Fair play or foul play?
Manchester City have appealed to the Court of Arbitration for Sport against decisions taken by the UEFA Club Financial Control Body regarding City’s alleged non-compliance with UEFA's Club Licensing and Financial Fair Play Regulations.
The Club Licensing and Financial Fair Play Regulations (“the Regulations”) were introduced in 2011 to control club spending or “financial doping” within the football industry. UEFA considered the level of debt incurred by clubs to be unsustainable with total losses amounting to over EUR 5 billion between 2008 and 2011. The Regulations aim to improve the economic and financial capability of UEFA clubs, increasing their transparency and credibility and to encourage responsible spending for the long-term benefit of football.
The Regulations are enforced by the Club Financial Control Body (“CFCB”), which is comprised of an Investigatory Chamber and an Adjudicatory Chamber. Eligible clubs are monitored using certain criteria including the “break-even requirement.” In order to comply with the break-even requirement, club losses must be kept within EUR 5 million over a three-season period. Losses can be increased up to a final maximum amount of EUR 30 million provided that the excess is entirely covered by contributions from the club’s owners or related parties. “Relevant income” for the break-even calculation includes gate receipts, broadcasting rights, prize money and sponsorship (i.e. “pure” football income).
UEFA launched their investigation in March 2019 after internal emails published by German magazine Der Spiegel were alleged to show the club had inflated its sponsorship agreements in 2013 in order to meet the break-even requirement. Most notably, it is alleged the value of its main sponsorship, Etihad, had been significantly increased by investment by the club’s owner, Sheikh Mansour bin Zayed Al-Nahyan of the Abu Dhabi ruling family.
The Regulations allow sponsorships by companies connected to owners, but only if they are for “fair value”, being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction. Der Spiegel’s report alleged some of the Abu Dhabi sponsorship contracts were valued at three times more than their “fair value.”
Instead of concluding a settlement agreement with the Club, the investigatory arm of UEFA’s CFCB referred City to its Adjudicatory Chamber in May. City have denied any wrongdoing, and have appealed to the Court of Arbitration for Sport (“CAS”) to throw out the case. The club claims the emails were stolen and their contents taken out of context.
Under the procedural rules governing the CFCB, clubs have the right to appeal a final decision of the CFCB but there is no scope to appeal the decision to refer the case to the Adjudicatory Chamber. This was confirmed by CAS in 2018 in AC Milan v. UEFA (CAS 2018/A/5808). Accordingly, a successful appeal in relation to the referral seems unlikely.
Meanwhile, City awaits the decision of the CFCB. Sanctions for failure to comply with the Regulations range from warnings and fines to spending restrictions and competition bans, meaning, if the allegations are proven, City could face the prospect of expulsion from the Champions League in 2020. A decision of this kind would be one of the most high-profile and controversial since the adoption of the Regulations. In any event, the investigation indicates UEFA’s determination to achieve its objectives and serves as a warning to any club that may be tempted to manipulate its contracts.
For more information please contact Tessa Newman on +44 (0)20 7203 8843 or at Tessa.Newman@crsblaw.com.
The Future of Property Careers
Join to our panel discussion and Q&A with industry leaders on the range of opportunities within the property and construction sector.
COVID-19 Vaccination – can an employer make it compulsory for employees?
We review what legal issues to take into account when considering to make vaccination compulsory as an employer.
Music to our ears? Well, perhaps not for Apple.
A feud first began when the music streaming giant, Spotify, filed a complaint against music streaming provide rand competitor, Apple Inc.
Linking ESG and Executive Pay
How does a business go about embedding a focus on strong ESG performance into the structures and culture of its organisation?
National Security and Investment Act granted Royal Assent
The Act establishes a new regime for the review of mergers, acquisitions and other transactions that could threaten national security.
Recent Trends In Firewall Legislation: BVI, Bermuda And Gibraltar
Charles Russell Speechlys advises Waverton on acquisition of Cornerstone Asset Management
Established in July 2010 and with offices in Edinburgh and Glasgow, Cornerstone offers wealth management and financial planning advice.
What do the new Debt Respite Scheme Regulations mean for Landlords and Tenants?
This will provide legal protection from creditors in the form of either a breathing space or a mental health crisis moratorium.
Charles Russell Speechlys promotes five to Partner
The promotions are effective 1 May 2021 and are accompanied by one Legal Director and 15 Senior Associate promotions.
Risk allocation in commercial leases: the High Court considers rent suspension, insurance and frustration arguments
Read our summary of the full judgement on the latest Covid arrears case.
Charles Russell Speechlys boosts private wealth offering with the hire of an international tax team
Robert Reymond will be joined at the firm by Leigh Nicoll, Emma Tyrrell and Oliver Cooper.
Proposed Takeover Code Amendments – Key Changes
The Consultation Paper has now been followed by a corresponding response paper which made certain modifications to the initial proposals.
Competition and Markets Authority announces review of the EU vertical agreements block exemption
The UK Competition and Markets Authority is reviewing the future application of the EU vertical agreements block exemption in the UK.
Playing Copycat – Why have M&S begun legal action against Aldi over Colin the Caterpillar?
M&S’s chocolate caterpillar was the first of its kind to land on our supermarket shelves, over 30 years ago.
Building Back Better: Future Gazing
What’s next for the hospitality industry post-pandemic?
Building Back Better: Re-examining your proposition
Why hospitality businesses should re-examine their proposition now
Building Back Better: Real Estate and Restructuring
How and why should hospitality businesses re-structure post pandemic?
Charles Russell Speechlys advises Fudco Partnership on sale to Exponent-backed Vibrant Foods
Fudco is a family-owned business selling South Asian ethnic foods in UK and Europe.
Charles Russell Speechlys advises Polar Technology on investment by BGF
Polar Technology Management Group is a holding company for engineering businesses operating at the leading edge of technology.
Electrical safety standards in the private rented sector from 1 April 2021
The Electrical Safety Standards in the Private Rented Sector will apply to existing specified tenancies from 1 April 2021.