How COVID-19 outbreak is disrupting sports events, measures adopted by the Italian Government.

The Prime Minister’s Decree dated 9 March 2020 has suspended all sports’ events and competitions.

The sports facilities can be used only behind closed doors to allow the training sessions of professional and non-professional athletes (i.e. athletes recognized as being of national interest by CONI and the respective federations).

Sports associations and clubs, through their medical staff, must implement appropriate controls to contain the risk of propagation of the COVID-19 among athletes, technicians, managers and all other persons involved.

On 17 March 2020, the Italian Government issued the Law Decree no. 18 containing measures to support the National Health Service and economic support for families, workers and business related to the epidemiological COVID-19 emergency, adopting some specific economic measures also for the sport field.

In particular:

  • Article 61 provides that payments of withholding tax, social security contributions, and the mandatory insurance premiums to be made by national sports federations, sports promotion bodies, sport associations, amateur sports clubs and for those who manage stadiums, sports facilities, gyms, clubs, dance and fitness center and swimming pools, are suspended until 31 May 2020. Such payments mentioned above shall be made either in a lump sum by 30 June 2020 without the application of penalties or interests, or in a maximum of 5 monthly installments, starting from June 2020.
  • Article 95 provides the suspension from 17 March to 31 May 2020 of the rent payment for public sports facilities owned by the Italian State (and by local authorities) remained unused during this period. In any case, the rent for the mentioned months shall be paid out either in a lump sum by 30 June 2020 without the application of penalties or interests, or in a maximum of 5 monthly installments, starting from June 2020. Moreover, the provision doesn’t apply to lease agreements for private facilities.
  • Article 96 provides the payment by Sport e Salute S.p.A. (former Coni Servizi S.p.A. owned by the Ministry of Economy) of an indemnity of 600 euros for the month of March 2020 in favor sport collaborators with VAT number and to holders of a non-fixed term employment contract registered to the so called “gestione separata” Inps as of 23 February 2020, provided that they are not retired and not registered with other forms of mandatory social security, they didn’t get any other wage and/or indemnity.

Remainder understood that the all other provisions of the Law Decree no. 18/2020 apply also to the operators in the world of sports, where applicable (i.e. Ordinary Wage Guarantee Fund, etc.).  

For the time being, Sport e Salute S.p.A. set aside a fund of 50 million euros but needless to say that this provision is not sufficient to cover the payment in full of the mentioned indemnities due to the considerable number of workers employed in the associations and sports clubs registered with the CONI.

Furthermore, it is necessary that the Italian Ministry of Economy and Finance provides for the procedures for filing the relevant applications and it determines the rules for the management and control of the fund (expected within 1 April 2020).

Concerning European competitions, UEFA (Union of European Football Associations) decided to postpone the final match of UEFA Europa League, UEFA Champions League and UEFA Women’s Champions League, all originally scheduled for May 2020.

UEFA, also, announced the postponement of its flagship national teams’ tournament, UEFA EURO 2020 until next year. UEFA stated that the reasons of postponement are: i) the protection of the health of all those involved in the game; ii) the avoidance of placing any unnecessary pressure on national public services involved in staging matches; and iii) the postponement should help all domestic competitions, currently put on hold due to the COVID-19 emergency, to be completed.

In a note dated 17 March 2020, the representatives of the 55 national member federations, as well as representatives of the European Association of Clubs, European Leagues and FIFPro Europe, reiterated that given the health emergency, the plan adopted is the best solution.

Announcing the above decisions, the Chairman of UEFA Aleksander Čeferin said: “We are at the helm of a sport that vast numbers of people live and breathe that has been laid low by this invisible and fast-moving opponent. It is at times like these that the football community needs to show responsibility, unity, solidarity and altruism”.

In the same view, FIFA decided to postpone the FIFA Club World Cup, which should have had taken place in June/July 2020, to a date to be set in the international match calendar which has to include also the new dates for CONMEBOL Copa América and UEFA EURO tournaments.

Finally, the IOC Chairman and the Prime Minister of Japan have concluded that XXXII Olympic Games in Tokyo must be rescheduled to a date beyond 2020 but not later than summer 2021, to safeguard the health of the athletes, everybody involved in the Olympic Games and the international community.

COVID-19 lockdown, impact on civil proceedings.

Italy is under lockdown due to COVID-19 emergency and the Italian Government has implemented also rules  to handle the administration of justice both for the purposes of avoiding material adverse effects on the system and protecting the parties’ rights of defence.

In particular, on 17 March it has been issued the Law Decree no. 18/2020 in which, in addition to economic measures to counteract the effects of COVID-19 outbreak, are contained some rules that affect the organization of justice, amending or clarifying what is already provided for in the Law Decree 11 March 2020 no. 9.

First of all, art. 83 of the new Law Decree expressly repeals articles 1 and 2 of the Law Decree 8 March 2020, providing, with immediate effect, for a “Buffer Period” from Monday 9 March to Thursday 15 April 2020.

During this period, save for the few exceptions provided for in the Law Decree (e.g. urgency proceedings,cases involving minors, alimony, precautionary measures on fundamental rights, etc.):

  • the hearings of civil proceedings scheduled within the Buffer Period shall be rescheduled to a new date after 15 April 2020;
  • all procedural deadlines falling within the Buffer Period are stayed and postponed after 15 April 2020.

Furthermore, during the Buffer Period, the statute-limitation and forfeiture of rights are also suspended if the underlying right can be enforced only by means of filing a petition or any other procedural initiative prevented by the suspension.

In addition, from 16 April 2020 to 30 June 2020 the Chairman of each Court, having consulted the local health authorities, shall implement measures to protect the health and safety at work and the relevant activities to be performed.

Considering that the positive effects of the measures adopted need time to widespread, it is likely that additional measures also on the management of justice will follow in the next due course.

Stay tuned for further updates.

Does the coronavirus spread to contracts? A focus on commercial lease agreements.

The restrictions on commercial and production activities imposed by the Italian Government and the other measures adopted could have a significant impact on pending contractual relationships.

If the parties predetermined in the contract the effects in case of exceptional, unforeseeable, unavoidable events, and/or they have expressly provided for the specific case of an epidemic, the consequences would be those determined by the parties.

On the contrary, whether the contract – and this is the most frequent case – does not provide anything in this regard, first, it should be determined whether the contract is governed by Italian law and, in such case, the following principles of Italian law apply.

The Italian law allows the parties legitimately not to fulfil and/or partially fulfil to the contractual obligations, or to delay the execution of the obligations, without incurring in negative consequences, if extraordinary circumstances and events occur.

In particular, pursuant to Article 1256 of the Italian Civil Code, the obliged party is not bound to fulfil the obligation when the latter becomes impossible for a cause not attributable to such obliged party.

In this regard, the obligation could be considered impossible in case: a) it is objectively impossible; b) it is permanent impossible, i.e. it does not permit fulfilment in any way; c) the obliged party did not cause the impossibility with its conduct. With respect to the latter requirement, causes not attributable to the obliged party are: i) the so-called factum principis, i.e. a legislative measure, or a measure of public authority, imposed for general interests, which makes impossible the performance, independently from the obliged party behaviour; ii) force majeure: an unforeseeable, unavoidable external event not attributable to the party which consists of a force to which it is not possible to oppose, whose effects cannot be removed and which prevents the technical execution of the performance, including natural events and acts of the Public Administration.  

If the impossibility is only temporary, when there is an objective situation which only temporarily prevents a party from performing, the contract cannot be terminated – except in the case the other party doesn’t have the interest to receive a late performance – and the party temporarily prevented from performing is not liable for the delay.

Likewise, if performance has become only partially impossible, the contract cannot be terminated  – except in the case the other party doesn’t have the interest to receive a partial performance – provided that it can be performed for the remaining part.

Pursuant to Article 1467 of the Italian Civil Code, in contracts with continuous, periodic or deferred performance, in case the obligation of one of the parties becomes excessively burdensome, the obliged party may request the termination of the contract, if such party proves that the excessive burdensomeness of the performance is due to: a) extraordinary and unforeseeable events which do not fall within the scope of the normal contractual risk, such as force majeure or factum principis referred to above; b) an alteration of the former conditions related to the initial relationship, determining inequality not existing at the time of the stipulation of the contract.

The other party may avoid the termination of the contract by offering to modify the terms of the contract in an equitable manner.

Having said the above, it should be noted that the recent Law Decree no. 70 of 17 March 2020 added a new paragraph 6-bis to Article 3 of Law Decree no. 6 of 23 February 2020, stating that: “compliance with the containment measures referred to in this decree is always assessed for the purposes of excluding, pursuant to and for the purposes of Articles 1218 and 1223 of the Italian Civil Code, the debtor’s liability, also with regard to the application of any forfeiture or penalties connected with delayed or omitted performance“.

The provision, therefore, relieves the debtor who has not performed his performance due to these measures from the obligation to compensate damages caused to the creditor, to incur in any forfeiture provided for in the contract and to pay any penalties for delays in the performance.

The same provision, however, does not clarify whether it also determines the impossibility of the performance (pursuant to Article 1256 of the Italian Civil Code) with the relevant consequences mentioned above.

In conclusion, without prejudice to what is explicitly provided for by the Law Decree no. 70 of 17 March 2020, it is not certain whether the Coronavirus outbreak, or the measures implemented by the competent authorities, could be a valid reason for justifying the non-fulfilment of contractual obligations. The contracts entered into by the parties shall have to be assessed on a case-by-case basis, taking into account several factors such as, for example, the applicability of the Italian law to the contract, the delay and/or the non-fulfilment reasons, the specific impact of the same on the performance and the absence of alternative solutions for the fulfilment of the contract.

Focus: commercial lease agreements.

The Prime Minister Decree 11 March 2020 ordered the mandatory closure of a large number of activities open to the public, thus forcing a large number of service and tertiary activities to remain suddenly closed.

As far as commercial leases are concerned, the restrictions on commercial activities imposed by the Italian Government if, on the one hand, they do not make it impossible for the landlord to perform its main obligation (to provide premises suitable for the agreed use), on the other side, they could make it temporarily impossible for the tenant to pursue its commercial activity in the rented premises and, consequently, cause difficulties for the payment of the relevant rent.

Notwithstanding that, in terms of strict causality, the temporary closure of the business does not necessarily make it impossible for the tenant to continue leasing the premises and paying the relevant rent even more in light of the Article 65 of Law Decree no. 17 March 2020 that provides “in order to contain the negative effects deriving from the prevention and containment measures connected with the epidemiological emergency by COVID-19, persons carrying out business activities are granted, for the year 2020, a tax credit in the amount of 60% of the amount of the rent, relating to the month of March 2020, of buildings falling under cadastral category C/1“.

In light of the above, for the time being and unless the situation of impossibility becomes permanent it might be questionable for the tenant to argue that the lease agreement could be terminated or the payment of the rent suspended, for that reasons the tenant may consider to promptly send to the landlord a request for reduction or suspension of the rent, stating the reasons why it is impossible to fulfil its contractual obligations.