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Undertaking flies off with illegality, appeal judges rule

19 November 2013

An undertaking to refrain from specific illegal acts ceased to have effect and became unenforceable when the acts themselves ceased to be illegal, appeal judges in the Court of Session have ruled.

Lady Paton, Lord Bracadale and Lord Kingarth gave their decision in refusing an appeal by the Scottish Professional Football League against the dismissal by Lord Woolman of their action against Lisini Pub Management Co Ltd, for interdict against the defenders screening Scottish Premier League matches in their pubs on Saturday afternoons.

The court allowed the defenders' counterclaim for damages for a breach of article 101 of the Treaty on the Functioning of the European Union to go to proof.

The defenders accessed a signal using a decoder device licensed by the SPFL for use only in Poland. The SPFL did not permit live TV broadcasting in Scotland on Saturday afternoons, in order to encourage people to go to matches. After the defenders broadcast matches in 2006 using their device, the pursuers raised sheriff court proceedings which were dismissed on the defenders granting an undertaking not to use such devices without the pursuers' consent. Following a further screening despite the terms of the undertaking, the pursuers obtained an interim interdict in the Court of Session.

"Changed landscape"

In October 2011 a decision of the Court of Justice of the European Union "changed the legal landscape", as Lady Paton put it in delivering the opinion of the court. It ruled in a similar case brought by the English Premier League that clauses prohibiting the use of foreign decoders and smart cards were void as constituting a restriction on competition contrary to European law. The defenders obtained recall of the interim interdict but the pursuers sought to enforce the undertaking, arguing that it predated the English proceedings and the court shoul not remake the parties' bargain.

Giving the court's decision, Lady Paton said the whole purpose of the undertaking was to stop further illegal acts of the sort described. "If therefore the specified acts described in the first two paragraphs subsequently ceased to be illegal, we consider that the undertaking ceased to have effect and became unenforceable. Looked at another way, the undertaking given 'for the future' should not, in the unforeseen circumstances which occurred, be construed as meaning 'come what may'. As the whole purpose of the undertaking was to prevent acts which were accepted by both contracting parties at the time as being forbidden because they were illegal, then, when the illegality was removed, the defenders were no longer bound by their undertaking", she said.

She added that the undertaking ceased to have effect as soon as the CJEU issued its opinion in October 2011, rather than at any later date, such as the time when the interim interdict was recalled of consent.

As regards the counterclaim, the CJEU had ruled that an obligation granting an exclusive licence restricted to a particular territory "was, by its very nature, injurious to the proper functioning of normal competition in the internal market", one which "immediately triggered the prohibition imposed by article 101 of the TFEU", and the defenders had sufficient in their pleadings to go to proof.

Click here to view the opinion.

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