Introduction
The first part of this
two-part blog on multi-club ownership in European football outlined the circumstances
leading to the adoption of the initial rule(s) aimed at ensuring the integrity
of the UEFA club competitions (Original Rule) and retraced the
early existence of such rule(s), focusing primarily on the complaints brought
before the Court of Arbitration for Sport and the European Commission by the
English company ENIC plc. This second part will, in turn, introduce the
relevant rule as it is currently enshrined in Article 5 of the UCL Regulations
2015-18 Cycle, 2017/18 Season (Current Rule). It will then explore how the UEFA Club Financial
Control Body (CFCB) interpreted and applied the Current Rule in the Red Bull
case, before drawing some concluding remarks.
The Red Bull case: The concept of decisive influence
Background
The company Red Bull
GmbH (Red Bull) started building its football empire[1] in
2005 by transforming the Austrian club SV Wüstenrot Salzburg[2]
into what would henceforth be known as FC Red Bull Salzburg (RB
Salzburg). As regards its legal form, RB Salzburg is currently a
limited liability company (GmbH) wholly owned by the association FC Red Bull
Salzburg e.V. Until 2015, when the club began a disengagement
process from Red Bull, the
statutes of FC Red Bull Salzburg e.V. conferred on Red Bull the right to
appoint and remove the members of the association's board.
In 2009, with the
objective of playing the top-flight Bundesliga within a decade, Red Bull
invested in the German club SSV Markranstädt, at that time competing in the
fifth tier of German football. The club was subsequently rechristened as RasenBallsport[3]
Leipzig (RB Leipzig) and rebranded. Although RB Leipzig thrived on the
pitch, it attracted much
criticism off
the pitch for attempting to circumvent the so-called '50+1 rule', according to
which German football clubs may not allow investors to acquire a majority of
their voting rights.
Since
Red Bull's takeover of RB Leipzig in 2009, the two clubs have maintained a
close cooperation involving an increased transfer activity which has seen
players moving from one club to the other on a regular basis. With the help of
players like Naby Keïta, who moved from RB Salzburg to
RB Leipzig in the summer of 2016, the German club finished second in the
2016/17 Bundesliga season, its first-ever in the top flight, and qualified for
the 2017/18 UCL group stage. RB Salzburg, for their part, added in the 2016/17
campaign another domestic title to their collection and secured a spot in the
2017/18 UCL second qualifying round.
The Current Rule
As mentioned above, the
Current Rule is encapsulated in Article 5 of the UCL Regulations 2015-18 Cycle,
2017/18 Season (UCL Regulations). It preserves the structure of the Original
Rule, making admission to the UEFA club competitions conditional upon
fulfilment of three specific criteria. In terms of substance, however, the
Current Rule differs in two important aspects. First, unlike the Original Rule
which outlawed ownership, personal and other links only between clubs
participating in the same UEFA club
competition, the Current Rule extends this prohibition to clubs participating
both in the UCL and the UEFA Europe League. Second, an individual or legal
entity is now deemed to have control
over a club not only if he/she/it (i) holds a majority of the shareholders'
voting rights; (ii) is authorized to appoint or remove a majority of the
members of the administrative, management or supervisory body; or (iii) is a
shareholder and single-handedly controls a majority of the shareholders' voting
rights, but also if he/she/it (iv) is able to exercise by any means a decisive influence in the
decision-making of the club.[4]
The purpose of this latter change is to address situations where an individual
or legal entity falls short of having de
jure control over a club, but nevertheless remains able to exercise such an
influence that may, if exercised in more than one club, jeopardize the
integrity of the UEFA club competitions. As will be discussed in the next
section, the concept of decisive
influence played a pivotal role in the Red Bull case.
Furthermore, the club coefficient no longer serves as a
principal criterion in determining which of the two or more commonly owned
clubs should participate in a UEFA club competition. Under the Current Rule,
the club which qualifies on sporting merit for the more prestigious UEFA club
competition is to be favoured.[5] If
two or more commonly owned clubs qualify for the same UEFA club competition,
then the club which was best-ranked in its domestic championship should be
admitted.[6]
Proceedings before the CFCB
On 15 May 2017, soon
after RB Salzburg and RB Leipzig had both secured their place in the 2017/18
UCL, the UEFA General Secretary dispatched a letter to the CFCB, expressing his
concern that the clubs might not fulfil the criteria enshrined in the Current
Rule. The subsequent investigation conducted by the CFCB Investigatory Chamber
relied to a great extent on compliance reports prepared by independent
auditors. On 26 May 2017, the CFCB Chief Investigator referred the case to the
CFCB Adjudicatory Chamber, concluding that the clubs had failed to satisfy the
criteria set out in the Current Rule and, as a result, only RB Salzburg should
be admitted to the 2017/18 UCL.[7] In
particular, the CFCB Chief Investigator suggested that Red Bull exercised decisive influence in the
decision-making of both RB Salzburg and RB Leipzig, and identified several ways
in which this influence manifested itself. For instance, the CFCB Chief
Investigator drew attention to the presence of certain individuals allegedly
linked to Red Bull in the decision-making bodies of both clubs or an unusually
high level of income received by the clubs from Red Bull via sponsorship
agreements.[8]
In its decision handed down on
16 June 2017, the CFCB Adjudicatory
Chamber paid attention mainly to the changes made by RB Salzburg as part of the
club's disengagement process from Red Bull. As noted above, Red Bull ceased to
have the right to appoint and remove the board members of FC Red Bull Salzburg
e.V. in 2015, when the association's statutes were amended accordingly. With
this in mind, the CFCB Adjudicatory Chamber had to examine whether Red Bull was
not able to exercise decisive influence
in the decision-making of RB Salzburg (and RB Leipzig) by any other means.
The CFCB Adjudicatory
Chamber was confronted with an onerous task, in particular because the UCL
Regulations do not specify when an individual or legal entity is deemed to have
decisive influence in the
decision-making of a club. Nor do these regulations clarify how such a level of
influence could be attained. Having examined the wording and purpose of the
Current Rule, the CFCB Adjudicatory Chamber asserted that ''the benchmark for establishing decisive influence is a high one'',[9]
finding support for its conclusion in the EU Merger
Regulation.[10] For the avoidance of doubt, the
Chamber further noted that the concept of decisive
influence is not to be confused with that of significant influence which features in the UEFA Club
Licensing and Financial Fair Play Regulations, Edition 2015.[11]
In
determining whether Red Bull was indeed capable of exercising decisive influence in the
decision-making of both clubs, the CFCB Adjudicatory Chamber observed from the
aforementioned compliance reports that RB Salzburg had removed certain individuals
allegedly linked to Red Bull from the club's decision-making bodies and
terminated certain loan agreements entered into with the beverage company.[12]
With the aim of refuting the CFCB Chief Investigator's allegations, RB Salzburg
presented additional documentary evidence. According to the CFCB Adjudicatory
Chamber, it followed from such evidence, inter
alia, that Red Bull had reduced the amount of sponsorship money paid to the
Austrian club or that a cooperation agreement between the two clubs had been
terminated.[13]
This evidence alleviated the CFCB Chief Investigator's concerns to such an
extent that he eventually decided to withdraw his objection to the admission of
RB Salzburg and RB Leipzig to the 2017/18 UCL.[14]
Consequently, the CFCB Adjudicatory Chamber held that, at the time of its
decision, Red Bull's relationship with RB Salzburg resembled ''only a standard sponsorship relationship''.[15]
Having concluded that Red Bull did not have decisive
influence in the decision-making of RB Salzburg, there was no need for the
Chamber to consider Red Bull's relationship with RB Leipzig.[16]
Furthermore,
the CFCB Adjudicatory Chamber verified whether one of the clubs did not
exercise decisive influence over the
other. In this regard, the Chamber referred to the cooperation agreement and
the increased transfer activity between the clubs. Nonetheless, the Chamber
eventually stated that there was insufficient evidence to arrive at the
conclusion that RB Salzburg exercised decisive
influence over RB Leipzig or vice
versa.[17]
Further implications and
concluding remarks
Rules aimed at ensuring
the integrity of club competitions also exist at the national level. In
England, the Rules of the Premier League stipulate, inter
alia, that a person[18] –
be it either natural person, legal entity, firm or unincorporated association –
may not (i) be involved in or have any power to determine or influence the
management or administration of more than one club participating either in the
Premier League or the English
Football League;[19]
and (ii) hold or acquire any significant
interest in more than one club participating in the Premier League. A
person is deemed to have acquired significant
interest in a club if he/she/it holds 10
per cent or more of the shareholders' voting rights.[20] In Spain, an individual or legal
entity may not hold 5 per cent or more of
the shareholders' voting rights in more than one club participating in a
professional competition at the state level.[21]
It follows that both in
England and Spain, the pertinent regulations set a relatively low threshold of
the shareholders'
voting rights that an individual or legal entity may not exceed in more than
one club participating in the same domestic club competition. Moving back to
UEFA, the Current Rule sets the relevant threshold at 50 per cent (majority of the shareholders' voting rights), but
complements it with the 'catch-all' notion of decisive influence.
I
believe that the CFCB Adjudicatory Chamber may have missed a golden opportunity
in the Red Bull case to clarify further the rather vague concept of decisive influence. Unfortunately, the
Chamber limited itself to stating that ''the
benchmark for establishing decisive influence is a high one'',[22]
without providing any concrete examples of how such a level of influence could
be attained or manifested in practice.[23]
The concept of decisive influence therefore
remains shrouded in legal uncertainty. Moreover, in order to avoid
speculations, the Chamber could have provided more details about the changes
made by RB Salzburg. For instance, it could have specified which individuals allegedly
linked to Red Bull were removed from the club's decision-making bodies or how
the amount of sponsorship money paid to the club was reduced. Such details
become particularly important if the concept of decisive influence plays a central role, because in this context
the general public will not be able to access most of the relevant information via
commercial registers. In contrast, this will not be the case with legal systems
in England or Spain which employ a threshold of the shareholders' voting rights
as a key criterion. Thus, if UEFA fails to provide such details (subject to
confidentiality rules) in its decisions, its credibility might suffer.
Despite
the fact that this post has identified certain flaws of the concept of decisive influence, I do not believe
that a modification of the Current Rule should be a matter of urgency. As
suggested above, a well-reasoned decision may foster UEFA's credibility and
help reduce the legal uncertainty emanating from the concept of decisive influence. Bearing in mind the
recent revitalization of multi-club ownership in European football, UEFA might
soon get another opportunity to deliver such decision.