Did Quess make a mistake by unilaterally activating the ‘Force Majeure’ clause?

Under the unforeseen circumstances caused by the Coronavirus pandemic, Quess East Bengal took a bold step of cancelling their players’ contracts…

Quess Corp took a harsh decision of activating the ‘Force Majeure’ clause in wake of the Coronavirus crisis and have terminated the contracts of all the players of Quess East Bengal FC after April 30, 2020.

Quess East Bengal FC were the first club in I-League to activate the Force Majeure clause. After the Kolkata club’s decision, former I-League champions Chennai City FC have also joined the party in cancelling the existing contracts of their players by activating the same clause.

Several clubs across the world are taking this step of activating the Force Majeure clause as the football season has been halted due to the pandemic. Players and coaches of some of the top European clubs like Juventus, Real Madrid, FC Barcelona have unanimously decided to take a pay cut and help their clubs in this extraordinary situation.

The issue in Quess’ approach in dealing the situation is that they did not take the route of negotiating the terms of ‘Force Majeure’ with their players and instead took the decision unilaterally, informing them just five days before terminating their contracts.

With the Covid-19 situation hampering the clubs across the world, FIFA had put out a guideline to be followed in such cases.

The global governing organisation had said, “FIFA strongly encourages clubs and players to work together to find agreements and solutions during the period when football is suspended.

“While it is primarily up to the relevant parties at national level to find solutions to fit the circumstances in their own country, FIFA recommends looking at all aspects of each situation in an even handed manner, including what government measures are there to support clubs and players, whether pay should be deferred or reduced and what insurance coverage may exist.”

It further points out that in case of legal issues due to disagreements between the players and the club, FIFA will examine the following factors before coming to a judgement – Whether there was a genuine attempt by the club to reach agreement with the players; what the economic situation of the club is; the proportionality of any adjustment to player contracts; the net income position of players after any contract adjustment; and whether players have been treated equally or not.

Taking this into account, the only problem with what Quess has done is that there has been no genuine attempt to reach an agreement with the players.

It must be noted that like other corporate entities across the country, Quess Corp too has been hit financially. 

The company’s share price has seen a steep fall since March 12 when the Coronavirus pandemic started affecting the country. As of April 28, Quess Corp’s share price stands at 201.50 INR, which is less than half of what it was before March 12. It must be noted on Janaury 30, 2020, the share price was touching 600 INR.

Quess Corp chairman Ajit Isaac had mentioned at the beginning of last season that they were looking for an exit strategy from Quess East Bengal.

At a conference call conducted by IIFL Capital Limited, Isaac had revealed, “When we invested in East Bengal Club, we had a three-year investment horizon there, so this is the second year. We already started talking to our other relevant stakeholders to monetize this asset. We have also been talking to a few possible investors. So it will take some time. We are confident that by the end of this season, we will most probably not be there in that club.

“So by the next two to three quarters, I think we’ll be out of this arrangement. But what this year we have been trying to do is to increase our sponsorship income. Initially last year we didn’t have much time (as it was the first year). We already signed three sponsorships this year. So our idea for the current year is to content our loss year and make it as minimum as possible. And at the same time look for an exit from this investment.”

A company, which was reluctant to continue their association with the club even before the Coronavirus crisis due to financial losses has expectedly curtailed their costs in a time of a global pandemic.