BUSINESS BUSINESS BUSINESS BUSINESS BUSINESS BUSINESS BUSINESSIn issue 1 of GK1 we highlighted the issues surrounding many image rights contracts entered into by players, and the systematic investigation into the validity of such contracts by HMRC. In a further twist it has become public knowledge that the owners of West Ham United FC have taken the unique step of withholding any sums due to their players under such contracts, pending an appeal to HMRC who found the contracts invalid. This has created a level of disquiet amongst players, many of whom are the most senior amongst the Hammers squad.The image rights payments, which are typically free of PAYE and National Insurance, and often channeled through an offshore company, have come under increased scrutiny across the Premier League as HMRC seeks to recover up to £60m in unpaid taxes. It is unclear just how much individual clubs would be liable to pay back if the Revenue is able to prove that image rights contracts are a form of remuneration but West Ham are not prepared to wait and find out.The decision could be seen as further evidence of West Ham's financial plight but David Sullivan, their chairman, maintains the move is a "logical, common-sense solution to a potential problem".He said: "Because the Inland Revenue are saying that tax has to be deducted at source, until the people receiving the image rights have clarified things with the Inland Revenue, we are freezing payments on the basis that there has been a backlog of deductions that have not been made. Every penny they are entitled to will be paid in due course, but until it is agreed with the Inland Revenue we can't release the money."Until we build up the deficit for the previous payments, the payments will be held in escrow pending a settlement with the Inland Revenue. If anyone wants to sort out their particular case with the Inland Revenue, we'll abide by whatever they say. But what we can't have is a situation where a guy goes back to France and then in two years' time they [HMRC] say to us: 'You've given him £1m in image rights, we want 40% of that.'"It is understood that the legal and financial representatives of the players have contacted West Ham to contest the decision, which they claim breaches contractual obligations. Sullivan, however, has urged them to deal directly with HMRC. "They can bring it to a head with the Revenue themselves. Their lawyers and their accountants should write to the Inland Revenue and resolve it," said Sullivan, who claimed "people are not particularly disgruntled" despite suggestions to the contrary.The Bribery ActCorruption in football is one of the hottest topics amongst journalists and football commentators alike, with the reputation of football and footballers seemingly constantly taking a battering. The introduction of the Bribery Act 2010, which comes into effect in April 2011, will have a wide ranging effect on football, with stringent penalties (including imprisonment) for non-compliance. Do not be fooled by the title, for this Act is extremely broad and is intended to capture a wide range of activities, affecting everyone from the FA to clubs, directors, players and agents.Of particular relevance to organisations and clubs is the new strict liability offence of 'failing to prevent bribery', where the only defence will be to show that adequate procedures were in place to prevent it. The concept of a "bribe" is very wide and covers any 'financial or other advantage' and clearly extends to the infamous 'brown envelope' and 'facilitation payments'.With the high profile that football and its West Ham Chairman David Sullivanplayers enjoy, those involved would be well 20WINTER 2010

BUSINESS BUSINESS BUSINESS BUSINESS BUSINESS BUSINESS BUSINESSadvised to review internal policies and take appropriate measures to protect themselves from corruption.Olympique Lyonnais SASP V Olivier Bernard and Newcastle United FCThe recent decision in the case between Olivier Bernard and Olympique Lyonnais regarding the payment of training compensation determined, on appeal to the European Court of Justice, in favour of the latter. It was determined that any damages demanded by a club in respect of the training and development of a player MUST reflect the true costs incurred in that training. However, the ECJ failed to accurately set out how such costs were to be determined in future cases.The 'Webster' Case-latest development As a result of Ghana midfielder Stephen Appiah's decision to unilaterally terminate his contract with Fenerbahçe, we now have a clearer view from the Court of Arbitration for Sport (CAS) on compensation payable for breach of contract. Appiah terminated his contract without just cause and within the 'protected period'. CAS overturned the decision of the FIFA Dispute Resolution Chamber, by ruling that Appiah did NOT have to pay over ?2,000,000 compensation to Fenerbahçe.The significance of the decision is that there has been a clear departure from the approach taken in earlier cases such as Webster and Matuzalem, where the awards of compensation were made on the basis of the remaining value of the player's contract.Henceforth it seems that the compensation will be determined by establishing the actual loss suffered by the victim of the breach, in this case Fenerbahçe.Backing the Salary CapChelsea chairman Bruce Buck has given his backing to a 'properly implemented' salary cap in football.The Blues have been one of the biggest spenders in world football since billionaire Russian owner Roman Abramovich's arrival at Stamford Bridge in 2003.UEFA has agreed a set of Financial Fair Play regulations which will come into effect from the start of the 2013-14 season and under the new rules European clubs must not spend more than they generate over a period of time.That has led to renewed talks of a salary cap and Buck has now lent his club's weight to future discussions."We would seriously consider a wage cap. It has to be properly implemented," he told the Sunday Times."I'm not even sure that Europe-wide is enough. Look what happened with cricket and the IPL (Indian Premier League): the best players are going to go where they can make the most money."We have many of the best players in England and we do not want to see them go elsewhere."Bruce BuckWINTER 201021