Football League vows legal action over ITV Digital

The Football League will sue Carlton and Granada for £500m if there is no settlement of its three-year, £315m contract with ITV Digital, co-owned by the media giants, the League said last night.

The announcement was made after the League and its 24 First Division clubs discussed how best to secure the two outstanding payments on the deal – £89.25m this August and the same next year.

ITV Digital went into administration last week after failing to renegotiate the deal and it had been suggested that the League might be willing to compromise and settle for less than was owed. But yesterday's announcement signalled a hardline stance and the dispute seems destined for the courts.

Carlton and Granada have claimed they have no legal liability to underwrite the deal and sources say they are prepared to let ITV Digital go into liquidation. Although no "long form" agreement binding Carlton and Granada to the deal was signed, the League remains convinced that the broadcasters are liable for ITV Digital's debts under the short-form tender agreement that was actually signed.

The League said in a statement: "The Board of the Football League will continue to engage Carlton Communications and Granada to secure a settlement of the current dispute. This would involve an assurance that the £89.25m due to the Football League in August this year will be paid.

"We are prepared to discuss the method for the payment of the final tranche of £89.25m in conjunction with the future of our media rights."

The League hopes that a long-term rights deal might still be done, allowing ITV Digital to come out of administration rather than go into liquidation. Sources at ITV Digital maintain the company is unable and unwilling to pay more than £50m of the £178.5m owed.

David Burns, the League's chief executive, said that if there was no settlement the League would start legal proceedings against Carlton and Granada for the amounts owed, plus damages and costs. "The claims would be expected to be in the region of £500m," he said. "If the ITV Sport Channel [which screens League games from the First, Second and Third Divisions] is closed down, the Football League will consider a number of options for licensing its product, the most popular football league in Europe, to other media platforms over the medium term."

The League is understood to be considering an alternative deal with either BSkyB or the BBC. It has been estimated that between 30 and 50 of the League's 72 clubs could face severe financial difficulties or even collapse if the expected television revenues are not forthcoming.

Mr Burns acknowledged last night that the legal cases of both the League and the media companies had strengths and weaknesses. "If we end up in a court of law, one side will win and one will lose," he said. "Our document was not completed in a final way – but the short-form agreement is legally binding and was cross-referenced with Carlton and Granada's bid document. They have both contractual and moral obligations to football as a whole."