PSL franchises seek legal action against PCB over financial model of league

They have submitted a law suit in the Lahore High Court

Umar Farooq
Umar Farooq
 Darren Sammy, Sohail Akhtar, Sarfaraz Ahmed, Shadab Khan and Imad Wasim pose with the PSL trophy, PSL 2020, February 20, 2020

Associated Press

The six Pakistan Super League (PSL) franchises have collectively sought legal action in a bid to force the Pakistan Cricket Board (PCB) to change the financial model of the league. It has been a long-running demand from the franchises, but by submitting a law suit in the Lahore High Court, the franchises have escalated it.
Their central grievance is that the PSL has made the PCB richer while the franchises have run losses every season. The petition asks the court to direct the PCB to "formally redress the grievances of all franchises" and "revise the model of PSL in accordance with its statutory mandate and make it financially viable".
The move also means that the PSL is now entangled in legal disputes with two of its major stakeholders, the broadcast-rights holder and its franchises. Last week, the PCB terminated the contract of PSL's international media-rights holder, Techfront, citing a series of breaches, including matters relating to payments. The PCB is also in arbitration against PSL's local media-right holders - Blitz - who went to court for a stay order against the board's move to cash in an insurance guarantee from the broadcaster (held as security for the deal) of PKR 1 billion. These disputes with the broadcaster - who constitute a sizeable portion of the income franchises ultimately make - have played a part in pushing the franchises to this move.
"The PCB is surprised to hear that the franchisees have opted to take a legal route despite our recent invites on two separate occasions to discuss the financial model in good faith and as part of our relationship building," the PCB told ESPNcricinfo. "The PCB cannot comment on the exact contents of the matter as it is yet to receive any notice from the honourable court. We understand a hearing is set for Friday, following which we will be able to comment."
The move is a culmination of years of frustration for the franchises, almost from the moment the PSL began, about the overall financial model of the league and its revenue distribution. A number of issues make up the concern about the financial model, from wanting tax exemptions, to better distribution of gate money, to more favourable exchange rate terms. The bottom line that has finally prompted this action, however, is the same for all franchises: no franchise has broken even in the first four full seasons of the league, and the addition of an extra franchise - the Multan Sultans - has lessened everyone's share from the central pool the PCB has set up for revenue.
The PCB has insisted that once the league moves back to Pakistan properly then not only will the franchises be able to move towards breaking even because of the lower costs of running a league there rather than in the UAE, but it will also generate "higher economic activity in the country". This season - the league's fifth - was the first to be fully played in Pakistan, but it was hit by the Covid-19 crisis. Four matches of the playoffs could not be played and have been rescheduled for November behind closed doors.
"Given the uncertainty in the situation, it cannot be reasonably predicted if the matches will resume in-stadia and in the same manner as before which clearly means that the profitability of the franchisees will drop further since there may not be enough gate receipts," read the petition. "In addition to the same, it is an admitted fact by PCB that they have terminated their contract with the international broadcaster and have been involved in legal proceedings with their domestic and international broadcasters. This further affects the Central Pool Income and places the broadcasting rights and revenues from the same in jeopardy. This has created further uncertainty despite which PCB is insisting on the payment of security for the franchise fee in its entirety."
The petition further reads: "PCB is not only an organizer of the tournament but is also the regulator who is bound to act in a fair, reasonable and equitable manner and insistence upon the payment of security before the situation has settled and uncertainty relating to COVID 19 has subsided, is unreasonable. It is also pertinent to note that while the uncertainty has affected the revenues of the Petitioners, PCB has continued to ensure that its own profits and revenues from the franchise fee are not affected which demonstrates the exclusive power that it exercises as the regulator."
It isn't as if the PCB hasn't engaged with the franchises on the matter and at the time of the league's inception, it is understood verbal assurances had been given that the model would be revisited and revised from time to time (some tweaks have been made over the years). The board has offered to revisit the financial structure and discussions on some of the specific issues have been ongoing - such as the fact that a plummeting of the value of the Pakistani rupee against the US dollar has meant that annual franchise fees have rocketed but that revenue, pegged to an old fixed dollar rate, has fallen.
There have been several meetings on the matter with various suggestions put forward but little definitive action has resulted from it. And the issue reared its head when the board was late in distributing the franchises' share of the revenue generated during the 2019 season. This led to all six owners refusing to submit their bank guarantees, a key part of this petition.
There is some weight to what might be the PCB's counter-argument, that the franchises signed on to these terms and conditions knowingly and that five seasons of this arrangement have passed. But the franchises argue in the petition that the entire framework of the agreements is excessively and unreasonably restrictive.
"This is evident from the fact that the Franchise Agreements was made a part of the bid documents which foreclosed any option to negotiate the Franchise Agreement and the Petitioners were forced to accept the terms which were onerous, restrictive, one sided and unfair."

Umar Farooq is ESPNcricinfo's Pakistan correspondent