A Complete Disembowelment of the Indian ‘Claim for Compensation’ Letter to the West Indies

In case you may have missed it, the West Indies recently withdrew midway through a tour of India.

That story can be heard here.

Friend of Dennis Does Cricket, West Indian based David Oram, has today leaked the demand letter that the Indian’s have sent to the West Indian Cricket Board.

Download it from David’s blog here.

Yes, the leaked letter is real and this is not a parody piece.

I’ve read it a few times now and will attempt to dissect it in layman’s terms using a full transcript.

Kind Attn: Mr. Whycliffe Cameron (President)
Dear Mr. Cameron,

Re: Memorandum of Understanding entered into between the
Board of Control for Cricket in India and the West Indies
Cricket Board relating to the scheduled 2014 West Indies’
Tour of India;

Re: Unilateral cancellation of the tour by the West Indies Cricket
Board, repercussions thereof and claim for compensation by
the Board of Control for Cricket in India

 

Boom! A shot across the bow aimed straight at the WICB President. However, the most interesting thing to note is that the letter refers to a Memorandum of Understanding (MOU) and not a contract. There is a big difference between the two. While a contract is a firm commitment to do something in return for consideration, an MOU usually only signals intent. In most cases, MOU’s are not legally binding. Not having seen the MOU, I can’t say for certain whether that is the case here, but it is a fair conclusion to make as I will point out later.

This has reference to the captioned 2014 West Indies’ Tour of India
(“Tour”). As you are aware, the Board of Control for Cricket in India was
in discussions with you for well over a year for the purpose of agreeing a
mutually acceptable schedule of matches to be played in India by the West
Indies cricket team. Such discussions finally culminated in the
Memorandum of Understanding dated 1 st August 2014 (“MOU”).

The West Indies Cricket Board (“WICB”) gave the BCCI a binding
commitment that it will field its team in India for a total of 9 Matches being
5 ODI Matches, 1 T20 Match and 3 Test Matches to be played in that order

Again, reference to the MOU. However, the Indians have turned up the rhetoric by claiming a ‘binding commitment’ was made by the West Indian’s. This is fine to say, but where is the quote of the relevant clause of the contract that demonstrates that?

Oh, that’s right! There was no contract.

The boards only signed an MOU. An intent to do something only, not a binding commitment.

That’s Ok. The Indians will just revert to the tactic of using misrepresentative language to scare the West Indies.

Delving a little further, I went to the ICC website to try and find some binding rules regarding how boards should conduct tours.

Luckily enough, I found the ‘ICC Members’ Agreement Between ICC Full Members relating to Future Tours Program and Schedule (As Approved Executive Board Meeting – Auckland March 2004, UN Amended March 2007)’

I can’t be sure if it is the latest version given this:

 

The ICC haven’t updated their site since October 2007? Seriously?

God help us.

In any case, I’ve read through the Future Tours Program Agreement.

It shifts this India vs West Indies dispute in a dramatic way.

First of all, it states in clause 20 that all disputes must go to, and be resolved, by the ICC Disputes Committee.

20. Disputes
Any dispute arising out of or in connection with this Agreement and any Tour Format
Agreement (insofar as the same is affected by the terms of this Agreement), including any
question regarding the existence, scope, validity or termination of this Agreement or such
Tour Format Agreement or this clause shall be referred to and finally resolved by a Disputes
Committee appointed pursuant to the ICC Disputes Procedure.

So firstly, if I was advising the West Indies Cricket Board, any threat of legal action from the Indians would be met with a swift rebuttal and reminder of this clause.

Not only must the case be heard by this ICC Disputes Committee, but both India and the West Indies have agreed that the Disputes Committee will also be the party that resolves the dispute.

In effect, the right for this to be heard in a court of law has been written away.

Anyhow, let’s keep reading what the Future Tours Agreement says about not fulfilling your obligations as a touring party:

7. Non-Compliance
7.1

The parties recognise that if an event of Non-Compliance by a party to this Agreement
occurs, the Compliant party in relation to the affected Tour will suffer loss and damage.
Whilst recognising that (having regard to the nature of such loss) it is impossible to
quantify such loss comprehensively in financial terms at the date of this Agreement, the
parties to this Agreement agree that subject to clause 9 (Acceptable Non-Compliance),
the provisions of this clause 7.1 constitute the best attempt by the parties to provide a
formula for calculation of the Compliant Party’s loss in the following circumstances:-

Ok. We have an acknowledgement that calculating losses is hard to do, but there is a formula to assist us.

Let’s take a look at that formula:

7.1b

In respect of any Tour for which the Visitor is the Non-Compliant party, the Non-Compliant party shall pay to the Host for such Tour, an amount equal to the Host’s Budgeted Net-Profit for such Tour or, where only a portion of such Tour is affected, the proportion of such Budgeted Net Profit as relates (pro-rata) to the affected portion of the Tour and subject in either case to a minimum amount payable of USD$2m  (“Host’s Loss”)

Now it starts to get interesting.

It appears that both the West Indies and India have signed up to a contract that commits the West Indies to only pay the budgeted net profit lost for that section of the tour they ran away from.

Not the expected revenues.

Just the net budgeted profit.

So, cut and dried right?

Just pull out the budgets from before the tour began, find the number and pay it?

Well, not quite.

Firstly, the Indians are asking for lost revenues of USD$42m (as you will read later).

As I interpret the contract that the Indians are party to, this is just an ambit claim with zero substance. Just some chest beating.

The Future Tours Agreement also has this little clause called Force Majeure. 

Typically, Force Majeure refers to an Act of God or something that neither party can control.

It is important, as it removes as party from being liable for damages.

Force Majeure usually describes things like cyclones, earthquakes, war, civil unrest, etc, where that event affects another parties ability to fulfill their end of the contract.

For example, when the Sri Lankan players were shot at in Pakistan and the tour was called off, that would likely have been a Force Majeure event.

Pakistan would not have been able to sue Sri Lanka for going home as civil unrest had made it unsafe for the tour to continue.

In the context of this agreement, here is how Force Majeure is used:

9. Acceptable Non-Compliance
9.1

Non-Compliance shall be Acceptable Non-Compliance where the Non-Compliance is
caused by circumstances of Force Majeure as a result of which Compliance is rendered
impossible, illegal, likely to give rise to a serious risk of death or personal injury to the
players and/or officials due to take part in the Tour concerned or in respect of which
appropriate insurance is unavailable on reasonable terms and, in each case, where there
is no action that the party or parties concerned could reasonably take to render
Compliance possible, legal, free of a serious risk of death or personal injury and covered
by appropriate insurance as referred to in this clause.

 

What is this clause saying?

Well, to simplify, it is saying that if a Force Majeure event occurs under certain conditions, then Non-Compliance with the agreement will in fact be ok.

But didn’t the players quit? That wasn’t an Act of God, or a war or a cyclone.

How the hell does Force Majeure apply here.

HOLD ON!

To understand if Force Majeure applies here, we need to read its definition as per the contract.

Here it is:

“Force Majeure” means any circumstances not within the reasonable control of the party
concerned including, without limitation:
a. storm, flood, earthquake, subsidence, life-threatening illness (epidemic or otherwise) or
other natural physical disaster.
b. any civil commotion or disorder, riot, invasion, war, threat of or preparation for war or
terrorist action;
c. any accident, fire, or explosion, (other than in each case, one caused by a breach of
contract by or assistance of the party concerned);
d. any action taken by a governmental or public authority of any kind, including, without
limitation, not granting a consent, exemption, approval or clearance or imposing any
restriction or prohibition;
e. any strike, lockout or other industrial action;

 

Oh dear.

Look at clause ‘e’.

Did the West Indies players strike or take industrial action?

In fact I believe they did!

The fact that the West Indies players went on strike, forcing the West Indies Cricket Board to cancel the tour, will very likely be argued to be a Force Majeure event as per the Future Tours Program Agreement that both the Indians and West Indians are a party to.

 

This is gold, as it means that the Indians shouldn’t be able to sue for loss or damages given the facts as we know them.

 

So, let’s get back to that pesky Indian letter of demand and laugh at it, now that we have legal context.

 

On the eve of the first ODI in Kochi on 8th October 2014, you intimated the
BCCI that, on account of some disputes between you and your players, the
WICB was considering pulling out of the Tour. On account of the timely
intervention of the Hon. Secretary BCCI, who spoke to your players, a
crisis was averted. However, the threat of cancellation of the Tour
continued to be raised prior to each of the next three ODIs where again due
to intervention of high-ranking BCCI Officials, your team took the field and
the matches took place. Finally, after the fourth ODI at Dharamshala on 17th
October 2014, you pulled out your team and communicated your decision
to cancel the remainder of the Tour.

 

So the Indians admit that they were fully aware of a pending and likely risk.

What did they do about it?

They spoke nicely to the West Indian players and asked them to stay.

That is not risk management. That is just wishing upon a star for a favourable outcome.

What should happen as standard practice is that a ‘Business Interruption’ insurance policy is taken out.

What this does is insure your projected revenues should something occur that causes the tour to end.

It doesn’t appear that the Indians took out this cover.

If they had, the insurer would have paid out the Indians as per the rules in the Future Tours Agreement.

It would have then been the insurers call as to whether they wanted to chase the West Indies for costs due to breach of contract. I think this would have been unlikely as I believe there was no breach.

Anyhow, let’s continue with the letter.

 

The WICB is more than aware of the economics of the sport of cricket; that
each National Board is dependent on its Home Tours to generate income.
This is a financial model that is common to all National Boards including
the WICB. Such income is derived from various sources including
sponsorships and broadcast rights. The adverse financial ramifications and
the negative impact of your action to unilaterally cancel the remainder of
the Tour was well within your understanding, yet you still went ahead and
cancelled the Tour in complete disregard of your legal commitments.

 

The premise of this last sentence is just plain wrong.

Have the Indians not read the clause about Force Majeure and its definition in this case?

The only commitment that the West Indies have is to abide by the clauses of the contract, which it looks like they may well have done.

 

The WICB is also aware that each National Board is committed to touring
each other in a given period such that the schedule of tours between each of
the Boards is fixed 8 years in advance. Such touring obligations are on a
reciprocal basis so as to reflect not only fairness in ranking but also equal
opportunity to each Board. As such, given the limited windows of
opportunity and the long-term schedule of tours as between the National
Cricket Boards, rescheduling of Tours within the 8-year period becomes
impossible

 

Didn’t the Indians ‘reschedule’ their tour to South Africa in 2013, causing quite an issue for the locals?

This letter is starting to get rather ironic and very funny

 

As you are aware, the Sri Lanka Cricket Board has agreed to our last minute
request to play 5 ODIs in India in the month of November 2014. However,
this does not offset the financial loss suffered by BCCI on account of the
cancellation of the WICB Tour. This is because the Sri Lanka Cricket
Board has not committed to any additional tour of India but has only
advanced its 2015 Tour to 2014. In return, the BCCI has agreed to tour Sri
Lanka in 2015 whereby it has permanently and irretrievably lost a valuable
home tour.

 

Easy to say, but we all know that this is bullshit.

To make up the 3 Tests lost to the West Indies, the Indians only need to add 1 Test to any three home tours over the next few years.

If they had taken out a business interruption policy…..

 

The consequences on the BCCI of not delivering a scheduled home tour to
its members, sponsors, broadcasters and the fans are multifold and
crippling.

 

Crippling? HAHAHAHAHAHAHAHAHAHAHAHAHAHA

 

The BCCI is faced with huge revenue losses, a loss of reputation
and is at risk of losing valuable commercial partners. The consequences of
cancellation of a committed home Tour during the biggest festival season
Diwali in India is a monumental disaster for the BCCI. It is during this
season that our partners derive the most value from their rights. Our
broadcaster had committed to its advertisers during this season and on
account of your actions, is facing a severe crisis the effects of which are felt
by the BCCI. The BCCI holds the WICB responsible and liable for all such
consequences and intends to enforce its rights to seek compensation from
the WICB to the fullest extent permissible in law

 

I never knew the link between India, West Indies and an ancient festival of lights of was intrinsic to the continued success of cricket?

The rest of that paragraph is just a big sook.

Business involves risk. The Indians didn’t manage theirs very well.

 

In plain economic terms, the BCCI can tentatively quantify its losses as
follows;

 

Yeah, that’s great. But doesn’t the Future Tours Agreement state that the losses you can claim are for budgeted profit only?

Even that doesn’t really matter in this case, as a Force Majeure event occurred, so the Indians can’t claim anything.

Never mind, let’s just send of a silly letter anyway.

 

Please note that the above quantification is tentative and constitutes an
approximation of the losses that BCCI is able to quantify at this time. The
BCCI is in the process of assessing its other heads of losses including
without limitation towards expenses incurred against organization of the
remaining 5 matches of the WICB Tour. Once quantified, the same will be
intimated to the WICB.

 

That’s nice.

 

The BCCI calls upon the WICB to formally inform the BCCI, in writing, of
the steps it intends to take to compensate the BCCI towards the losses
quantified above as well as those losses yet to be quantified by the BCCI in
relation to the cancelled WICB Tour. In the event the BCCI does not
receive such a proposal in acceptable terms, within a period of 15 days from
receipt of this letter, please note that the BCCI has peremptorily instructed
its attorneys to initiate steps for recovery of the losses by filing appropriate
legal proceedings against the WICB in the appropriate Indian Court and you
may treat this notice as a formal demand in that regard.

 

That’s nice too.

Note that any sane Court will throw out the Indian case given their is a clear dispute resolution procedure in the Future Tours Agreement contract.

The Court will force India to use the process that they have willingly committed themselves to.

 

Pending resolutions of all disputes the BCCI suspends all bilateral
cricketing relations with the WICB.

Yours faithfully,
For the Board of Control for Cricket in India
Sanjay Patel
Hon. Secretary, BCCI

 

Ok, now we see the true face of Indian cricket.

We have thrown our toys out of the pram and won’t recognise or talk to  you until you fix this to our satisfaction.

I don’t care if we have signed up to another dispute resolution process.

I couldn’t give a damn about what Force Majeure means or whether I am bound by it.

You will  pay me God damn it else I will continue to write you nasty letters, waste some money in Indian courts to appear strong and just won’t play you.

Laughable.

Given there has only been 4 India v West Indies Test series played in the last 15 years, it’s probably not such a massive problem.

 

So there you have it. A big nasty letter, with almost zero basis or link to the contracts in place between the Indians and the West Indies.

Now, when the India, Australia and English bloc took over the ICC in March, the Future Tours Program Agreement was meant to be torn up. However, no one has seen the new one, if there is a new one?

I can only assume the risk positions and control over disputes have remained similar in nature.

Speculation for sure, but logical given the focus of the changes was distribution of money and not risk.

Assuming the risk positions either in a new Future Tour Program Agreement or the mysterious MoU have not moved, I would conclude with:

1) The Indians are going to struggle to find a legal way to get paid the $42m they are claiming;

2) If I was representing the West Indian’s, I would be reminding the Indians of both the Force Majeure clause and the Dispute Resolution Committee; and

3) I would also counter claim that the Indians were negligent in not taking out Business Interruption insurance, given they knew the risks of an West Indian player strike;

 

Sorry that this is such a long read, but it gives you a great insight into how ‘Demand Letters’ are usually just baseless words hidden behind some scary words.

Comments welcome as always!Follow @denniscricket_