In a session organised by the Guardian in 2015 on the increasing influence of money in English Football, Duncan Drasdo, CEO of the Manchester United Supporters Trust commented, "The growth in revenue has attracted the wrong kind of owners, particularly those looking to use clubs as a cash cow". The negative influence of money was always lurking over the game but never came out as to be formally criticized until 14th of this month.
The last season EPL champions Manchester City (MCFC) has been banned from UEFA Champions League for next two seasons by the independent Adjudicatory Chamber of the Club Financial Control Body (CFCB) for violating UEFA's Financial Fair Play (FFP) Rules. Also known as "Financial Doping", City was found to have overstated its sponsorship revenue in its accounts and in the break-even information submitted to UEFA between 2012 and 2016. The situation seems to be triumphant against the overspending middle east business owned clubs so much so that not so relevant La Liga President Javier Tebas praised the UEFA's decision.
Before moving onto the background of the verdict and its intricacies, it will be convenient to discuss the relevant rules and the adjudicating body.
FINANCIAL FAIR PLAY RULES
FFP took effect from the 2011 season with the objective to "increase the integrity and longevity of the game" (Article 2). They were again updated in 2015 that too not with the intent to sort out its former version criticisms but rather to take into account clubs who had then gone into an "economic shock" and give them some leeway. The main purpose of FFP is to ensure clubs did not have any overdue payables. It introduced the break-even analysis (Article 58-64) which means that a club's spending shall be balanced with its revenue. This revenue includes gate receipts, sponsorship and advertising, broadcasting rights, commercial activity, UEFA prize money and other operating income all count in the break-even analysis. As for expenses, the break-even analysis takes into consideration: cost of sales/materials, employee benefits and other operating expenses. If in the relevant "reporting period", break even analysis is total zero or more, UEFA will judge the club to have a surplus. However, if it is less than zero, UEFA will find the club will have a break-even deficit.
The main crux of FFP, which becomes relevant in the present case of Manchester City is the concept of "related parties" and regulation in respect of it. "Related Parties" includes individually related parties and legal entities. Some clubs try to conceal contributions from related parties as payment for services.
CLUB FINANCIAL CONTROL BODY
The enforcement of FFP lies with CFCB. It has two chambers: investigatory chamber and adjudicating chamber. The former conducts the investigation, determines the facts and gathers all relevant evidence. The latter takes a final decision on the case which varies from warning to the exclusion from competitions or withdrawal of titles. The appeal from CFCB lies with the Court of Arbitration of Sports, Lausanne. (Article 61 of the UEFA Statutes)
The major practice at CFCB has been of settlement between the investigatory chamber and the concerned club. A number of prominent clubs like Paris Saint-Germain, Inter Milan, FC Porto have entered into settlement agreements in order to avoid lengthy judicial procedure.
THE PRESENT BAN
The chain of events started after leaks of Manchester City's internal emails by the German magazine Der Spiegel. The information to Dep Spiegel was provided by Mr. Rui Pinto, a Portuguese national who has now been arrested by his country's authority for computer hacking for this case only. As was discussed earlier, the email showed violation of "related party" rule. The leaked emails and documents showed that the Club's owner Sheikh Mansour was funding expenses of the club through his country's airline, Etihad. Thus deceiving UEFA over different sources of funding on balance sheet for Man City while in reality it was flowing from one source only.
One of the emails, from City's then chief financial officer, Jorge Chumillas, headed "Cashflow", stated that Mansour's own company vehicle, the Abu Dhabi United Group (ADUG), would be paying £57m as a "contribution to 13/14 sponsorship fee", while only £8m was Etihad's "direct contribution". The CFCB investigatory chamber chaired by Yves Leterme, a former Belgian prime minister on the basis of these reports "in various media outlets" opened an investigation on 7 March 2019 for potential breaches of Financial Fair Play (FFP) regulations. On 16 May, 2019 chief investigator, after having consulted with the other members of the independent investigatory chamber decided to refer MCFC to the CFCB adjudicatory chamber following the conclusion of his investigation.
On 14th February, 2020 the Adjudicatory Chamber of the UEFA Club Financial Control Body (CFCB) found that Manchester City Football Club "committed serious breaches of the UEFA Club Licensing and Financial Fair Play Regulations by overstating its sponsorship revenue in its accounts and in the break-even information submitted to UEFA between 2012 and 2016". It imposed disciplinary measures directing that "it shall be excluded from participation in UEFA club competitions in the next two seasons (ie. the 2020/21 and 2021/22 seasons) and pay a fine of € 30 million". UEFA has refused to give a full reasoned decision till the final award by the CAS in appeal as MCFC has the right to appeal there. Though this decision won't affect the women's team of MCFC.
THE WAY AHEAD
This is not the first instance when MCFC had to face CFCB. In 2014, the investigation chamber determined that City had a deficit of €180m over that two-year period, vastly in excess of the €45m permitted, and in May that year agreed a settlement which some at UEFA believed was too lenient.
Though the end result of proceeding against MCFC is going to have an unprecedented effect on money in football, the pundits are skeptical about the final judgment in the light of deeply rooted corruption in UEFA. It was observed during UEFA proceeding against PSG where the basic norm of nemo judex in sua causa was ignored: P.S.G's president holds a seat on the UEFA's executive committee. Further, he is also a major executive at beIN Media Group, a broadcast company that is the biggest buyer of UEFA's television rights.
With the scope of problems ever increasing for Manchester City (Manchester City Could Have Two Premier League Titles Taken Away From Them), the stakes are getting higher for it to lose at CAS. The case may not have major legal implications in this realm of law but its politico-reform significance for controlling money and corruption in football will be Brobdingnagian. If UEFA's order gets reversed on proposed MCFC arguments, it will be a major precedent for "elite" clubs in tackling FFP proceedings. Most importantly the case zeroes down to governing bodies trying to tackle out money mindedness of owners camouflaged in popular football fan support and national prestige. We are to witness a history made off the field.
[The authors are Delhi-based lawyers.
The opinions expressed in this article are the personal opinions of the authors. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]