At a meeting of the Kings Sport Network in Manchester on 17 November, an assembly of almost 90 external advisors alongside in house counsel from some of the UK’s largest Football Clubs indicated that despite worthy intentions, UEFA’s new ‘break even’ rules may not succeed.
We asked members of the Network whether they believed a more level financial playing field for clubs would be achieved in European competition by 2018 – the date set by European football’s governing body for the full roll-out of its new Financial Fair Play Regulations. While 75% believed that break-even was possible, only 25% considered it to be probable. Therein lies the concern.
Football clubs hoping to compete in lucrative European competition will have to navigate skilfully through the complexities of the Financial Fair Play Regulations which come into force from the beginning of the 2013-14 season.
With the principal aim of ensuring that clubs do not spend more than they earn, the FFPR have been introduced with a range of sanctions for a failure to meet the announced criteria ranging from financial penalty to license refusal or withdrawal. However, there is as yet a lack of clarity from UEFA on how strictly these sanctions will be imposed and this means clubs need to examine the rules carefully.
There is widespread support for UEFA President Michel Platini’s attempts at taking steps to level the playing field. For the first time the governing body has sought to grasp the nettle of expenditure running massively out of control. Very high spending clubs are generally believed to be distorting competition and inflating transfer fees to the detriment of competitors who operate without the support of billionaire benefactors.
But the extent to which UEFA will achieve its announced aims remains to be seen and the question everyone would like to know the answer to is whether it would be prepared to refuse to renew or otherwise withdraw the licence of a large club for failure to comply with its obligations under the Regulations?
Until now, UEFA has spoken of sanctions amounting to financial penalties or transfer fee adjustments and seems to be avoiding talk of exclusion or withdrawal. I doubt whether a large club would succumb to serious sanction without investigating and prosecuting every available line of challenge via commercial and competition law.
Since 2004, clubs have required a licence granted by UEFA to compete in the Champions and Europa Leagues (or the latter’s predecessor, the UEFA Cup). In 2009 UEFA ratified an additional component to the system which means not only that clubs will have to comply with the FFPR but will be monitored on an ongoing basis as to their continued compliance. The rules will come into force gradually from the 2013-14 season with a number of support mechanisms and buffers designed to assist during the introductory years. By 2018 when national European teams should be visiting Russia for the FIFA World Cup, the FFPR state that every licensed club should achieve a ’break-even’ financial position.
For clubs hoping to compete in major European competition, a careful consideration of the regulations should begin now. The UEFA Club Financial Control Panel will be monitoring accounts for the years 2010-11 and 2011-12 to make its initial assessment of each club’s finances.
Understandably, but importantly, a number of exceptions have been written into the FFPR which could also provide clubs with breathing space, including the introduction of the notion of ‘acceptable deviation’ from the breakeven point. This is a buffer zone, set at €45m for the 2013-15 period, reducing to €30m in the following three years to 2018. Oddly, the regulations later stipulate that after that point the UEFA Executive Committee can fix further acceptable deviation.
So is UEFA really likely to flex its muscles in terms of license revocation or refusal, bearing in mind that the minimum value to a club of a Champions League place is in excess of €30m?
Arguably, these regulations have been designed to achieve a position of encouragement rather than propulsion towards an even playing field. Though financial/transfer adjustment penalties are not to be lightly dismissed as meaningful sanctions, they fall well short of the drama and significance of licence refusal. Nevertheless since 2005, UEFA has refused licences to 27 clubs who sportingly won the right to play in European competition. Perhaps it is the smaller, less famous clubs with a more modest reach and ambition who should take these regulations most seriously for it seems to be they who have, in the recent past, fallen foul of the Regulations. Food for thought before embarking on spending sprees or other adventures without a close eye being kept on the balance sheet.
Dr Nick Braslavsky QC is head of chambers at Kings Chambers based in Manchester and Leeds.