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A Sporting Insight
Is UEFA’s Financial Fair Play already dead?
The following article is a free-to-view version of an article published in the World Sports Law Report, Volume 10, Issue 10 (October 2012). The original version can be viewed here: http://www.e-comlaw.com/world-sports-law-report/article_template.asp?Contents=Yes&from=wslr&ID=1485Those who have read my previous articles or opinions regarding UEFA’s Financial Fair Play Regulations (FFP) will be aware of the disdain I hold for them. This article, however, has nothing to do with the merits of the rules merits or the arguments against them or in their favour. Rather, it takes the form of an objective analysis considering their current status. Whilst sanctions cannot be issued until the 2013/2014 season, with the 2010/11 and 2011/12 accounts involved in the 2013/14 calculations, the era of Financial Fair Play (FFP) should already be upon us; an era which was supposed to bring with it a new standard of financial prudence for European football. However, ambiguity within the rules, actions by some of Europe’s top clubs and questionable comments by senior UEFA officials threaten to destroy the world of Financial Fair Play before it has even started.Overview of the rulesIn simple terms, the aim of the Financial Fair Play Regulations with a few exceptions is to limit a football club’s expenditure to the level of its revenue[1].Each of the following sections explains a potential barrier to the efficacy of the Financial Fair Play regime. Questionable sponsorship dealsManchester City’s sponsorship deal with Etihad and Paris Saint Germain’s deal with the Qatar National Bank worth £40million per year and €100million per year respectively have raised eyebrows throughout the football universe because such transactions seemingly provide the means for wealthy owners to continue to bankroll their clubs just as they were doing in the pre-FFP era. The accusation is that the companies who have entered into these sponsorship deals have direct links with ownership of the clubs and have inflated the prices purely to assist the clubs in their quest for FFP compliance.The FFP Regulations do contain a provision which seeks to prevent certain ‘related party transactions’. However, in order for UEFA to have the right to assess whether or not the deal represents fair value, the company entering into the sponsorship deal must first be considered a ‘related party’. To satisfy this requirement, it is thought that the company must have some influence on the way the football club is run[2]. This requirement looks as though it could be difficult to satisfy. Whilst the chairman and vice chairman of Etihad are Sheikh Mansour’s half-brothers, I struggle to see how anyone could demonstrate that they have any influence on how Manchester City is run.Consequently, it is difficult to imagine a situation in which a transaction of this type will be struck down. Therefore, one can clearly see the opportunity available to football clubs like Manchester City and PSG to undermine the FFP break-even requirements by artificially increasing their revenues through this method. Relevant football incomeAlthough it hasn’t attracted the same media attention as the excessive sponsorship deals, Trabzonspor have stated that they plan to build a hydroelectric power station in order to increase the club’s revenue. If such a transaction was allowed for FFP purposes, could Sheikh Mansour transfer one of his money-generating assets or businesses to Manchester City Football Club, thus allowing the revenue it generates to be included in calculations relating to FFP compliance? If such arrangements were allowed, they would provide a serious threat to the credibility and effectiveness of Financial Fair Play.Unsurprisingly, Annex X(B) of the FFP Regulations states that such income will not count as club revenue for FFP purposes if ‘it is clearly and exclusively not related to the activities, locations or brand of the football club’. However, Swiss Ramble points out that ‘the same clause does confusingly allow the inclusion of revenue from non-football operations if those operations are ‘clearly using the name/brand of a club as part of their operations’ with no reference to location’[3]. So perhaps there is scope for owners to organise their business arrangements or set up new ventures in a way which will increase the avenues from which revenue can be generated for the purposes of FFP.If the scope of this possibility turns out to be wide, it provides another opportunity for owners to get round the FFP Regulations and continue to invest out of proportion to what the general public would consider to be relevant football income. UEFA’s own self-interestsThere are two types of conflicts of interest which may come into play.Firstly, I will assess the impact that sanctioning a top European club could have on UEFA. Imagine a situation in which a few teams like Inter Milan, Valencia and Chelsea fail to meet the break-even test and are consequently banned from European competitions. Consider the impact that their absence will have on the UEFA Champions League both financially and with regards to the credibility of the tournament which is supposed to pit the best football teams against each other in order to establish which is the best in Europe. A competition of this sort, which omits the champions from some of Europe’s elite leagues, will be severely harmed. Is it really in UEFA’s interest to start banning clubs from its most prestigious competition?The second type of conflict relates to specific links between UEFA and certain companies:• Michel Platini’s son works for QSI, the Qatari owners of PSG;• Kremlin-owned Gazprom, owner of Zenit St Petersburg, is a major partner of the UEFA Champions League.Zenit St Petersburg and PSG have both engaged in extensive transfer and wage expenditure and are consequently considered to be two clubs severely at risk of breaching the rules. I am not stating with certainty that Platini lacks the power or integrity to act fairly when assessing PSG’s and Zenit’s FFP compliance, particularly with regards to the aforementioned sponsorship deal, but some would certainly deem these conflicts of interest to be a threat to the fair application of the rules. If such suspicions turn out to be founded, UEFA will find it very difficult to sanction anybody else. Lack of clarity within the rules regarding sanctionsAt the inception of the FFP Regulations, the absence of clear sanctions for contraveners was immediately noted. Some saw this as a positive omission, enabling UEFA to take a flexible approach and look at the wider context when applying sanctions. This is certainly true to an extent. In April this year, UEFA announced a wide-range of sanctions that they would be willing to use[4] and Alasdair Bell, a senior UEFA official, subsequently stated that only repeat offenders will receive the toughest of penalties, namely forced withdrawal from UEFA’s competitions. He also stated the innovative sanction for first offenders that their club’s UEFA competition squad sizes may be cut by five men[5]. It has also been repeatedly stated that, despite a club falling foul of the provisions, if UEFA can see that the club is moving in the right direction towards break-even, UEFA will be lenient.Whilst nothing that has been said by UEFA officials is binding, their words will hardly strike fear throughout the sugar daddy universe and until UEFA state with greater clarity and severity the specific action they will take on those who flout the rules, some clubs may think it worth the risk to continue to spend.Overall resultAs has been explained, these four factors pose a significant threat to the long-term success of Financial Fair Play. Of course, people will point to the impact that the rules have already had. Whilst PSG has continued to spend extravagantly, those at Manchester City were particularly cautious throughout the summer transfer window indicating that they are taking the rules seriously. Consequently, it cannot be said that Financial Fair Play is already dead.However, unless UEFA states clearer sanctions to act as deterrents, takes a stricter approach to contrived business arrangements and is willing to act against its own self-interests, it will not be long before Platini and co are forced to throw in the towel.[1]. For a more comprehensive analysis of how the rules work, see ‘Financial Rules: UEFA’s Financial Fair Play Regulations: analysis’, World Sports Law Report (WSLR) Volume 8 Issue 12, December 2010 at www.e-comlaw.com/world-sports-law-report/article_template.asp?Contents=Yes&from=wslr&ID=1292;‘UEFA FFPR Regulations: the grounds for legal challenge’, WSLR Volume 9 Issue 3, March 2011; ‘UEFA’s FFPR & ‘third party’ rules: an English handicap’, WSLR Volume 9 Issue 12, December 2011 atwww.e-comlaw.com/world-spor
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