Alex Walmsley, from Harrison Drury’s sports law team, considers the recent landmark decision by the Court of Arbitration for Sport (CAS) and the impact this may have on the future of football and financial regulations.
In February 2020, UEFA’s club financial control body (CFCB) handed Manchester City a two-season ban from European football and a fine of £24.9m for what the Adjudicatory Chamber of the CFCB described as ‘serious breaches’ of UEFA Club Licencing and Financial Fair Play (FFP) Regulations.
The breaches centred around City’s artificial inflation of their sponsorship revenue produced in their accounts between 2012 and 2016. City vehemently opposed the verdict and announced that they would be taking their case to CAS to challenge what they believed to be a ‘prejudicial’ process.
What was the verdict of CAS?
On 13 July, 2020, CAS announced the unprecedented verdict that City’s two-season suspension from European football had been lifted and reduced their fine to £9m. The reason the fine was maintained, albeit a reduced figure, was that CAS found City had breached Article 56 of the club licencing and FFP regulations by failing to cooperate with UEFA’s investigation.
CAS ruled that UEFA’s allegation that City had artificially inflated their sponsorship revenue was ‘not established’ (not proven) or ‘time barred’. This quote has posed more questions than answers, however, in short, ‘not established’ means UEFA failed to prove part of its case and ‘time barred’ means the alleged offences happened too long ago to be considered now.
The statute of limitations as per Article 37 of the procedural rules governing CFCB is five years. Given that UEFA’s allegations against City were between 2012 and 2016, a substantial proportion of those allegations fell outside the statute of limitations. Sight of the full written verdict of CAS is expected soon and will certainly make for an intriguing read as to how and why their decision was reached.
What are the ramifications for the future of FFP?
This verdict appears to be a particularly damaging defeat for UEFA and one which has brought significant criticism and the potential for eradication of FFP altogether. FFP was introduced in the 2010/11 football season and was premised on ensuring that clubs did not spend beyond their means, thus creating a healthier sustainability model and long-term viability for European club football.
In its first assessment period, nine clubs were found to have breached FFP criteria, most notably Manchester City and Paris St Germain FC with various fines and sanctions imposed. When quizzed on the seriousness of sanctions that an FFP breach could attract, the first chairman of the CFCB, Jean-Luc Deheane said in 2011, that: “The atomic bomb is a ban from European competition”.
What appears clear, however, is that UEFA and CFCB are not prepared to impose such sanctions on elite European clubs just yet. In many instances, the key aims of FFP have worked in recent years, with studies indicating that European club football’s debt has fallen and acted as a soft salary cap to match that of generated revenue.
However, many believe that the way in which UEFA has readied and presented their case against City has been a ‘disaster of communications’ and led to a ‘fundamental misunderstanding of what FFP is all about’. Former UEFA boss, Michel Platini, an unerring advocate of FFP, also hoped that by restricting irresponsible spending, FFP would address the competitive balance in European football.
The CAS verdict appears not only to have shown the weakness of FFP application, but may in fact have widened the gap for competitive balance by reinstating City in the pinnacle of European competition and therefore opening the door to significant broadcast revenue that such a position attracts.
Despite the fact that City has not been completely exonerated from their actions, if the written verdict from CAS reveals that City escaped further punishment from FFP based on technicalities alone, it may be that UEFA will be forced to reconsider and address the evident procedural issues in pursuing and implementing FFP regulations to reflect the ever evolving commerciality in the business of European football.
UEFA may wish to challenge the CAS verdict at the Swiss Federal Court, however, in light of their conduct; many believe it is unlikely that this will happen.
Harrison Drury’s sports law team can assist sports clubs, players and regulatory bodies with dispute resolution matters. For more information please contact Matthew Astley or Alex Walmsley on 01772 258321.