Followers of my Twitter account will know that I tweeted last week: “Wayne Rooney has paid £5k to get his image rights back. I would have advised Shrek to hold out for £10k”. I was joking about Wayne’s appearance, but also referring to his dispute with Proactive Sports Management Limited.
When Wayne Rooney was 17 he entered into an Image Rights Representation Agreement (“IRRA”) with Proactive, under which Proactive would negotiate contracts with third parties for exploitation of his image rights. Proactive would take 20% of the gross sums payable on any contracts agreed, and the agreement was to run from 16 January 2003 to 16 January 2011. All was well until October 2008, when Wayne and Proactive fell out. The IRRA was subsequently terminated, and since then Proactive have been claiming that it is owed millions in damages and further millions in future commission.
The parties ended up in court, and on 1st December the Court of Appeal broadly upheld the earlier Manchester Mercantile Court decision that the IRRA was unenforceable on ground of restraint of trade. Proactive will receive a payment for the reasonable value of its services, which will be established at a later hearing, but it won’t be calculated according to the contractual commission rate of 20%. (In case you’re wondering, the £5k in my joke above was how the tabloids reported it, but in typical tabloid-disinformation style actually refers to an accountancy bill which was adjudged to have been owed by Rooney to Proactive as the result of a totally separate agreement.)
In reaching their decision the judges found several aspects of the deal between Proactive and Rooney persuasive, including:
- Wayne was only 17 years old when the IRRA was signed;
- Wayne and his parents were “wholly unsophisticated in legal and commercial matters”, but were not advised to take legal advice;
- The IRRA was not in any sense a standard form – on the contrary, it was unusual in many respects; and
- The duration of the IRRA was excessive (notwithstanding Proactive’s submissions that it needed to “adopt a long terms strategy to develop the value of the player’s brand”).
What are “Image Rights”?
A good result for Wayne then. But what are “Image Rights”? “Image Rights” in the context of footballers refer to the rights in the likeness, name and other personal attributes of that individual, exploited through various off-field activities such as sponsorship, promotional appearances and shirt sales. Legally, the UK has no actual codified law of image rights, so an individual wishing to protect these rights has to rely on a mix of privacy case law, and assorted legislation regarding data protection, copyright and trademarks.
At a World IP Day conference in Edinburgh a few years ago, I asked Patrick Stewart (Head of Legal at Manchester United) about image rights. Patrick said it was the one thing he had hoped he wouldn’t be asked about! At the time I was just genuinely interested to hear how they operated, and how they could be enforced – but with hindsight I was potentially putting Patrick on the spot about a pretty sensitive issue.
Image rights contracts in football
Football clubs increasingly use the concept of image rights as a way of offering paying star players suitable remuneration. Payments for image rights allow players to avoid paying 50% income tax on all their earnings, whilst also saving the club from having to make National Insurance or PAYE contributions.
Here’s how it works. Players are paid wages for their services on the pitch, but further image rights payments are made to a company which has been set up to hold the player’s image rights. These payments are subject to corporation tax levied at 22%, and the players can take interest-free loans from the companies as a “benefit in kind” taxable at 2% (instead of salaries and/or dividends which would be income, and be taxable at the corresponding higher rate).
Unsurprisingly these tax arrangements attract a lot of negative publicity. In August the Press Complaints Commission rejected a complaint made by Wayne Rooney about a Sunday Times article investigating the structuring of his finances. Arsenal striker Dennis Bergkamp won a test case against the Inland Revenue in 2000 after it attempted to claim that a percentage of the image rights income that had been paid into an offshore business established in his name constituted tax evasion. Nevertheless, HMRC has recently announced a new crackdown on tax evasion in football, so it looks like things will “kick off” (ah a football-pun in stoppage time!) again in 2012.
[Ed: the Techblogggers will now be negotiating image rights deals at their next appraisals.]
On December 15, 2011