If you haven't read my overview on the major forces in esports I would recommend you look at that first if you are new to the esports scene. This article will be focused mostly on contracts between the player athletes and the team organizations. This is a dense topic that receives a substantial amount of attention from the legal community as a whole, but this post is intended to be a snapshot of the topic as it relates to the esports industry as a whole, not as a comprehensive review of the topic as a whole.
One of the major strengths of esports is the global appeal; there are major bastions of competitive play from the United States, to Korea, to Sweden, and all the way in China. The nature of electronic medium, and the fact that the major events are always broadcast on internet streaming services like Twitch.tv rather than traditional regional broadband and cable providers, means that esports will organically grow across the globe. The largest DotA 2 event last year, The International, was broadcast in multiple languages, including English, Russian, and Chinese. Even within the United States, it is more likely for events and agreements to be happening across state lines, rather than from within the same state boundaries. However, this global nature comes with its own set of problems. What happens when a player in one state or country enters into a playing contractual agreement with a team organization located in another state or country? Well, hopefully they've drafted a comprehensive contract that addresses this issue through choice of law and jurisdiction provisions.
Choice of Law Provisions
First, a quick and dirty explanation on exactly what a choice of law provision is. Don't worry, if your eyes start to glaze over you can just move ahead to the next section where I discuss what happens when the contracting parties forget to include a choice of law provision--who doesn't love a bit of chaos??
Here's an example of a choice of law provision in a contract: "This Agreement will be governed by the laws of North Carolina." That's it. It's that short and sweet. But don't be fooled, this one little sentence can mean the world when there's a dispute.
It's no secret that every country, and for that matter, each state in the U.S., have different laws that apply in a variety of different situations. Some states may favor the employee, and require longer breaks each day, while other states will allow employers to fire their employees "at will." The purpose of choice of law provisions is to allow the parties to decide which jurisdiction's (which means which state or country) laws apply to that contract. This is generally used by corporations to simplify its existence; if all of its contracts are governed under Delaware law, it knows generally what results will occur should a dispute arise. If the corporation is a large one, and has dealings all over the world, it would be prohibitively expensive to incorporate contract law from every jurisdiction into their everyday business dealings.
Choice of law also benefits the individuals. They will walk into the contract knowing exactly where to look to see how a dispute will be solved. They can hire an attorney that knows the applicable law to help them with their disputes, and should a dispute occur the litigation will be far less expensive (more on that below).
So how does this apply in the esports industry? Fnatic, a well known esports organization, is currently headquartered in London. Hypothetically, Fnatic wants to sign a hotshot Tracer player from the United States, along with his Canadian Pharah buddy, two support players from the U.K., and the last two players from Korea. By using choice of law provisions that state the contract will be governed by the laws of the United Kingdom, Fnatic will be able to offer contracts to every player under the same laws and terms, rather than dealing with employment and contractual law issues from the three different countries.
There is an interesting legal wrinkle to consider. What if Fnatic and our friendly Tracer main want their agreement to be governed by the laws of Korea? In most jurisdictions, the courts would be disinclined to allow such an agreement, unless the agreement was physically signed by the parties in Korea, or one of the contracting parties has substantial ties to Korea. Generally speaking, there must be some sort of tie to the jurisdiction and the contracting parties, or the courts will ignore the choice of law provision entirely.
So what happens when the organization and player fail to include a choice of law provision in their written contractual agreement? Practically speaking, any court with jurisdiction (meaning the power to hear the case) will be able to apply the laws of its venue to the conflict at hand. The court will be able to apply general contractual jurisdictional precedent, which includes the ability applying the law of a jurisdiction where the performance of the contract took place. This means that if Fnatic's players lived in California while under the contract and there was a dispute between Fnatic and the players, the players could file a lawsuit in California and the case would be heard under California law. Of course, Fnatic could counter and say that half the time, the team was visiting Fnatic HQ in London, and that London law would apply.
These types of disputes are unreasonably expensive to resolve, and will lead to inconsistent results. No team or players want to leave the door open to these kinds of disputes, but there is no doubt that many of the poorly constructed contracts in the esports industry fail to include this necessary provision. As the esports scene grows and matures these issues will arise less often, but there's still a long way to go.