UEFA announced on 8
May that it had entered into Financial Fair Play settlement agreements with 10 European
football clubs. Together with the four other agreements made in February 2015, this brings the total to 14 FFP
settlements for 2015 and 23 since UEFA adopted modifications in its Procedural
rules and allowed settlements agreements to be made between the Clubs and the Chief
Investigator of the UEFA Club Financial Control Body (CFCB).[1]
In the two years during
which UEFA’s FFP regulations have been truly up and running we have witnessed the
centrality taken by the settlement procedure in their enforcement. It is
extremely rare for a club to be referred to the FFP adjudication chamber. In
fact, only the case regarding Dynamo Moscow has been referred to the adjudication chamber. Thus, having
a close look at the settlement practice of UEFA is crucial to gaining a good
understanding of the functioning of FFP. Hence, this blog offers a detailed
analysis of this year’s settlement agreements and compares them with last year’s settlements.
The two tables below
provide an overview of last year’s nine settlement agreements (table 1) and
this year’s settlement agreements (tables 2 and 3).
Table2014.jpg (310KB)
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Table2015(1).jpg (259.6KB)
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Table2015(2).jpg (228.4KB)
DIFFERENCES WITH LAST YEAR’S SETTLEMENTS
The financial contribution (fines)
In 2015, the financial
“sanctions” have been much lower than last year, especially with regard to the
highest penalties. In 2014, Paris Saint-Germain and Manchester City agreed to
pay an overall of €60 million (€40 million, subject to the fulfilment of the
conditions imposed by UEFA to the club). This year, the two highest financial
contributions will be those of FC Internazionale (€20 million) and AS Monaco
(€13 million). Moreover, the contributions imposed on FC Internazionale and AS
Monaco have a conditional element: should the clubs fulfil UEFA’s requirements,
they will get €14 million and €10 million returned to them respectively.
Last year, the
revenues derived by the clubs from participating in European competitions were
withheld by UEFA in every settlement agreement. However, this year, UEFA will withhold
revenue from the UEFA competitions in only some cases, namely for FC Krasnodar,
FC Lokomotiv Moscow, Besiktas, AS Roma, AS Monaco and FC Internazionale.
Moreover, another
difference concerns the way the club may pay the ‘conditional amount’ provided
in the settlements. Last year, the conditional amounts were “withheld and
returned” to the club, provided it fulfilled the “operational and financial
measures agreed with the UEFA CFCB”. This year, however, these conditional
amounts “may be withheld in certain circumstances depending on the club’s
compliance”. This means that there is no a priori retention of the money by UEFA
that is subject to the achievement of the objectives agreed.
The deficit limits
As can be seen from the
tables above, UEFA limits the total deficit that clubs are allowed to have. The
clubs must comply with this UEFA obligation for one or two seasons, depending
on the settlement agreement. This condition was imposed in both the 2014 and
2015 agreements. Yet, some differences arise with regard to the deficit allowed
for clubs.
These differences
become apparent when comparing FC Rubin Kazan (2014) with AS Roma (2015). Both clubs
agreed to a three seasons duration of the settlement, a €6 million fine, a
reduction of the squad (22 players for AS Roma and 21 for FC Rubin Kazan), and
a limitation on the number of player registrations. However, the maximum
allowed deficit for each club is different. As regards AS Roma, UEFA restricted
the deficit authorized to €30 million. It should be noted that, according to
UEFA’s own regulations, the maximum acceptable deviation is €30 million.[2] In
other words, this is not a real sanction imposed on AS Roma, since every European
club has the duty to comply with the maximum acceptable deviation rule. In its agreement
with FC Rubin Kazan, on the other hand, UEFA imposed a deficit limit of €30
million for the first season and full break-even compliance for the following
season. This is a harsher sanction than in the agreements found in 2015, in
which a specific deficit is permitted for the second season of the settlements
(see the FC Krosnodar, AS Roma, Besiktas and AS Monaco agreements).
The salary cap
This salary cap measure is regulated in
Article 29(1)(g) of the Procedural Rules Governing the UEFA Club Financial
Control Body. According to this provision, a salary cap is a “restriction
on the number of players that a club may register for participation in UEFA
competitions, including a financial limit on the overall aggregate cost of the
employee benefits expenses of players registered on the A-list for the purposes
of UEFA club competitions”.
In 2014, every
settlement reached by the clubs with UEFA prohibited the increase in salary
expenses for the first season following the agreement. In 2015, this condition
was not stipulated in all of the agreements. More concretely, the agreements
settled with Ruch Chorzów, Panathinaikos, Hapoel Tel Aviv, and Hull City, do
not include a salary cap.
Changes have also
occurred regarding the structure of the salary cap imposed. In 2014, a unitary
interpretation of the salary cap
provision was used by UEFA. In the case of Manchester City, for of example, UEFA
stated that “employee benefit expenses cannot be increased during two financial
periods”.[3]
In 2015, however, UEFA
used two different ways to ‘cap’ salaries:
In the cases of the FC Rostov,
CSKA Sofia and Kardemir Karabükspor settlements, it held that “the total amount of the Club’s aggregate cost of employee benefits
expenses is limited”.
With regard to FC Internazionale and Besiktas, the settlements hold that
“the employee benefit expenses to revenue ratio is restricted and that the
amortisation and impairment of the costs of acquiring players’ registration is
limited.”
The first alternative
is similar to the solution adopted in 2014 to cap players’ wages. As UEFA
releases only some elements of the settlements, the precise levels of the cap
imposed remain unknown, as was the case last year. The mechanism used by UEFA in
the case of Besiktas and FC Internazionale is different. It is based on a fixed
ratio between employee benefit-expenses and the clubs revenue. The cap becomes
more dynamic, as it is coupled to another variable, the revenue of the club,
but also less predictable.
Is the settlement a sanction or an agreement?
According to UEFA’s regulations, the UEFA CFCB Investigatory Chamber has
the power to negotiate with clubs who breached the break-even compliance
requirement as defined in Articles 62 and 63 UEFA Club Licensing and Financial
Fair Play Regulations. If a settlement is not reached, the CFCB Adjudicatory
Chamber will unilaterally impose disciplinary sanctions to the respective clubs.
The ‘settlement
procedure’ allows for a certain degree of negotiation between the parties. Settlements
are likely to be in the interest of both parties. Firstly, by agreeing to
UEFA’s terms, the club secures its participation in European competitions which,
in many cases, are one of its main sources of revenue. Not agreeing to the
terms would entail risking a much bigger sanction. Naturally, such a sanction
can be appealed in front of the Court of Arbitration for Sport (CAS), but such
a procedure would be expensive, time consuming and does not guarantee a better outcome.
To UEFA, a settlement is a guarantee that the case ends there, that its FFP
regulations do not get challenged in front of the CAS, but also that it does
not need to invest resources to fight a long and costly legal battle. Moreover,
the settlement procedure provides the flexibility needed for a case-by-case
approach to the sanctions.
CONCLUSION
The settlement
procedure is a key element to the current implementation process of the UEFA
FFP regulations. UEFA is still in the learning phase concerning FFP and the
recourse to settlements is a way to provide for much needed regulatory flexibility.
Even if the settlements have many advantages for all the parties involved, they
also have detrimental effects. It is regrettable that they are not published in
full, even if slightly redacted, so that clubs may enjoy a higher legal
certainty when facing an FFP investigation. This lack of transparency makes it
harder to predict and rationalize the sanctions imposed and exposes UEFA to the
risk of being criticized for the arbitrariness of its settlement practice.
This year’s
settlement harvest was undoubtedly more lenient than in 2014. UEFA has
apparently decided to water down its FFP sanctions, maybe to make sure that FFP
survives the many legal challenges ahead. The balance between under-regulation,
that would render FFP toothless, and over-regulation, that would make it
difficult for clubs to invest and take risks, is indeed very difficult to find.
UEFA’s settlement practice is a soft way to walk this complex line.
[1] Article 14(1)(b) and
Article 15 of the Procedural Rules Governing the UEFA Club Financial Control
Body – Edition 2014.
[2] Article 61 UEFA Club Licensing and Financial Fair Play
Regulations
[3] Decision of the Chief
Investigator of the CFCB Investigatory Chamber: Settlement Agreement with
Manchester City Football Club Limited (2014)