On Monday 13 July 2020, Manchester City Football Club (“MCFC”) discovered the news that it had been successful in its appeal to the Court of Arbitration for Sport (“CAS”) to overturn UEFA’s decision to ban the club from European competitions for the next two seasons.
Back in February of this year, UEFA announced that the Adjudicatory Chamber of the UEFA Club Financial Control Body (“CFCB”) had found that MCFC had committed “serious breaches” of UEFA’s Club Licensing and Financial Fair Play Regulations (“FFP Regulations”), the result of which saw disciplinary measures being imposed on MCFC. Those measures consisted of a fine of €30m and a ban from competing in European club competitions for the two forthcoming seasons.
However, as a result of the club’s positive outcome at the CAS, MCFC has had its ban lifted and its fine significantly reduced. Following the landmark decision at the CAS, we take a closer look at the FFP Regulations, UEFA’s investigation into MCFC, the decision of the CAS, the potential next occurrences and what this decision may mean for the FFP Regulations moving forwards.
UEFA’s FFP Regulations
The FFP Regulations were introduced by UEFA in 2010 with a primary objective of preventing football clubs from falling into serious financial difficulties due to overspending. The constraints of the FFP Regulations (which only apply to club’s participating in the UEFA club competitions) mean that clubs are required to operate and “live within” their financial means. Compliance with and enforcement of the FFP Regulations is overseen by the CFCB, which is split into two divisions: an Investigatory Chamber and an Adjudicatory Chamber.
In terms of figures, the FFP Regulations set a cap of €5m on the annual losses that can be recorded by a club, rising to €30m where that excess is offset by club owners and related parties. Essentially, the FFP Regulations stipulate that clubs must ‘break even’ on the basis of money that a club generates for itself, excluding outside investment.
Also of note in the FFP Regulations is Article 56(b) and (c) which levies an obligation on clubs to provide the CFCB “with all necessary information and/or relevant documents” and to “confirm that all the submitted documentation and information are complete and accurate”.
The case against Manchester City
In March 2019, UEFA announced that the CFCB would be conducting a formal investigation into MCFC and that the investigation would focus on “several alleged violations of the FFP Regulations that were recently made public in various media outlets”. UEFA and the CFCB’s investigation into MCFC was opened following the publication of leaked documents on to the Football Leaks website and Der Spiegel in November 2018.
It has been reported and suggested that those documents severely implicated MCFC and that they provided evidence that the club had deliberately misled UEFA, in an attempt to circumvent the FFP Regulations, by inflating its sponsorship revenues. The particular sponsorship agreements called into question were those which concerned MCFC’s shirt and stadium sponsor, Etihad Airways and also Abu Dhabi-based telecoms company, Etisalat. It was reported that, one document in particular appeared to show that Etihad Airways was paying only £8m of a £67.5m sponsorship agreement, with the shortfall coming directly from the club’s parent company owner, Abu Dhabi United Group (“ADUG”).
Following an extensive investigation process, in February 2020, the CFCB announced that it had reached a decision in respect of the allegations against MCFC and that it had found that the club had overstated its sponsorship revenue in its accounts and in the break-even information submitted to UEFA between 2012 and 2016. In addition to this, UEFA also found that MCFC had failed to cooperate with the CFCB’s investigation.
As a result, the CFCB imposed disciplinary measures on MCFC directing that the club should be excluded from participation in the UEFA club competitions in the next two seasons (i.e. the 2020/21 and 2021/22 seasons) and pay a fine of €30 million.
MCFC’s response to its punishment was to appeal the decision to the CAS, as the club had accused UEFA’s processes of a lack of independence, information leaks and a failure to consider a “comprehensive body of irrefutable evidence.”
MCFC’s appeal against the decision of the CFCB took place before the CAS by video conference on 8 – 10 June 2020.
What was the decision from the CAS?
The official press release from the CAS, released on 13 July 2020, briefly set out its decision on the case as follows:-
“Manchester City did not disguise equity funding as sponsorship contributions but did fail to cooperate with the UEFA authorities.
The CAS decision: Exclusion from participation in UEFA club competitions lifted; fine maintained but reduced to EUR 10 million.
The CAS Panel concluded that the official decision made on 14 February 2020 by the Adjudicatory Chamber of the UEFA Club Financial Control Body should be set aside and replaced with the following:-
- MCFC has contravened Article 56 of the Club Licencing and Financial Fair Play Regulations.
- MCFC shall pay a fine of EUR 10,000,000 to the UEFA, within 30 days as from the date of issuance of the arbitral award.”
The brief press release also offered further guidance on the decision making process by indicating that “most” of the alleged breaches reported by the Adjudicatory Chamber were “either not established or time barred”. The limitation period for prosecution for all breaches of the FFP Regulations being five years (as set out within Article 37 of the CFCB Procedural Rules).
The intricacies of the CAS decision eventually surfaced on 28 July 2020 when the CAS released the full contents of its arbitral award, by way of a 93-page document. The arbitral award sheds much more light on the case as it outlines the written reasons as to why the CAS came to the decision that it did.
Did MCFC disguise equity funding as sponsorship contributions?
Starting with the first issue in question, being whether or not MCFC disguised equity funding as sponsorship contribution, MCFC’s case rested on the premise that “the criminally-obtained documents” (the label that MCFC gave to the leaked documents that came to the attention of UEFA) “provide no proper factual basis” for the decision reached by the CFCB (i.e. the CFCB’s finding that MCFC had overstated its sponsorship revenue in its accounts). Despite MCFC having submitted un-redacted original versions of the leaked documents to the CAS, in MCFC’s view, the leaked documents are “confusing snapshots, taken out of context, of matters that simply did not happen in the way that has been portrayed”.
As confirmed by the CAS, the burden of proof in establishing that MCFC committed the breaches for which it is charged was on UEFA and it had to establish to the CAS Panel’s “comfortable satisfaction” that not only did the leaked documents portray the picture they seemed to paint at first glance, but that the arrangements that the documents described actually occurred.
In respect of the evidence presented before it, the CAS was of the view that the leaked documents “themselves are not sufficient evidence to support a finding that MCFC provided incorrect information to UEFA by disguising equity funding as sponsorship contribution”. On the contrary, the CAS Panel, by a two to one majority, found “there is no doubt” that MCFC’s main sponsor Etihad “fully complied with its payment obligation towards MCFC” and, rather importantly, “MCFC rendered the contractually agreed services to Etihad in return”. Crucially, the CAS concluded that there is no evidence to suggest that payments made by Etihad to MCFC actually came from ADUG. In short, UEFA’s claims were simply “not established”. As a result, the CAS Panel came to the conclusion that UEFA’s main charges against MCFC – providing incorrect information to UEFA with respect to having received disguised equity funding through Etisalat and Etihad – “must be dismissed.”
And what was ‘time barred’?
As briefly set out above, Article 37 of the CFCB Procedural Rules provides that prosecution “is barred after five years for all breaches” of the FFP Regulations.
The CAS determined that the effect of Article 37 meant that any breaches committed before 15 May 2014 are “barred from being prosecuted”. Ultimately, this meant that any alleged breaches which related to MCFC’s financial statements for the years ended May 2012 and May 2013 are time-barred, together with the break-even information submitted for the 2013/2014 monitoring process.
Did MCFC fail to cooperate with the CFCB’s investigation?
The second major issue in question concerned MCFC’s failure to cooperate with the CFB’s investigation. The majority of the CAS Panel found that MCFC’s conduct throughout the investigation process was a severe breach of the FFP Regulations and that MCFC is “to be seriously reproached for obstructing the CFCB’s investigations”.
Article 56 – Responsibilities of the ‘licensee’
As it has been found that MCFC did in fact obstruct the investigations of the CFCB, MCFC were found to have breached Article 56 of the FFP Regulations which sets out the “Responsibilities of the licensee”. As a licensee of UEFA, MCFC’s licence certificate confirms that the club has fulfilled the minimum criteria required to participate in UEFA club competitions. The responsibilities of the licensee as set out by Article 56 include:-
- Cooperating with the licensor and the UEFA CFCB in respect of their requests and enquiries;
- Providing the licensor and the UEFA CFCB with all necessary information and/or relevant documents to fully demonstrate that the monitoring requirements are fulfilled;
- Confirming that all submitted documentation and information are complete and accurate; and
- Promptly notifying the licensor in writing about any subsequent events that constitute a significant change to the information previously submitted to the licensor.
As outlined above, whilst it has been accepted by the CAS that MCFC did obstruct the investigations of the CFCB during the evidence gathering process, the initial decision by the Adjudicatory Chamber implementing a two year ban from all UEFA club competitions was not considered to be appropriate. As such, this explains why the CAS has lifted MCFC’s ban from European club competitions and the initial fine of €30m has been reduced to €10m. Rule R46 of the CAS’s Code of Sports-related Arbitration sets out that any award made by the CAS is final and binding upon the parties, subject to recourse available in certain circumstances pursuant to Swiss law.
Can UEFA appeal the CAS decision?
There is one potential – though rather unlikely - avenue remaining for UEFA to appeal the decision reached by the CAS. However, for the reasons explained below, UEFA must act fast.
As the CAS is situated in Switzerland, it is Swiss law that applies. In particular, Article 191 of the Federal Statute on Private International Law provides that an arbitral award may be challenged only before the Swiss Federal Supreme Court. Any appeal proceedings are governed by Article 77 of the Federal Statue on the Swiss Federal Supreme Court and, under that statute, a party wishing to challenge a decision made by the CAS has 30 days from receiving the decision to commence proceedings in Switzerland’s highest Court.
However, excluding the time constraints, this is not as simple as it sounds. UEFA’s ability to take such action relies on the CAS having made either a serious procedural or substantive error in reaching its decision. Though not unprecedented (the Swiss Federal Supreme Court overturned a CAS decision as recently as 2018) this has happened only rarely since the inception of the CAS in 1984. It looks, therefore, that UEFA’s chances of getting the CAS decision set aside are very unlikely even more so now that the deadline for deadline for appeal is fast approaching.
What does this mean for the FFP Regulations?
Some initially, and rather pre-emptively, commented that the ruling of the CAS undermines the credibility of the FFP Regulations and many having expressed the view that the size of the fine (when considering the supreme wealth of MCFC and their Qatari owners) is disproportionate. UEFA may feel comforted that the CAS concluded that there was ‘insufficient’ evidence to support UEFA’s allegations, rather than completely exonerating MCFC. However, the fact the CAS simply dismissed some of UEFA’s allegations against MCFC, on the basis that they were more than five years old, may illustrate a real need to at least to tweak the current FFP Regulations.
Perhaps legitimately, UEFA may argue that the FFP Regulations are still fit for purpose as they have resulted in many clubs across Europe being in a much healthier financial position than before the FFP Regulations were introduced. However, for all the evidence they may produce to support that position, this decision remains a landmark decision in football finance governance and it will, inevitably, lead to further questions about the effectiveness of the FFP Regulations.
