It is clear that Uefa will not hesitate to enforce the FFP regulations and sanction clubs for breaches; however, clubs are likely to be encouraged by the recent successful CAS appeals, particularly AC Milan’s appeal
John SheaJohn Shea is a senior associate at law firm Lewis Silkin and an experienced dispute resolution lawyer with a particular focus on the sport sector. John’s clients in the sport sector include clubs, intermediaries and athletes.
Europe’s soccer clubs are continuing to spend vast sums of money in the pursuit of sporting success, which has led to greater scrutiny being placed on Uefa’s Financial Fair Play Regulations which are designed to stop excessive spending by football clubs.
Financial Fair Play
The Financial Fair Play regulations form part of the licensing conditions which entitle soccer clubs to participate in Uefa competitions such as the Champions League. The FFP regulations were introduced by Uefa in 2010 with the overall aim of improving the economic and financial capability of soccer clubs, introducing more discipline and rationality into clubs’ finances, encouraging clubs to operate on the basis of their own revenues and encouraging responsible spending for the long-term benefit of football.
It should be noted that in addition to Uefa’s FFP regulations, the English Premier League and English Football League also have their own financial regulations, which limit the amount of losses that clubs can make and in the Premier League there are also short-term cost control measures which restrict the amount of funds which can be used to improve player wages.
Uefa’s FFP regulations
Uefa’s FFP regulations were implemented at the start of the 2011-12 season, and since then all clubs qualifying for Uefa competitions are not permitted to have overdue debts to other clubs, their players and the tax authorities. Also, most notably, from the 2013-14 season, clubs have had to comply with Uefa’s break-even requirement, which aims to prevent clubs from accumulating unacceptable levels of losses and, in doing so, help stabilise and rationalise spending in the long term.
The break-even result is calculated over a three-year monitoring period whereby each club’s relevant expenses are deducted from its relevant income in each year and the break-even requirement is the aggregate break-even result for the three consecutive years. In order to promote investment in youth development, stadiums and training facilities, monies spent by clubs on these areas are excluded from the break-even calculation.
If any club’s aggregate break-even result over the three-year monitoring period is negative, then the club has an aggregate break-even deficit. The maximum aggregate break-even deficit possible for a club is €5 million ($5.7 million); however, this can be increased up to a maximum amount of €30 million, provided that it is covered entirely by a cash injection from the club’s owner or related parties of the club.
Sanctions for non-compliance
The FFP regulations are enforced by the Uefa Club Financial Control Body. The CFCB consists of an Investigatory Chamber responsible for the investigation phase of the proceedings and the Adjudicatory Chamber responsible for deciding the cases brought before it by the Investigatory Chamber.
The most serious sanctions which can be imposed on clubs by the CFCB for non-compliance are exclusion from taking part in Uefa competitions or withdrawal of a title
The most serious sanctions which can be imposed on clubs by the CFCB for non-compliance are exclusion from taking part in Uefa competitions or withdrawal of a title. However, there are a wide range of other possible sanctions, including warnings, fines, withholding of revenues from Uefa competitions and restrictions on squad sizes.
Sanctions for not fulfilling the break-even requirements were first imposed in May 2014 when a total of nine clubs were found to be not compliant with the regulations, the most high profile being Manchester City and Paris Saint-Germain. As part of the disciplinary procedure, Uefa and clubs can enter into settlement agreements which include a set of obligations that are individually tailored to the situation of the club with the aim of the club eventually complying with the break-even requirement.
The settlement agreement entered into between Manchester City and Uefa covered the 2013-14, 2014-15 and 2015-16 seasons in which the club was fined a total €60 million (€40 million of which was suspended), had spending restrictions imposed and the club could only name a 21-man Champions League squad for the 2014-15 season.
Qatar-owned Paris Saint-Germain received a similar punishment to Manchester City as they were deemed to have failed the test when the CFCB decided that the value of their sponsorship deal with the related Qatar Tourism Authority was inflated. If a club’s owner invests money into the club through a sponsorship deal with a related company, then Uefa will investigate the transaction and, if necessary, reduce the sponsorship revenue to a fair market value if it suspects that the sponsorship has been deliberately over-inflated.
After the settlement agreement was concluded between Paris Saint-Germain and Uefa, the CFCB opened a subsequent investigation in September 2017 as part of its continuing monitoring of clubs. This was as a result of the club’s spending during the 2017 summer transfer window when it purchased both Neymar and Kylian Mbappé.
That investigation was closed in June 2018 on the basis that the club had managed to comply with the rules for the financial years ending in 2015, 2016 and 2017. However, the case was referred back to the investigatory chamber of the CFCB in September 2018 for a further review. Paris Saint-Germain appealed that decision to the Court of Arbitration for Sport which very recently upheld the appeal on the basis that the review did not take place within the required 10-day period and so, for now, the club has escaped possible sanctions.
Manchester City and Paris Saint Germain are not the only high-profile examples of clubs falling foul of Uefa’s FFP regulations
Manchester City and Paris Saint Germain are not the only high-profile examples of clubs falling foul of Uefa’s FFP regulations. In June 2018, the CFCB excluded AC Milan from participating in Uefa competitions for the 2018-19 and the 2019-20 seasons as a result of failing to fulfil the break-even requirement. The club appealed to CAS which partially upheld the appeal on the basis that the sanction imposed was disproportionate. CAS, therefore, annulled the original sanction and referred the case back to the CFCB in order to issue a proportionate disciplinary measure.
Accordingly, the CFCB decided that should AC Milan not comply with the break-even requirements by 30 June 2021, then it will be excluded from participating in Uefa competitions for the 2022-23 and 2023-24 seasons. The club will also have €12 million of its Uefa revenues from the 2018-19 Uefa Europa League withheld and will not be permitted to register more than 21 players for participation in Uefa competitions in the 2019-20 and 2020-21 seasons.
It is clear that Uefa will not hesitate to enforce the FFP regulations and sanction clubs for breaches; however, clubs are likely to be encouraged by the recent successful CAS appeals, particularly AC Milan’s appeal where CAS determined that the sanction of excluding the club from Uefa competitions was disproportionate.
We have certainly not seen the end of high-profile FFP cases because the CFCB has reopened investigations into Manchester City following recent leaks which allege that the club attempted to circumvent the regulations through artificially-inflated sponsorship deals. Paris Saint-Germain also remain under assessment for later monitoring periods. AC Milan are also once again appealing the latest CFCB sanction to CAS.
All eyes will, therefore, be on Uefa to see how it acts following the conclusion of the investigations into Manchester City and Paris Saint-Germain, as well as in further cases where breaches have occurred.