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Manchester City wins fair play rule appeal

Manchester City escaped punishment for breaching UEFA financial fair play rules (FFP) in a decision that will reverberate around European football for years. Mark Bisson reports

16th Jul 2020
Sports business reporter
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Manchester City escapes European football ban
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Reacting to the Court of Arbitration for Sport’s decision on Monday to uphold City’s appeal against a two-year ban from the Champions League, English clubs and football finance experts say FFP has suffered grave reputational damage.

The CAS ruled that City “did not disguise equity funds as sponsorship contributions”, overturning UEFA’s biggest ever sanctions for FFP breaches handed down in February. However, the ruling did not exonerate the club; its €30m fine was reduced to €10m, with the court citing “obstruction of the investigations”.

Sport’s highest court emphasised that most of the alleged breaches reported by the adjudicatory chamber of the UEFA Club Financial Control Body between 2012 and 2016, “were either not established or time-barred”, which suggests the five-year statute of limitations had expired. The reasoned decision is due shortly.

City’s Abu Dhabi owners will be relieved they dodged a Champions League ban, which would have cost around £200m in UEFA prize money and broadcast revenues. The court ruling ends the club’s six-year battle with UEFA; in 2014, the club was charged with breaching FFP rules related to sponsorship. It was sanctioned with transfer and wage caps for two seasons and received a €60m fine, later reduced in a settlement with UEFA.

In March 2019, UEFA launched a fresh investigation into Football Leaks revelations published in the German magazine Der Spiegel in November 2018 alleging that City’s owners had overstated sponsorship revenue in club accounts and in the break-even information submitted to UEFA between 2012 and 2016.

Internal emails and documents obtained from the club by a hacker appeared to reveal how the club’s owners hid and rerouted sources of revenue, including the make-up of sponsorship funding from Etihad Airways, to avoid breaking FFP limits.

FFP in tatters

Now the FFP rules lie in tatters. The failure of UEFA to put together a cast-iron case against the Sheikh Mansour-owned club raises serious questions about its clout and the credibility of regulations designed to curb spending and reduce club losses.

The CAS verdict will do little to discourage other clubs from sticking to the rules and taking on UEFA.

Liverpool boss Jurgen Klopp sought clarity on FFP and took a swipe at Manchester City: “It’s there for protecting teams, protecting the competition. Clubs have to make sure that money they want to spend is based on the right sources.”

While many clubs are reluctant to speak out about this week’s court verdict, one Championship club told AccountingWEB that FFP has been unworkable for years: “We’ve long campaigned for it to be scrapped… and would favour a salary cap instead.”

Dan Plumley, senior lecturer in sport finance at the Sheffield Business School, said the concept of financial fair play has “certainly lost face”.

“I don’t think we’ll see the end of it immediately as things stand. UEFA are committed to it and they will want to keep hold of some kind of financial control mechanism. However, it needs an overhaul,” he said.

While FFP was designed with good intentions, it never really got to grips with financial control. “There were too many exemptions and loopholes for clubs to exploit and clubs were always going to push the envelope (rightly or wrongly) as plenty of businesses do with accounting/industry regs,” said Plumley.

In the wake of City’s court triumph, are the football authorities equipped to unravel creative accounting practices by other clubs and police FFP to prevent further abuses?

University of Liverpool football finance expert Kieran Maguire isn’t so sure: “Provided UEFA can gather evidence quicker and of a better quality then there still is scope for future prosecutions, albeit I suspect many cases may not now go even as far as UEFA’s own adjudicating panel as the threshold for a prosecution is likely to be much higher than was the case in respect of City.”

He continued: “UEFA’s FFP now have both a reputational and credibility gap. Any club subject to a UEFA sanction is now more likely to appeal to CAS, which will increase time delays and legal costs in determining a verdict.”

Need for a shake-up

A shake-up of the financial control system might better serve UEFA. “If it is [to] lower debts then it seems bizarre to prosecute City who had no bank debt whereas clubs such as Manchester United and Spurs owe nine-figure sums to financial institutions. There’s nothing wrong with debt though, it is used in many industries to provide funding. So why should football be any different?

“If, as some ambitious clubs suspect, FFP is there to either create or reinforce a glass ceiling to prevent owners taking smaller clubs to ‘the next level’ and compete for trophies, then UEFA needs to be honest about these objectives,” Maguire added.

“The gap between wealthy clubs and the also-rans has never been wider, which contributes to domestic monopolies for trophies such as Bayern Munich in the Bundesliga (8 in a row) Juventus in Serie A (8 in a row) PSG in France (8 in 9 years) and Celtic in Scotland (9 in a row).  FFP does nothing to stop these on the pitch processions.”

Most aggrieved by the CAS decision are the Premier League clubs who were in for a financial windfall if City were booted out of European competition – among them Manchester United, Spurs, Sheffield United and Wolves.

“The main repercussions domestically is that the side finishing 5th in the Premier League will not earn a Champions League spot next season, which is worth up to £150m,” Maguire said.

“Those Premier League and other European sides who were openly gleeful when Manchester City were given the ban in February will now have to perhaps build bridges, although support from other clubs towards City in respect of the verdict seems to be sparse to date.”

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By graydjames
17th Jul 2020 10:33

"'If it is [to] lower debts .....'"

It isn't is it? It is to try to achieve fair competition.

"'If, as some ambitious clubs suspect, FFP is there to either create or reinforce a glass ceiling to prevent owners taking smaller clubs to ‘the next level’ and compete for trophies, then UEFA needs to be honest about these objectives'"

But that's exactly what it's about - that and avoiding the monopoly of the clubs mentioned - and UEFA have been honest about it haven't they? That is what I and all my football fan friends have always believed anyway. Have we been disillusioned all this time?

It is blatantly obvious even to a half-wit that Manchester City have bought their success with ridiculous sums of money being poured in from Qatar. The same is true of PSG in France, financed by the Qatari government, on the back of Sarkosy's promise to force Platini to back them for the 2022 World Cup. This has rendered the French Ligue 1, which I regularly watch, just a fairly pointless competition to see who can finish second.

This will be the eventual ruin of football. Crazy!

PS I don't think you can bracket Celtic in with the other examples given my this Maquire chap. Entirely different.

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Replying to graydjames:
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By wilkotax
17th Jul 2020 11:03

"It is blatantly obvious even to a half-wit that Manchester City have bought their success with ridiculous sums of money being poured in from Qatar."

It is blatantly obvious that's not the case, if only for the fact that Manchester city aren't owned by Qatar (that's PSG) but by an individual from Abu Dhabi. If you can't get the fundamentals right it does rather detract from the rest of your arguments and suggests that you don't have as firm a grasp on the subject as you might think. Reading Martin Samuels' articles on this topic might be a good place for you to start.

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Replying to graydjames:
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By Michael B
20th Jul 2020 11:01

Football isn't the dominant sport in France and Ligue 1 was never much more than a farmer's league.

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By mkowl
17th Jul 2020 10:57

Football finance expert Keiran Maguire - LOL

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By jamiea4f
17th Jul 2020 11:08

Financial rules don't apply to "elite" clubs who have a seemingly endless tap of funds from various dubious sources under the disguises of "sponsorship" etc to pay their mediocre talent per week more money than you or I would earn in a year. Meanwhile at the other end of the scale clubs are going bust on a regular basis due to lack of financial support. As this case proves the way to get yourself out of financial irregularity cases is to buy it.

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By beancounter333
17th Jul 2020 13:40

"While FFP was designed with good intentions, it never really got to grips with financial control." absolute tosh I say !
The reason UEFA are tied up in knots with FFP is it was not and never was designed to create a level playing field. It was designed to try to preserve the status quo, to protect the big clubs like Barca and Real Madrid, not forgetting Man U and Liverpool.

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Replying to beancounter333:
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By Michael B
20th Jul 2020 10:59

It was actually designed to protect clubs from ending up in the position Leeds United ended up in, by restricting club debt. That was seen off thanks to the number of 'elite' clubs which operate with massive debt - and then subverted into the protectionist racket you describe.

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