Can sailing events be protected against cancellations for unforeseen reasons?

Covid was the first pandemic in this era affecting all nations and, in turn, all sports.?It necessitated an unprecedented lock down and the closing of international borders.?It was not just illegal to travel, but it was illegal to go out.

Covid is not the only factor that has recently made the organisation of international events more difficult.?Brexit, and the worldwide delays across the shipping industry arising from a combination of Brexit, Evergreen, Covid and international conflict have all played a role.?

Lessons learnt from Covid and recent international events

Risk is an inherent part of sailing – whether it be the elements, the sea, our own fragilities in ourselves or preparing our equipment - the organisation of events is no less hazardous.?

The risk of cancellation in sailing is hardly novel as the sport is at the mercy of the weather.?I also recall events being cancelled by Foot and Mouth, volcanic ash and a lack of water.?Significant historic events, such as the passing of Her Majesty, Queen Elizabeth II, the conflict in the Ukraine and Brexit, impact on participation numbers and finances.?

The cancellation of significant sports events will have an obvious material economic impact, particularly for those businesses whose principal source of income derives from the successful running of such events.?What we have learnt from Covid in the wider sporting industry is that cancellation is the measure of last resort, and postponement is usually preferable.

What is apparent post Covid is that event organisers need to seek to reduce risks and exposures by running their events differently.?For instance, by choosing to build more event infrastructure locally, rather than relying on transporting everything around the world.?Using local umpires and juries rather than travelling to the event location would reduce risk and cost.

Planning for the unforeseeable

There is, however, no one size fits all method of planning for such eventualities, as the sport of sailing covers such a wide spectrum of disciplines (dinghies, windsurfers, keelboats, yachts, and indeed ocean racing yachts), from those who race as a hobby to the highest level of professional event, the Americas Cup or SailGP.?

If an open meeting is cancelled, the Club or association may lose hospitality revenue but the refund of an entry fee is unlikely to be fatal and, if managed well, the goodwill of the participants and club members will likely survive.?

?By contrast, the more “professional” the event in terms of complexity and international involvement, the higher the financial exposure and risk.?It is not just the actual costs and outlay incurred (investment, event hire, logistics), but it is the potential liabilities and harm to sponsorship partnerships.?Further, there is an increase in the number and type of stakeholders, including event venues, sponsors and ticket holders.?

What most sailing events share is tight margins, and an unforeseen risk (including the financial viability of contracting partners) can make the difference in terms of economic viability.?With financial storms ahead, event organisers and clubs should be assessing all possible risks, seeking to understand the exposures both in terms of financial outlay and liabilities, and then seeking reduce or mitigate those risks. ?Race documents, including sailing instructions, should consider a degree of discretion or flexibility to accommodate a postponement or change of venue.?Organisers should consider having in place a core team to take decisions whether that be plan A, B or C.

Equally, event organisers need to be alive to the knock on disruptions from such an event like a pandemic.?For instance, in 2021 the lack of available insurance for event cancellation and curtailment due to Covid meant ticket companies would not release funds to event organisers until the event started.?This resulted in suppliers not being paid in advance, as was previously the norm.

Therefore, one must look to different ways to mitigate commercial risks that might lead to event cancellation and the knock on effects of such incidences.

Insurance

In the past event stakeholders often sought to insure against specific risks, whether that was business interruption, event cancellation (such as ticket sales and hospitality), public liability or even legal defence cover.?Insurance is an essential part of risk management.?However, all risks may not be insurable and certainly the risk of a counterparty failing to pay has never been covered.?Where Covid is now foreseeable and a part of everyday life, business interruption and event cancellation due to Covid is unlikely to be insurable or it is at least cost prohibitive to obtain such insurance.?

It is therefore essential to work closely with a good insurance broker, and even consider whether bespoke insurance can be obtained for specific contingencies.?In the event of a likely claim it is imperative that a claim is submitted promptly and in accordance with the policy time limits, with evidence to support the claim.?Organisers should liaise with their broker and if necessary, seek legal advice.

Contracting for risk

However, in engaging with third parties, whether event venues, the hospitality sector, or suppliers, it is even more important that parties have good contracts in place that clearly set out who is responsible for what in the event of a specific contingency.?Often parties can be daunted by the process of entering a contract, or they may fail to look at the detail to understand the implications.?However, it is important to keep in mind that careful attention is usually only paid to the contract when something has gone wrong.?Therefore, at a minimum by having a contract in place it forces the parties to consider in advance what should happen in the event of an unforeseen event.?Parties may even agree in advance to each share part of such a risks.?

Under English law businesses are free to contract on any terms they choose. This is different from consumer contracts which are not addressed in this article.?The contracting parties may allocate risks within their contracts as they wish. It is up to the parties to decide what risks they will accept and on what terms. Courts will respect their decisions and enforce the deals that they sign up to.

The very limited exception to this is the doctrine of frustration, which only applies in very limited circumstances.?A contract may be frustrated if there is an unforeseen event after its formation that renders it impossible or fundamentally different from that which was contemplated.

The doctrine of force majeure is often cited as a reason that would excuse parties from performing a contract.?However, the idea that force majeure is enshrined in English law is misconceived.?It is not, and this is to be contrasted with other jurisdictions like Spain.?Force majeure must not only be defined in the contract, but it must also expressly state which parties are entitled to be excused from performance on the grounds of a force majeure event.?Often provisions will require that the force majeure event was unforeseeable, was not caused by the negligence of a party, and performance is only excused if the force majeure event has directly prevented performance.?In the context of covid, there was significant debate as to whether government guidance not to travel actually prevented someone from travelling.?If no provision is included in clear terms in a contract, then one party may find that they are in breach of contract and bearing the cost consequences or liabilities.?

Parties to a contract may also include provisions that seek to limit or reduce their liabilities in the event of problems.?Whether that is by way of having indemnities in place, hold harmless provisions, limits on liability and exclusions.?However, one should be careful of simply adopting a standard form precedent contract.?Standard forms can be useful precedents, but one cannot assume that they will be suitable for every service offered, or that they will protect them as they would have hoped.?Legal advice should therefore be sought.

Another important provision which is often overlooked is the law and jurisdiction provision.?In the event of a dispute (hopefully unlikely) it is useful to have a clause which makes not only the dispute resolution process as cost effective as possible, but for international contracts enables one party to enforce any judgement or award against another.?Disputes can only be finally judicially decided by either the Courts in a jurisdiction, or by an agreed arbitration process.?Mediation is distinct in that it is a process that is intended on allowing parties to agree to settle, but it should not be confused with either Court proceedings or arbitration.?Equally, it is not enough to simply agree to arbitration alone, but one should refer to a specific arbitration association and the process of forming a Tribunal.?It should also be borne in mind that there are considerable costs differences in pursuing arbitration before different associations.?The international maritime industry often adopts the terms of the London Maritime Arbitrator’s Association.?Where parties reside in different jurisdictions arbitration may well be preferred because the awards can more easily be enforced by virtue of the New York Convention.

Conclusions

Covid obviously put into the spotlight event cancellation.?However, as we enter ever increasingly uncertain financial times, sailing event organisers can ill afford to fail to plan for the many risks that may lie ahead.?Ultimately, by minimising the level of risk afforded by taking certain elements out of the equation altogether, insuring where possible, and contracting wisely, sailing events and clubs will be better able to weather the storms ahead.?By managing any such event well their long term partners are more likely to stay on board.