This article is written by Arun Nair pursuing Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.
Introduction into the world of Esports
Esports often involves organized, multiplayer video game competitions between professional players, individually or as teams. Video game culture and competitions were largely unorganized and by the 21st century, Esports was a significant factor in the video game industry, with many game developers actively sponsoring live tournaments and other events with jam-packed audiences and cities building stadiums dedicated to it.
While Esports was once a small subset of the sports culture, it has now ballooned into an industry with an estimated market of $1.5 billion by 2022 with APAC, North America, and Europe contributing the lion share in terms of ‘revenue’ ‘viewership’ and ‘audience’. The future of the industry will be fuelled by the increasing mobile devices which will allow entry to more gamers.
For players, being a professional eAthlete can be as lucrative as playing a physical sport. Esports presents big opportunities to the players who are relatively young, with an average age of 24-27 years old (largely due to teens joining the base of Esports supporters) and prize funds extending into the millions.
This means that kids are now growing up with dreams of being a professional, getting to play video games while making money doing so.
As published in the ‘Esports laws of the world’ report, we understand that there are no specific laws governing Esports in India. However, there are broadly some laws that may indirectly affect the conduct of Esports in the country. These include:
Public Gambling Act, 1867 (“PG Act”) and related legislation. The principal legislation governing gambling in India is the PG Act. While the PG Act primarily regulates gambling, it is a central (or federal) legislation, and gambling is listed as a State subject. Consequently, individual States in India hold power to legislate on the subject and several states have distinct legislation regulating gambling. Pertinently, even though the PG Act does not specifically define gambling or its elements, Section 12 of the PG Act, exempts its applicability to games of skill, which include games containing elements of pure skill, as well as, games which are predominantly games of skill along with ancillary elements of chance.
Secondly, two states in India that provide licenses specifically for online gaming are Sikkim and Nagaland. As per the Sikkim Online Gaming (Regulation) Rules, 2009 (“Sikkim Rules”), a list of prescribed games such as roulette, blackjack, poker, poker dice, including sports betting, may be offered for online play after a license for the same is procured from the Sikkim government. Similarly, the Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2016 (“Nagaland Act”) contemplates the issuance of online gaming licenses, but only for games of skill. With reference to Esports, understood as organized electronic sports competitions, for instance, video gaming, fantasy sports, and such, have been held by recent judicial precedents in India, to be preponderantly games of skill.
For instance, the Punjab and Haryana High Court in Shri Varun Gumber v. Union Territory of Chandigarh & Ors., observed that playing fantasy sports games required the same level of skill, judgment, and discretion as in horse racing, and ruled that such games are predominantly games of skill. Similarly, the Bombay High Court, in Gurdeep Singh Sachar v. Union of India & Ors., recently held that online fantasy gaming are games of skill. In light of the above, since Esports is not designated as games of chance, but are specifically games of skill, it follows that Esports will, therefore, fall out of the purview of the PG Act and the State legislation, and would not be prohibited.
Further, the Information Technology Act, 2000 (“IT Act”) read with Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Information) Rules, 2011 (“SPDI Rules”) The IT Act regulates the electronic transmission
of information relating to gambling, and inter alia, penalizes scandalous/obscene content. The SPDI Rules also govern the collection, processing, transfer of Personal Information/Sensitive Personal Data or Information (“SPDI”). Indian Penal Code, 1860 (“IPC”) The IPC, inter alia, prohibits the sale, hire, distribution, exhibition, and circulation of any obscene objects and penalizes any person who engages, advertises, promotes, offers, or attempts to do an obscene activity.
Lastly, in India, the SPDI Rules are the primary legislation that governs the collection, processing, and transfer of Personal Information/SPDI. In terms of the SPDI Rules, passwords, financial information, physical, health condition, etc. of an individual, are classified as SPDI. Broadly, an entity that collects SPDI, such as Esports tournament organizers, is required to obtain prior written consent from the information providers (players).
However, it can be stated that in the absence of any specific governing law it would be prudent to say that the rules, regulations, terms and conditions as laid down by the tournament organizers would hold ground in case of any violations by the players and imposition of penalties or sanctions against players.
Official organization for Esports in India
Electronic Sports Federation of India (ESFI) is a Non Profit organization established Pursuant to Subsection (2) of Section 7 of the Companies Act, 2013 and Rule 8 the Companies (Incorporation) Rules, 2014 bearing CIN U74999DL2016NPL300732 and license under Section 8(1) of the Companies Act, 2013 Section 8 License Number 107018
ESFI is a full member of the International Esports Federation (IESF), Global Esports Federation (GEF), and Asian Esports Federation (AESF)
Mr. Lokesh Suji, the Director (ESFI) states that the main object of the organization is to promote, encourage, organize, educate, train and control Electronic Sports (Esports) in India and to provide facilities for training in Esports, to build and sustain the ecosystem for Esports in India not limiting to providing, conceptualizing, opening, managing, running, developing, facilitating, and promoting all areas of Esports and to provide all other possible and related form of Esports.
To be the official organization in complete and sole in charge of all Esports matters in India and to guard and enforce rules in cooperation with the state Esports associations/federations of the country and in full and complete collaboration with the Indian Olympic Association, to select and control the Indian Esports contingent to the Olympics, Asian Games, Commonwealth, and SAF Games and various other International competitions under the patronage of the IESF, AESF, OCA, IOA, and other federations/associations and to stimulate the interest of the people of the country in promotion of Esports.
To build infrastructure for Esports, to establish, maintain and run the academy, to provide the best education in the fields of computer education, character building, self-discipline, and the development of the creative & social faculties, to grant scholarships or provide financial aid to poor/meritorious individuals in the field of sports and skill development.
Esports player contract
Like any other contract, a well-drafted ‘Esports player contract’ provides clarity in the business relationships, agreements, rights, and obligations of the players and the team/organization. It further prevents misinterpretation of communication and agreements which can lead to potential contract disputes and unwanted litigation thus permitting better commercial relationships.
An Esports player contract is typically an employment contract and is designed to set out the players working conditions, duties, training among other things. It involves:
- The player who wishes to associate with the organization in return for remuneration and benefits for providing his/her expertise, services and,
- The organization/team who wishes to avail the services of the player who would represent them in gaming tournaments, online live-streaming, etc. in a professional manner such that it does not hamper the reputation of the organization through their association with each other.
Esports contracts are usually entered into for a finite period ranging from a few months to a year or for a specific tournament or event. These contracts outline the factors that the parties want such as -working hours, the scope of services, salary amount, distribution of tournament earnings, sponsorships, company guidelines – exclusivity, non-compete.
The commercial terms of the party’s engagement should be documented clearly and unambiguously in a formal written contract which gives a sense of security to both parties. Ultimately, each Esports contract is unique and depends on the contracting parties to lay down the objective that they wish to attain.
Things to consider while drafting a player contract
Relationship of parties
The agreement should specify the relationship between the contracting parties i.e. whether the organization wants to deal with the player as a contractor or as an employee. This matter is relevant since the employee-employer relationship involves consequences such as taxation, statutory employment rights, pension, etc.
This clause may be drafted thus – The nature of the relationship between the parties shall be that of an independent contractor. Nothing contained in this agreement shall be construed to create the relationship of principal and agent or employer and employee between the parties. the parties shall have a principal-to-principal basis relationship as per the terms of the agreement.
Non-Compete and other such restrictions
A contract should make it amply clear that the player, during the tenure of the agreement, shall not join or provide services to any competing teams/organization without the organization/team’s written authorization. The organizations would prefer contracting the player on an exclusive basis and sometimes, parts of the engagement can be made exclusive and therefore should include this clause in the contract.
The organizations may also put certain restrictions on the player’s ability to enter into third-party agreements which they find counter-productive to their brand, sponsors, and policies. One such example would be the endorsement of alcoholic beverages by the player which may be unacceptable to the organization.
Any violation of the code of conduct is subject to a penalty which gets deducted from the player’s remuneration. Such clauses safeguard the organization/team and its sponsors from unwanted remarks of the player in the event the organization and the player is at loggerhead.
Sample clause would be thus – At all times while the agreement is in force and after its expiration or termination, the player agrees to refrain from disclosing game plans, trade secrets, or other confidential material and, agrees to take reasonable security measures to prevent accidental disclosure
While the agreement is in force the player agrees to use his/her best efforts to abide by the non-disclosure and non-compete terms of this agreement. After expiration or termination of this agreement, the player agrees not to compete with the team/organization for a period of [ ] years.
What will be the terms of payment? When such fees shall be paid and whether some bonus or other remunerations like profit sharing will be included in the package? In some cases, players may not have a fixed salary arrangement depending on the size, the scale of the organizations/team, but instead, opt for a cut in potential prize winnings. A contract should mention what would happen in the event the player is unable to attend an event due to some unforeseen circumstances.
It should also state what all expenses will the organization/team reimburse to the player and whether or not the player can receive any independent sponsorship based on his/her standing in the team.
Sample – Throughout his engagement, the club/team/organization shall pay the player remuneration and benefits as set out in the below schedule (to be specified if it will be per tournament-based or fixed monthly sum). The team/club/organization shall reimburse the player all reasonable hotel and other travel expenses wholly and exclusively incurred by him/her in or about the performance of his duties under the agreement provided that prior approval was acquired from the management and original receipts and bills of such expenses have been produced.
The contract should state what the obligations are and how these would be performed and the duration in which they shall be performed and the consequences in case there is the failure of parties in performing these obligations.
For instance, it must be emphasised that the player ought to use his best efforts when competing in tournaments and he should also wear the team jersey while representing the organization/team during tournaments or promotional events. In addition, the services given by players should be listed comprehensively and should mention whether it extends beyond participating in tournaments for example like creating videos, live streaming, etc.
A sample obligation clause would be such – When directed by and authorized by the team/club the player shall attend matches, participate in matches, participate in training and match preparation, and play to the best of his skills, abilities at all times, to comply with and act in accordance with all lawful instructions of the team, club, to observe the laws of the game.
The contract should mention the duration for which the contract will last and whether it can be terminated prematurely. It should also define the circumstances under which the contract can be terminated prematurely.
This agreement shall run for a period of [ ] days/months/years beginning on [ ] date and terminating on [ ] date unless any contract violation occurs in which case the agreement will terminate as per terms of this agreement.
Law and jurisdiction
The contract should clearly state the laws that will govern the contract and which court of law would have jurisdiction to hear disputes in case one arises.
Clause – This contract is entered into, made under, and shall be governed by the laws of [ ] country and if the player is outside the country, the laws of [ ] shall govern.
Legal issues associated with Esports player contract
India with approximately 135 crore people, having the youngest population in the world, with a median age of 26 years and approximately 60% of the population under the median age is enthusiastic about sports, in general, and are gaining interest particularly, in the field of Esports.
Indian sports industry got a fillip in the form of online gaming, however, as of date, we have no dedicated online gaming, online gambling, or Esports laws in India.
Some of the legal issues that should be taken into consideration when considering an Esports player contract:
The enforceability of a contract in the absence of a specific governing law may prove troublesome while entering a contract. At present, the provisions would be considered from multiple statutes which will be bewildering. Since the Esports gaming industry is still in a nascent stage it is not governed by any dedicated Indian law and as a result, inevitably, the industry will be in limbo and legal troubles will arise every now and then.
The career of a typical sportsman generally starts early and ends early, as compared to any other traditional job. In comparison, the career of an Esports player starts much earlier than that of a physical sports person and ends early. These Esports players are generally in their teens and much before he/she is the legal age of 18 years (considered a major as per Indian law). Under the Indian Contract Act, minors (individuals who are below the age of 18years) are ineligible to contract and such contracts are unenforceable against the minor.
Whether the player will be considered an independent contractor, or an employee of the organization, is an important matter for consideration. Hiring a player as an employee entitles him to statutory benefits and protection under the law. Accordingly, the organizations/teams may aim to hire players as a ‘contractor’ in order to do away with the legalities and statutory provisions that accrue by virtue of the employment terms of the land. This may tilt the balance in favour of the organizations in terms of exploitation rights and especially since there are no regulatory frameworks in India with regards to Esports employment.
Absence of governing law
Online gaming is a multi-crore industry and despite this, there are no dedicated gaming laws in India. This has made the legal position of the provisions and enforceability muddled and confusing. Thus, the government has to come up with the technicalities and legal aspects that are attributable to the online gaming industry and the Esports industry in particular.
The Esports industry has been booming over the last few years, however, certain countries have been unable to catch up with them in formulating appropriate guidelines and legal frameworks for them.
Such a scenario leads to uncertainties in the minds of sponsors, organizations, media companies, etc and these industry participants would not want to endanger their investment in an uncertain market. Similarly, it would stifle the opportunity of a player who might become extremely popular in the near future.
Therefore, the governments should avoid half-hearted measures and act swiftly and credibly to come up with regulations that would augment and develop the industry since the time is ripe.
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