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Business & Sport: ANALYSIS

Commercial rights broker launches desperate claim against SA Rugby Union

Commercial rights broker launches desperate claim against SA Rugby Union

This latest development appears to be nothing more than a flexing of muscles from a bruised company that has lost several court cases over the past four years. 

The commercial rights company Aerios has launched a desperate attempt to recoup money after years of fruitless litigation attempts against Western Province Rugby (WPR) by turning its sights on mother body the SA Rugby Union (Saru). 

Aerios claims it is owed R183-million based on the “loss of extensive agreements that gave Aerios the exclusive rights to sell Western Province advertising at Newlands and/or the Cape Town stadium”. 

This latest development appears to be nothing more than a flexing of muscles from a bruised company that has lost several court cases over the past four years. 

In a highly sensational press release that made sweeping claims about the validity of its commercial rights and bullying tactics by Saru itself, Aerios sounded desperate after years of court setbacks. 

Aerios intends to take Saru and the Western Province Rugby Football Union (WPRFU) to court, in what is likely to be another expensive case. 

Aerios accused Saru of “endorsing” the liquidation of WPR, which effectively freed the union of its contractual obligations to Aerios. It also accused Saru of “threatening” to take away a lucrative Springboks versus All Black Test at Newlands as a way of coercing the WPRFU to sever ties with Aerios. These are fanciful claims from a company that has spent years unsuccessfully fighting the WPRFU in court. 

“After enduring months of distress at the hands of SARU, WPR eventually took a decision to ‘release’ itself from the Aerios agreements by going into liquidation, on the ground that it was unable to pay its debts,” a statement from Aerios read. 

“Having taken this decision, it immediately informed Aerios that its advertising contracts with Aerios would not be honoured.” 

Aerios is referring to events in 2016 when WP Rugby Pty (Ltd) was granted liquidation by the Western Cape High Court. That decision relegated Aerios to the status of a rank and file creditor, which it now claims was part of a plot hatched between Saru and the WPRFU. 

“We believe that Saru endorsed the liquidation of WPR,” Aerios chief executive Costas Constantinou said. “In doing so, it abused its effective monopoly over professional rugby and its position of authority over its members. In addition, it intentionally interfered with and forced WPR to end its contractual relationship between WPR and Aerios.” 

The onus will be on Aerios to prove this, and other sweeping claims, which will be especially difficult as it has unsuccessfully made a similar claim in court before. 

During the 2016 liquidation hearing, which Aerios opposed, Justice AG Binns-Ward found that there was nothing untoward about the WPRFU’s motivation to liquidate WPR, which was running at a loss. 

“The notion propounded by Aerios that the company’s [WPR’s] inability to meet its current liabilities was engineered and that its illiquidity could have been addressed by negotiating an increase in its overdraft facility is fanciful,” Justice Binns-Ward wrote in his judgment. 

“Aerios appears to consider that the applicant [WPRFU] is duty-bound to finance the company’s trading. It has failed to put up a cogent basis for its argument. Its contention that the company [WPRFU] is effectively the applicant’s alter ego, and that there cannot be a winding-up of the one without the other, does not bear scrutiny. The applicant rugby union is a legal personality that is able to conduct its business through a company just as a natural person may do.” 

Ultimately, it was another case Aerios lost and which Daily Maverick sources believe cost Aerios close to R10-million to pursue. 

The outcome of that liquidation allowed the WPRFU to shake itself free of what it believed to be an unfair contract whereby Aerios owned all its commercial properties.

Aerios didn’t let the matter settle there though, and in 2018 embarked on a Section 417 claim against the union and its minor shareholder Remgro Sports Limited (RSL). A Section 417 inquiry is a complicated process whereby witnesses are called and are compelled to answer questions – usually to determine if there was any misconduct in the original liquidation process. 

This process exists as a last resort for disgruntled creditors because a liquidator usually comes into a process at an advanced stage when a company is already in financial trouble. 

Aerios believed that WPR did not conduct its affairs in a proper manner and they challenged the R8.5-million valuation of the company‚ which was accepted in the liquidation process. 

Commercial rights in sport are a veritable fruit salad of agreements, but generally encompass four entities – the stadium, the host union or team, the national body (in this case Saru) and the broadcaster. 

Remgro waded into the battle at that time. 

“Remgro does not intend to respond to all the detailed allegations made by Aerios except to state that the liquidation process and our dealings with WPRFU were all conducted in an honest and legitimate manner,” Remgro chief executive Jannie Durand said. 

“We are offended by the baseless allegations of insincerity and dishonesty. It is noteworthy that according to Aerios’s version, every stakeholder involved in the liquidation process seems to have been plotting against them‚ including independent third parties like the judge‚ PwC and the liquidator.” 

Ultimately, it was another case Aerios lost and which Daily Maverick sources believe cost Aerios close to R10-million to pursue. 

The latest claim by Aerios has drawn a metaphorical shrug of the shoulders by Saru. A spokesperson said: 

“We strongly deny the allegations emanating from Aerios. Given the nature of these claims, the matter is now being dealt with by our legal team and we will respond to any further communication from Aerios through the appropriate legal channels.” In other words, they are not going to make it a publicity battle. 

Aerios believes that Saru abused its power and threatened the WPRFU that it would remove the highly sought-after 2017 Test against the All Blacks at Newlands if it did not get rid of Aerios as a partner. Which is all the more curious as Aerios is the Sharks’ commercial partner and still hosts Test matches, including the All Blacks in 2016. 

The complex world of sporting commercial rights 

Commercial rights in sport are a veritable fruit salad of agreements, but generally encompass four entities – the stadium, the host union or team, the national body (in this case Saru) and the broadcaster. 

Often, unions employ a third party such as Aerios to do commercial deals relating to the sale of advertising space at the stadiums as well as other aspects such as digital rights. The deals can be structured in multiple ways, but the underlying basis of these arrangements is that they are mutually beneficial. 

On most occasions it works well. There is always a need for compromise over certain games, especially when it comes to the Springboks. Test matches are owned by Saru and they choose where those are played. The Boks also come with different team and competition sponsors, which requires the host union to provide a “clean stadium”. In the South African sports sponsorship model, the national federation holds “superior rights” and can choose where it wants to play Tests and under what commercial conditions. 

Aerios’s claim of rights to a World Series sevens event, owned by World Rugby and licensed to Saru to run, is bordering on fantasy. 

This is standard practice and individual union’s title sponsors, which cannot be displayed on Test match days because of these commercial demands, are compensated. That compensation is usually considered in the original agreement, but if for some reason it hasn’t been included it is negotiated on a one-off basis. 

Sources familiar with the original deal, which commenced in 2012 between WPR and Aerios, admit that the union was sloppy in its attention to detail because many clauses were not spelled out in precise terms, which Aerios exploited. It is the root of the eventual disputes between the two parties. 

Aerios claimed to own the rights to all commercial deals, including those that are not WP properties such as Springbok Test matches at Newlands and the South African leg of the World Sevens Series played at the Cape Town Stadium.

Aerios’s claim of rights to a World Series sevens event, owned by World Rugby and licensed to Saru to run, is bordering on fantasy. 

Aerios was adamant in its statement this was the case: “By entering into these contracts with WPR, Aerios had acquired the advertising rights for professional rugby played at the Newlands and/or Cape Town stadiums. These included the rights to all international fixtures during the period January 2012 to December 2023, secured in separate contracts signed in 2011 and 2013.” 

Notwithstanding the fact that WPR could not sell Aerios rights to properties owned by World Rugby, and administered by Saru at a stadium that isn’t owned by the WPRFU, those contracts are also void. WPR was liquidated, and in the final liquidation settlement all contracts were terminated. DM

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