the ban as such.

In any event, TPO deals have rarely been so much under the public spotlight since their ban, and the legal suspense goes on…

[1]     Economic rights are the rights to future transfer fees from the transfer of the player to another club, and, unlike federative rights, economic rights can be divided between multiple parties. See, among others, W. Tyler Hall, After the Ban: The Financial Landscape of International Soccer After Third-Party Ownership, Oregon Law Review, Vol. 94, 2015, pp. 179 – 221.

[2]     Hereinafter “PILA”.

[3]     Mavromati, Despina, The Role of the Swiss Federal Tribunal and Its Impact on the Court of Arbitration for Sport (CAS), 29 September 2016.

[4]     Antonio Rigozzi, L'arbitrage international en matière de sport, Bâle, (Helbing & Lichtenhahn), 2^ème édition, 2005.

[5]     Niederer Kraft & Frey, Swiss Arbitration – Practical Aspects and New Developments, Publication 19, 2015, p. 28.

[6]     Ibidem.

[7]     Art. 190 para. 2 PILA.

[8]     ATF 132 III 389 consid. 2.2.3.

[9]     Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.1. The English translation is based on the Judgment of the FSC, 4A_304/2013, March 3rd 2014, par. 5.1.1 made by http://www.swissarbitrationdecisions.com (emphasis added).

[10]    Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.2.1.

[11]    Under Swiss law, the “partiary” loan is a form of loan in which the remuneration of the lender consists in a share of the borrower’s earnings. The “partiary” loan has a random element: the remuneration of the lender depends on the success of a specific business or transaction of the borrower. In casu, the ERPA can be qualified as a “partiary” loan insofar as the transaction depends on the profit made by Sporting in case of a transfer of Marcos Rojo and provides for a share of Doyen in Sporting’s success. See, Bovet / Richa, CO 312 N 6 in : Commentaire romand Code des obligations I, Pierre Tercier / Marc Amstutz (édit.), 2^ème édition, Bâle, 2012 ; Pierre Tercier / Laurent Bieri / Pascal G. Favre, Les contrats spéciaux, 5^ème édition, Genève Zürich Bâle (Schulthess) 2016, N 2539.

[12]    Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.2.1.

[13]    Hereinafter “CC”.

[14]    Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.2.1.

[15]    Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.3.1.

[16]    Ibidem.

[17]    Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.2.3.

[18]    Ibidem.

[19]    Ibidem.

[20]   Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.3.3.

[21]    Judgment of the FSC, 4P.12/2000, June 14^th 2000, par. 5b. aa.

[22]    Ibidem.

[23]    In March 2013, 35 to 40 players' economic rights were shared with various investment funds. See CAS 2014/0/3781, par. 217.

[24]   Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.3.3.

[25]    According to the exceptio de jure tertii principle, see Judgment of the FSC, 4A_304/2013, March 3rd 2014, par. 3.

[26]   Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.2.3.

[27]    Judgment of the FSC, 4A_116/2016, December 13rd 2016, par. 4.3.3.

[28]   Patricia Moyersoen, La décision du TAS du 21 décembre 2015 à propos des contrats de TPO passés entre le Sporting Club du Portugal et la société Doyen Sports Investments, http://www.droitdusport.com/; http://www.rfc-seraing.be/audience-au-tas-de-lausanne/.

Editor's note: Deeksha Malik is a final-year student at National Law Institute University, India. Her main interest areas are corporate law, arbitration, and sports law. She can be reached at dkshmalik726@gmail.com.

In 2015, while interrogating cricketer Sreesanth and others accused in the IPL match-fixing case, Justice Neena Bansal, sitting as Additional Sessions Judge, made the following observations as regards betting on cricket matches.

“Cricket as a game of skill requires hand-eye-coordination for throwing, catching and hitting. It requires microscopic levels of precision and mental alertness for batsmen to find gaps or for bowlers to produce variety of styles of deliveries’ (medium pace, fast, inswing, outswing, offspin, legspin, googly). The sport requires strategic masterminds that can select the most efficient fielding positions for piling pressure on the batsmen. Based on above description, cricket cannot be described anything, but as a game of skill.”

The debate on the issue of betting in sports has since resurfaced and gained the attention of sportspersons, media, sports bodies, policymakers, and the general public. In April 2017, the Supreme Court bench comprising of Justices Dipak Misra and AM Khanwilkar agreed to hear a public interest litigation (PIL) seeking an order directing the government to come up with an appropriate framework for regulating betting in sports. The arguments put forth in the PIL present various dimensions. One of these pertains to economic considerations, a submission that regulated betting would be able to generate annual revenue of Rs. 12,000 crores by bringing the earnings therefrom within the tax net. As for policy considerations, it was submitted that a proper regulation in this area would enable the government to distinguish harmless betting from activities that impair the integrity of the game such as match-fixing. Further, betting on cricket matches largely depends on the skill of the concerned players, thereby distinguishing it from pure chance-based activities.

The issue of sports betting witnesses a divided opinion till this day. This is understandable, for both sides to the issue have equally pressing arguments. Aside from its regulation being a daunting task for authorities, sports betting is susceptible to corruption and other unscrupulous activities. At the same time, it is argued that it would be better for both the game and the economy if the same is legalised.

THE MAGNITUDE OF CONSIDERATIONS

It is feared by some that the consequences of recognition and legalisation of betting could be negative, considering what happened in Australia. Australia legalised online betting in 2001, and by 2009, it found itself in a situation where betting took over the sporting landscape in a big way. The impact was clearly visible; betting was marketed extensively in public places, attracting many young potential punters. Some found the trend disturbing, for sports fans were more concerned about their personal gains than about the sport itself. It is estimated that around 500,000 Australians are on the verge of becoming “problem gamblers.”

There has been an increasing support for the other side of the debate that argues for recognition of betting as a legal activity. It is argued that criminalising betting does not prevent its happening; it merely drives the activity underground where it continues to thrive. Add to it the substantial revenues that government would be able to obtain therefrom. In fact, the Report of the Supreme Court Committee on Reforms in Cricket, also called the Lodha Committee Report, submitted that given the worldwide legal sports betting market which is worth over $400 billion, it will be in the best interest of the economy if betting is given legal recognition.

POSITION IN THE USA AND THE UK: GROWING ACCEPTANCE OF THE UK-BASED MODEL

In the USA, federal law has taken a tough stand against betting and gambling. The 1992 Professional and Amateur Sports Protection Act (PASPA) makes it unlawful for a person to sponsor, operate, advertise, or promote betting, gambling, or wagering scheme based, directly or indirectly, on one or more competitive games in which amateur or professional athletes participate. The provision prima facie makes no distinction between betting and gambling, and it is, therefore, irrelevant for the purpose of establishing an offence under this provision whether the activity in question involves skill or not.

On the other hand, one may refer to the position in the UK, where there has been a well-developed betting market with appropriate measures to ensure that the system is not abused. The governing organisation in this regard is the UK Gambling Commission, initially set up under the 1960 Betting and Gaming Act which works in partnership with all the sporting bodies which, in turn, frame their own bye-laws to regulate betting.[1] Apart from licensing requirements, the framework provides for an information-sharing system, whereby bookies are required to report any suspicious betting activity within their knowledge to the Gambling Commission.[2] The example of the UK shows how through appropriate safeguards and implementation policy that involves various stakeholders such as the sports bodies and the booking companies, sports betting could be effectively regulated, bringing, at the same time, significant economic advantage. It does not come as a surprise that a majority of Americans have advocated for a UK-based model.

Recently, the Supreme Court of the United States began dealing with the issue in the case of Christie v. National Collegiate Athletic Association. The State of New Jersey seeks to get the PASPA annulled, which, in turn, would facilitate state-sponsored sports betting. It is being submitted that the federal government through the aforesaid statute is violating the anti-commandeering principle of the Tenth Amendment, according to which states cannot be mandated to carry federal acts into effect. The outcome of the case would certainly have an impact on the debate, one way or the other.

POSITION IN INDIA: THE ‘GAME OF SKILL’ DEBATE

In India, the power to legislate on betting and gambling is conferred on states, since these subjects are enlisted in the State List. Nevertheless, the pre-independence legislation, namely the 1867 Public Gambling Act (Act), is still valid today, though some states have enacted their own laws pertaining to betting and gambling. Section 12 of this Act provides that it does not apply to a ‘game of skill.’ The legislation, therefore, makes a distinction between a ‘game of chance’ and a ‘game of skill.’ The term ‘game of chance’ has been explained in the case of Rex v. Fortier[3] as a game “determined entirely or in part by lot or mere luck, and in which judgment, practice, skill or adroitness has honestly no office at all or is thwarted by chance.” It has further been held in the case of State v. Gupton that any athletic game or sport is not a game of chance and instead depends on a number of factors such as skill, ability, form and practice of the participants.

At this juncture, reference must be made to the case of KR Lakshmanan v. State of Tamil Nadu, wherein it was held by the Supreme Court of India that horse racing, foot racing, boat racing, football and baseball are all games of skill. Betting on, say, a horse race entails use of evaluative skills in order to assess several factors such as speed and stamina of the horse, performance of the jockey, and the like. Similarly, the Supreme Court in State of Andhra Pradesh v. K Satyanarayana observed that rummy is not like a three-card game which is based substantially on chance. There is considerable amount of skill involved in memorising the cards, or in holding and discharging them, in a rummy game. The uncertainty involved in shuffling and distribution of the cards does not alter the character of the game to one based on chance.

Based on these judgments, it is reasonable to infer that betting in cricket, too, is an activity involving sufficient skill and is not based merely on chance. A person who studies the form and performance of a player, the conditions of play and the like could predict the outcome of a game with a reasonable accuracy. The mere uncertainty of the outcome should not come in the way of understanding sports betting as an activity based on skill. Considering this important factor, the government should proceed to develop an appropriate framework to regulate betting. 

A PRACTICAL POLICY FRAMEWORK

The International Cricket Council, too, has suggested that India should come up with a suitable policy framework to regulate betting.[4] Such a framework would keep a check on individuals and further help detect and prevent corrupt activities. The above-mentioned Lodha Committee Report has strongly recommended legalising cricket betting in India. The suggestion is based on the premise that while match-fixing interferes with the integrity of the game itself and is unacceptable, betting is a “general malaise” indulged by different sections of the society and is capable of being regulated. Therefore, betting should not be equated with unscrupulous activities such as match-fixing.

Having been so distinguished, a regulation along the lines of the UK model could be put in place to establish regulatory watchdogs tasked with monitoring betting houses and persons entering into betting transactions. Those placing bets could be brought within a licensing system wherein their identification and other details are recorded. This could be supplemented by an information-sharing mechanism whereby a database of undesirable entities such as bookies and fixers would be shared with players so that they do not remain in the dark with respect to suspicious activities. Importantly, players, match officials and administrators should be kept out of such regulated betting, and they should continue to be bound by the Board of Control for Cricket in India (BCCI) and IPL rules. It is important to note here that the BCCI Anti-Corruption Code prohibits participants from soliciting, authorising, placing, accepting, laying, or otherwise entering into any bet with any person in relation to the result, progress, conduct or any other aspect of any match or event. The Code further makes it an offence to ensure “the occurrence of a particular incident in a match or event, which occurrence is to the participant’s knowledge the subject of a bet and for which he/she expects to receive or has received any reward.” As can be seen from the provisions, the liability is imposed specifically on the participant. This is in line with the opinion of the Lodha Committee, which has recommended that if betting were to be legalised, the players should nevertheless be barred from indulging in the activity so as to prevent any apprehension concerning their integrity. It is submitted that bringing these reforms in the current uncertain and highly ambiguous regime would address several surrounding issues, provided all the stakeholders work in tandem.

Lesson could be learnt from the state of Nagaland, which recently enacted a law, namely the 2016 Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act. The said legislation defines “games of skill” as including “all such games where there is a preponderance of skill over chance, including where the skill relates to strategising the manner of placing wagers or placing bets, or where the skill lies in team selection or selection of virtual stocks based on analyses, or where the skill relates to the manner in which the moves are made, whether through deployment of physical or mental skill and acumen.” Besides providing such an inclusive definition, the Act sets out a schedule enlisting certain activities that shall be regarded as games of skill, such as poker, rummy and virtual games of cricket and football. All such games shall be regulated by way of issuance of a license to persons or entities based in India. Upon receiving the license, such a person or entity is eligible to earn revenue from games of skill, whether by way of advertising, obtaining a share of winnings or charging a fee for membership.

Some stakeholders are advocating for a uniform legislation on betting that would ensure that the legal position on betting remains the same across all the states. In July 2017, the All India Gaming Federation along with an advisory panel presented a white paper to Law Commissioner BS Chauhan, recommending a central legislation regulating online skill gaming, and that sports betting in general and cricket betting in particular be recognised as a game of skill. Such a legislation could introduce a system of checks and balances along the lines of that existing in the UK, for instance. A proposal has also been moved from the Central Information Commission in the case of Subhash Chandra Agrawal v. PIO, recommending the Government of India to consider moving the subject of sports from the State List in the Constitution of India to the Concurrent List so as to ensure a uniform policy regulating sports bodies and national sports federations such as the BCCI.

CONCLUSION

The international discourse on the issue of sports betting shows just how inadequate the Indian legal regime is to cater to the same. Suggestions have been pouring in from all quarters as to how, upon being legalized, cricket betting could be regulated. These suggestions, along with international best practices concerning ethics and betting, should be taken into account by the legislature and the executive to bring in an appropriate framework to address cricket betting. This, of course, requires the active participation of all the stakeholders, with the BCCI leading the way. 

[1] Ali Qtaishat and Ashish Kumar, ‘Surveying the Legality Issues and Current Developments’ (2013) 20 JL Policy and & Globalization 40, 42.

[2] See Gambling Act 2005 s 88.

[3] Rex v. Fortier 13 Que. KB 308.

[4] Rohini Mahyera, ‘Saving Cricket: A Proposal for the Legalization of Gambling in India to Regulate Corrupt Betting Practices in Cricket’ (2012) 26 Emory Int'l L. Rev.