Financial Fair Play: Potential Challenges Under and Against the UEFA Regulations

Brian Kennelly
Introduction 1. This paper addresses (1) challenges against sanctions imposed on clubs under the UEFA Club Licensing and Financial Fair Play Regulations (the FFP Regulations); and (2) the potential for challenging the FFP regime itself under EU law. As regards the first, advisers and clubs are not assisted by the fact that UEFA does not publish the decisions of the Club Financial Control Body (CFCB) Adjudicatory Chamber. There is, however, a right of appeal from such decisions to the Court of Arbitration for Sport (CAS)1 and CAS has published a number of decisions in appeals under the FFP Regulations. Although those cases involved the pre-June 2012 regime (with decisions taken by the Control and Disciplinary Body or CDB), they provide some guidance as to the likely approach to be adopted by the CAS and (potentially) the CFCB Adjudicatory Chamber. As regards the second, as has been widely reported, a Belgian football agent Daniel Striani has made a formal complaint to the European Commission (the Commission) to the effect that the FFP Regulations violate EU law. His argument is based principally but not exclusively on EU competition law.2 Although the Commission has informally blessed the FFP Regulations, Mr Strianis complaint cannot be easily dismissed. It appears to raise points which are at least arguable and are likely to require determination by the European Court.3

2.

3.

Challenging UEFA decisions under the FFP Regulations 4. As has been explained, in June 2012, the CFCB replaced the Club Financial Control Panel (CFCP), which had monitored clubs since the first introduction of the FFP Regulations in May 2010. The main change is that the CFCB is now an UEFA Organ for the Administration of Justice, which means that the only appeal which lies from its rulings is to CAS. Nevertheless, the approach of CAS to the cases involving the CFCP may provide some indication of how the Lausanne tribunal will treat the rulings of the CFCB in Nyon. I examine three cases in particular, involving the clubs Gyri ETO, Bursaspor and Beikta.

5.

6.

Article 25(2) of the Procedural rules governing the UEFA Club Financial Control Body (Edition 2012) http://www.sportingintelligence.com/2013/05/13/daniel-striani-and-uefas-financial-fair-play-regulationsthe-new-bosman-130501/; http://www.skysports.com/looktothefuture/story/0,28751,19690_8696959,00.html; http://www.guardian.co.uk/football/2013/may/06/agent-legal-threat-uefa-financial-fair-play; http://www.financialfairplay.co.uk/latest-news/legal-challenge-to-uefa-ffp-rules-by-bosman-lawyer 3 Since 1 December 2009, the General Court of the EU and the Court of Justice of the EU (CJEU)
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CAS 2012/A/2702 Gyri ETO v. UEFA (8 May 2012) In February 2009 Gyri ETO (Gyri), a Hungarian professional football club, entered into an agreement with Estonian club FC Flora Tallin (Flora) for the transfer of the player Jarmo Ahjupera. Flora agreed to transfer the Player to the Appellant in exchange for a fee of EUR 100,000 to be paid in two installments according to the Transferring Clubs invoices and transferred by bank transfer (at 7 of the CAS decision). Following an agreed extension in relation to the first invoice and further delay, the Estonian Football Association (EFA) asked FIFA to intervene on Floras behalf. EFA could not agree with the Hungarian Football Federation (HFF) whether any part of the UEFA Club Licensing Regulations 2008 had been breached (the 2008 Regulations).4 FIFA Subsequently informed UEFA that the transfer fee due from Gyri had not been paid (at 18). Gyri stated that on receiving the first invoice dated 17 February 2009 the debt was recorded in its accounts and included in its 2010/12 license application as an overdue payable. The application included an overdue payable in the amount of 13,542,000 Hungarian Forint, equivalent to EUR 50,000. Gyri was granted a UEFA club competition license and took part in the Europa league 2010-11 receiving EUR 360,000 from UEFA as participation fee. On 31 March 2010, Gyri paid Flora the sum of EUR 50,000 as a first installment. Flora acknowledged the payment but informed the HFF of the amount outstanding, including interest, which was contested by Gyri (at 25). The second installment of EUR 50,000 was paid in stages between 20 September 2010 and 17 November 2010. On 18 May 2011, the CFCP issued its report into the matter. The CFCP found that Gyri had failed to meet a number of criteria in the 2008 Regulations and opened disciplinary proceedings with the CDB.5 The decision of the CDB The CDB found both Gyri and the HFF guilty of violating the 2008 Regulations and issued the following sanctions (at 34): (1) The HFF was fined EUR 100,000, half of which was suspended for a probationary period of two years; and Gyri was disqualified from taking part in the next UEFA competition for which it qualified for the next three seasons, 2011-14.

8.

9.

10.

(a) 11.

(2)

12.

The decision was based on the following grounds (at 34): (1) Gyri had failed to prove that it had no overdue payables on 31 December of the year preceding the season to be licensed.

These were replaced by the FFP Regulations in 2010 As aforementioned, the UEFA Club Licensing and Financial Fair Play regulations replaced the UEFA Club Licensing Regulations 2008.
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Gyri had committed a serious offence. The absence of any previous infringement was not a decisive factor. The importance of the UEFA club licensing system, which aimed at protecting the integrity of UEFA club competitions, had to be taken into account. The fact that Gyri had received EUR 360,000 from UEFA for taking part in the 2010-2011 UEFA Europa League and the fact that its participation was based on a license given on the basis of misleading documents were relevant considerations. The HFF was liable for failing to undertake due diligence, and for granting Gyri a license despite the latters failure to meet the criteria.

(3)

(4)

(b) 13.

The decision of the UEFA Appeals Body The HFF and Gyri each appealed against the decision of the CDB. On 29 November 2011, the UEFA Appeals Body upheld the appeals in part, holding that: (1) The suspension decision should be replaced. Gyri was to be suspended from the UEFA club competition for the 2011-2012 and 2012-2013 seasons, in the event that it qualified. The 2013-14 disqualification was to be suspended for a probationary period. The original sanctions would be reactivated if Gyri committed a further offence during the licensing procedure for the 2012-2013 season. The fine of EUR 50,000 was upheld. Gyri and the HFF were jointly and severally liable for the legal costs related to the UEFA appeal proceedings EUR 6,000.

(2) (3)

14.

The decision of the Appeals Body was based, among other things, on the following grounds: (1) The original disqualification was excessively harsh because Gyri had trusted the HFF, which, despite being informed of the existence of the overdue payment did not bother to seek Gyris explanation. Pursuant to Article 14.1 of the UEFA Disciplinary Regulations, a disciplinary body has wide discretion to impose fines ranging between EU 100 and EUR 1,000,000. Given the fact that Gyri had unduly received EUR 360,000 in participation fees, the fine imposed by the UEFA Disciplinary Decision was appropriate.

(2)

15.

Gyri subsequently sought to challenge the Appeals Body decision before CAS. Gyri claimed, among other things, that since the transferring club had not issued a proper and original invoice in compliance with the EC VAT rules, they could not have paid the invoice without facing criminal sanctions in Hungary.

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Gyri further argued that the sanctions imposed were disproportionate and inconsistent with UEFAs approach in the cases of PAOK6 and Bursaspor.7 UEFA alleged that the club had given false information in its application. It had indicated that an amount of EUR 50,000 only was due in relation to the players transfer and made no mention of the total EUR 100,000 due. The CAS judgment CAS found that the club was required to disclose the relevant payables which were certain and enforceable irrespective of the potential threat of criminal sanction on payment (at 145-146). CAS noted that in assessing the sanctions, reference had to be made to Article 56 of the UEFA Club Licensing Regulations: [a]ny breach of these regulations may be penalised by UEFA in accordance with the UEFA Disciplinary Regulations.8 Article 17.5 of the Disciplinary Regulations provides that: [i]f the party charged has committed multiple disciplinary offences, the disciplinary body assesses the sanction according to the most serious offence and increases it accordingly.

17.

(c) 18.

19.

20.

21.

Noting that the Disciplinary Regulations permitted the imposition of a fine of between EUR 100 and EUR 1,000,000, CAS held that the decision-making body had a wide measure of discretion when issuing sanctions (at 154). On the facts of the case it could not be said that the fine of EUR 50,000 was disproportionate. CAS noted that the club had failed to act with transparency and diligence by (1) playing in the Europa League 2010-11 having failed to disclose its correct and true overdue payables; (2) having known that it had financial problems, not disclosing them; and (3) having paid the second instalment of the transfer fee only after the relevant deadline. It further noted that the lightest non-monetary sanction available was a warning with the most severe being the withdrawal of a license (at 158). The cases of Bursaspor and PAOK were distinguished on their facts. Gyri had committed two breaches: (1) it had overdue payables; and (2) it had failed to disclose those payables (at 159). Furthermore, the Bursaspor case was, at the time, awaiting determination by the UEFA Appeals Body.

22.

23.

6 By a decision dated 10 January 2012, the CDB issued penalties to Greek club PAOK FC in relation to violations of the UEFA club licensing regulations. PAOK was fined 250,000, of which 200,000 was suspended for a probationary period of three years. In addition, PAOK was excluded from one UEFA club competition for which they qualified in the following three seasons. The exclusion was also suspended for a probationary period of three years. PAOK was required to prove that, by 30 June 2012, they had no outstanding overdue financial obligations towards employees, tax authorities, social security institutions or other clubs arising from transfer agreements incurred before 30 June 2012. 7 Considered below. 8 Article 56 of the 2008 Regulations has been replaced by Article 72 under the 2012 Regulations.

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Accordingly, it had not been established that the imposition of the sanctions was inconsistent or disproportionate (at 159-161). CAS 2012/A/2821 Bursaspor Kulb Dernegi v. UEFA (22 June 2012) Bursaspor Kulubu Dernegi (Bursaspor) is a Turkish Professional football club and member of the Turkish Football Federation (TFF). In July 2007, Bursaspor entered into an agreement with the English club Portsmouth FC (PFC) for the transfer of the player Collins Mbesuma for a fee of EUR 500,000 to be paid in four instalments. In August 2007 and October 2007, PFC received the first two instalments of the fee. In 2008 a claim was filed before FIFA alleging that Bursaspor had failed to pay part of the transfer fee: namely the instalments due in April and August 2008. On 25 March 2011, Bursaspor applied for a license to the TFF. In the application the club listed an overdue payable to the sum of EUR 400,000. On 25 March 2011, Bursaspor applied to the TFF for a UEFA license. On 1 June 2011, Articles 53 to 56 and 64 to 68 of the relevant edition of the FFP Regulations came into force and introduced a monitoring process. On 9 June, the TFF granted Bursaspor a license for the 2011-12 season and the club took part in the UEFA Europa League club competition for the 2011-12 season, receiving EUR 180,000 in participation fees. The TFF subsequently submitted the payables information from the club to the CFCP. On 23 November 2011, Bursaspor paid PFC EUR 350,979,45 corresponding to the outstanding instalments. Prior to the payment the CFCP requested further information from Bursaspor. It subsequently issued its report, which concluded that the club had failed to meet a number of criteria laid down in the FFP Regulations. As a result, the CFCP and the CDB opened disciplinary proceedings. The decision of the CDB The CDB issued the following sanctions against Bursaspor: (1) (2) a fine of EUR 200,000; and exclusion from one UEFA club competition for which it qualified in the next four seasons. Exclusion was suspended for a probationary period of three years.

(2) 25.

26.

27.

28.

29.

30.

31.

(a) 32.

33.

The decision was reached on the following grounds (at 24): (1) Bursaspor had failed to meet the requirements of Article 65 on account of the overdue payable in favour of Portsmouth as of 30 June 2011.

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(2)

Bursaspor had failed to meet the requirements set out in Article 49 in failing to disclose the overdue payment in the licensing process. Bursaspor had not complied with an essential obligation. The monitoring system was held to be one of the pillars of the FFP system and any breach constitutes a serious offence. The absence of any previous disciplinary offence in this regard was not a decisive factor. The fine imposed was approximately the amount the club had gained during the 2011/12 UEFA competition and was proportionate in the circumstances of the case. The facts that the club was financially robust and had paid the amount to PFC as soon as it appeared that it had to face disciplinary proceedings were taken in account by way of mitigation. It would be disproportionate, relative to other cases, for the exclusion not to be suspended for a probationary period.

(3)

(4)

34.

On 28 February 2012, UEFA, acting through its disciplinary inspector, appealed against the CBD decision. UEFA argued that the facts of the case were too serious for the exclusion to be suspended for a probationary period. Bursaspor submitted a reply which included a cross-appeal requesting that the sanctions be annulled or scaled down. The decision of the UEFA Appeals Body The UEFA Appeals Body upheld the appeal in part: (1) Bursaspor was excluded from one UEFA club competition for which it qualified in the subsequent three seasons; and Bursaspor was fined EUR 50,000 with payment of the fine suspended for a probationary period of three years;

(b) 35.

(2)

36.

The decision was based on the following grounds (at 29): (1) The FFP Regulations (edition 2010) applied even if the dispute between Bursaspor and Portsmouth began in 2008. Bursaspor had failed to provide the information required relating to the payments due to Portsmouth; Bursaspor had grossly violated the applicable Regulations by creating the false impression that it had no overdue payables on 31 March 2011 despite the fact that there had never been any question of a debt less than EUR 300,000. The exclusion of Bursaspor from UEFA competitions should not be suspended for a probationary period. The first instance body showed unjustified leniency for the following reasons: (a) Bursaspor announced wrongly that the amount owed to PFC was a contested debt; www.blackstonechambers.com 6

(2)

(3)

(4)

(b) (c)

it failed to indicate the existence of the overdue payables; in Gyri the Appeals Body had already ruled, and the CAS upheld, that an immediate exclusion from a UEFA competition, with no suspension or probationary period, should be imposed (that case involved smaller r overdue payables and the club had already been awarded a licence); the fact that a club pays its debt only after a disciplinary procedure has been opened against it cannot be considered a mitigating circumstance; there was was nothing in the file or in argument to justify the CDB departing from its approach in Gyri. Doing so would risk violating not only the principle of proportionality but also that of equality of treatment.

(d)

(e)

37.

Bursaspor appealed the decision to CAS. It argued, among other things, that the Appeals Body decision wrongly justified the measurement of the sanction using an alleged similarity with Gyri. The case was distinguished on the basis that Bursaspor had disclosed the dispute over the overdue payable in its license application. It had been registering the amount claimed by PFC since 2008. The CAS judgment In assessing whether the UEFA Appeals Body lacked jurisdiction to impose sanctions, CAS summarised the licensing system under the FFP Regulations at 88108. CAS concluded that UEFA had jurisdiction under Article 72 of the FFP Regulations to impose sanctions under the Disciplinary Regulations (at 107). CAS found that the club had been in breach of the rules against overdue payables on account of the EUR 300,000 (plus interest) it owed to PFC although it had complied with its obligations of disclosure (at 120-127). In considering the proportionality of the sanctions imposed, CAS again noted the CDBs wide discretion when imposing sanctions and its right to take into account any aggravating or mitigating circumstances (at 134). CAS noted that there had been two breaches in Gyri. It found that the failure to disclose correct and accurate payables had been a decisive element in leading CAS to conclude that a non-suspended exclusion was proportionate in that case (at 138). CAS further noted that in the case of Besiktas, although five different overdue payables were involved amounting to around EUR 4 million, a practical exclusion for one season only was imposed by UEFA (at 140). CAS found that the breach had occurred during a transitional period between the new and old rules. They were of the view that the club had established that the sanction imposed by the Appeal Body had been disproportionate and inconsistent with previous cases. CAS, therefore, substituted the original exclusion for exclusion for one UEFA club competition for which the club qualified in the next four seasons, suspended for a probationary period of three years (at 143). www.blackstonechambers.com 7

(c) 38.

39.

40.

41.

42.

43.

However, CAS decided that it was appropriate to fine Bursaspor for the amount it had gained during the 2011/12 UEFA club competition in which it played notwithstanding that it had an overdue payable. CAS 2012/A/2824 Beikta JK v UEFA (29 June 2012) On 22 May 2008 Beikta JK, a professional Turkish Football Club, entered into a contract for the transfer of a player (T) with another club (Club X) for a net transfer fee of EUR 4,500,000 payable in three installments between July 2008 and June 2010 inclusive. On 28 May 2008, Beikta entered into a further contract with Club X for the transfer of another player (S) by way of loan from 1 July 2008 to 30 June 2009 and on a permanent basis from 1 July 2009. Under the contract Beikta were to pay EUR 300,000 net by 1 July 2008 in respect of the loan period and a further EUR 4,400,000 in respect of the final transfer, again in three installments between June 2009 and June 2011 inclusive. On 29 March, there was an agreement that the remaining monies due under each contract would be paid in a new configuration of installments between June 2010 and June 2011. Beikta made a payment of EUR 1,450,000 to Club X. On 31 March 2011, Beikta had overdue payables due to Club X in the sum of EUR 1,500,000, and due to Rubin Kazaan in the sum of EUR 750,000 respect of another transfer. The TTF subsequently submitted the list of clubs, including Beikta, to which it had granted licenses for 2011. On 30 June 2011, Beikta transfer payables table indicated that it owed (at 11): (1) (2) (3) (4) (5) EUR 1,608,000 in relation to S; EUR 1,669,000 in relation to T; EUR 365,000 in relation to solidarity contributions for another player (R); EUR 223,000 in solidarity contributions for another player (M); and EUR 750,000 in relation to player F;

(3) 44.

45.

46.

47.

48.

49.

All listed payables were stated to be disputed. On 30 September 2011, the club presented the same table save that the figure under (3) was reduced to EUR 364,000 and that under (4) to EUR 103,000 (at 14). TFF subsequently forwarded the information provided by Beikta to the UEFA CFP. The decision of the CDB Following a compliance audit conducted by PriceWaterhouse Coopers, on 1 May 2012, the CDB found that the club had breached Articles 65 and 66 of the FFP Regulations and imposed the following sanctions:

50. (a) 51.

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(1)

suspension from the next two UEFA club competitions for which it qualified to be suspended for a probationary period of five years; a fine of EUR 600,000 to be paid within 30 days of the communication of the decision;

(2)

52. (b) 53.

The decision was to have no effect on the 2012-13 club licensing procedure. The decision of the UEFA Appeals Body UEFA appealed the decision to the Appeals Body which found as follows: (1) Beikta was excluded from the next two UEFA club competitions for which it qualified in the next five seasons with the exclusion from the second competition being suspended for a probationary period of five years; Beikta was fined EUR 200,000 of which EUR 100,000 was suspended for a probationary period of five years; and the costs of the procedure, amounting to EUR 6,000 were to be charged in the proportions of EUR 4,000 to Beikta and the rest to UEFA.

(2)

(3)

54.

Beikta appealed to CAS alleging (1) procedural unfairness; (2) that the sanctions were disproportionate when compared with other decisions; and (3) that the Regulations had been misapplied. It was accepted that the club could not have satisfied the rule against overdue payables and that it should not have been granted a licence (at 50-58). The CAS judgment CAS noted that the objectives of the FFP Regulations were, among other things, to protect the integrity of UEFA Club Competitions, to improve the financial capabilities of clubs, to protect creditors of clubs and to introduce more discipline in clubs football finances. All of those objectives were there to protect the long-term viability and sustainability of European club football. Beikta had not shown that the disclosed payables were manifestly unfounded, as they were required to do in order to claim that the debt was contested. In comparing the case with the PAOK, Gyori, and Olympics Volou cases, CAS noted that the latter case involved match fixing while the others involved breaches of the FFP Regulations. In relation to the FFP cases, it was noted that some clubs had a single instance of overdue payables while others had more. The relevant sums differed as between the cases. Only in the case of Beikta was it clear that the club should not have been granted a licence and, additionally, the club failed the monitoring test at both dates with multiple significant overdue payables (at 126). CAS further noted that Beikta had a systematic approach to debts with other clubs; it simply ignored them until forced to pay by FIFA or CAS. www.blackstonechambers.com 9

(c) 55.

56.

57.

58.

59.

CAS found that the availability of alternative sanctions was insufficient to render the actual sanction imposed disproportionate (at 127). In order to succeed on the proportionality point the club had to demonstrate that the UEFA decision was grossly disproportionate. A club would be within the range of a competition ban and a fine (at 127) where: (1) a licence had been wrongly issued due to concealment by listing payables as disputed where they had not been contested with the other party; and the club has earned significant revenues that it should not have.

(2) 60.

CAS had no doubt that the breaches occurred in bad faith (at 127). CAS rejected the argument that a one competition ban was disproportionate when compared with the case of Volou which involved the potentially more serious offence of match fixing. The disparity in treatment (found CAS) was a sign of how seriously UEFA treated significant breaches of the FFP Regulations (at 128).

Principles to be derived from the FFP Regulations and the CAS judgments (1) 61. The standard of review The scope of the review conducted by the CAS is set out in Article R57 of the CAS Code. CAS has full power to review the facts and the law of the case. By way of remedy, CAS may issue a new decision, that replaces the challenged decision, or may annul the decision and remit the matter for re-decision. It was noted in all three cases that on the face of the FFP Regulations the decisionmaking bodies of UEFA have a broad discretion in terms of the type and severity of the sanctions, which they may impose (see, for example, Beikta at 127). In reviewing sanctions the standard of review adopted by CAS has been that of gross disproportionality. Proportionality Given the nature of the powers in issue it is unsurprising that the common bases of challenge are proportionality, inconsistency and unequal treatment. The UEFA Appeals Body has itself held that, so far as the imposition of sanctions are concerned, previous decisions ought to be followed to avoid the risk of violating not only the principle of proportionality but also that of equality of treatment (Bursaspor at 26). The availability of less onerous sanctions will not in itself render the actual sanctions in any given case disproportionate. The club will have to demonstrate that the sanctions imposed were grossly disproportionate (Beikta at 127). The UEFA bodies and CAS will take the following categories of factor into consideration in assessing the proportionality of the sanction imposed: (a) The seriousness of the offence

62.

(2) 63.

64.

65.

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66.

CAS has so far been unreceptive to arguments that sanctions imposed for breaches of the FFP Regulations are disproportionate when compared to those imposed for other offences, such as match fixing (see Beikta at 127-128). In Beikta the CAS reasoned that any disparity might be due to higher importance given by UEFA to the FFP Regulations. It was held by the CDB in Bursaspor that in failing to disclose its overdue payables the club had failed to comply with an essential obligation. The monitoring system was said to be one of the pillars of the FFP system so that any breach constitutes a serious offence (at 24). It was further held by CAS that the failure to disclose the correct and accurate payables was a decisive element in concluding that a nonsuspended exclusion is not disproportionate (at 138). (b) Previous conduct

67.

68.

It was held in both Gyri (at 34) and in Bursaspor (at 24) by the CDB, that the absence of any previous infringement would not be a decisive factor in determining the suitability of sanctions. It was found in Beikta (at 127) by CAS that the club had a practice of acquiring credit from other clubs and deferring payment thereby creating an uneven playing field. On the face of the judgment that fact appears to have been taken to constitute an aggravating factor. It appears therefore that a clean record will not necessarily be taken to be a mitigating factor but a poor record may well be taken to be an aggravating factor. (c) Fault and restitution-type fines

69.

The cases clearly establish a principle that where a club has acquired a licence by concealment of its overdue payables i.e. either by (1) not listing those overdue payables; or (2) by listing uncontested overdue payables as disputed, it will be proportionate to impose a fine by reference to the gains made by the club in wrongfully participating in a competition. Accordingly, a system of fault-based liability to fine that is otherwise unapparent on the face of the FFP Regulations emerges from the case law. In Bursaspor, the CDB imposed a fine that was approximate to the amount the club had gained during the 2011/12 UEFA competition and was therefore proportionate in the circumstances of the case. The UEFA Appeals Body similarly found that Bursaspor had grossly violated the applicable Regulations by creating a false impression that it did not have any overdue payables on 31 March 2011 (at 29). CAS similarly held that it was appropriate to fine Bursaspor for the amount it had gained during the 2011-12 UEFA Club competition for which it ought to have been found ineligible. Similarly in Beikta, CAS held that a club would be in the range of receiving both a ban and a fine, for example, where (1) a licence had been wrongly issued due to concealment; and (2) the club had earned significant revenue. The implication was that once that has been established there will be limited scope for a finding that any particular combination of fine and ban are grossly disproportionate (see Beikta at 127).

70.

71.

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72.

The CDB found that the offence committed in Gyri was a serious one on the basis of the deception. This was effectively upheld by CAS which noted that the club had failed to act with transparency and diligence by: (1) playing in the EUROPA league 2010-11 having failed to disclose the correct overdue payables; not having disclosed its financial problems; and having paid the second instalment of the transfer fee only after the relevant deadline.

(2) (3)

73.

Fault appears to include a failure to act with diligence (i.e. a requisite standard of care) (see Gyri at 158) as well as intentional concealment (see Beikta at 66). In order to justifiably claim that overdue payables are disputed, a club will have to show that the disclosed payables were manifestly unfounded (Besiktas at 116). (d) Reliance on the National Association

74.

75.

In Gyri the UEFA Appeals Body found that the original sanction had been harsh on account of the fact that the club had relied on the HFF which had issued a licence and had not bothered seeking an explanation for the overdue payable despite being on notice (at 38). That was found to be the case notwithstanding the fact that the documentation provided by the club had been misleading (at 34). (e) Other legal measures preventing payment of overdue payables

76.

CAS held in Gyri that the fact that the club may have been liable to criminal sanction on payment was not sufficient excuse for non-disclosure. It was sufficient for the purposes of the duty to disclose that the payables were certain and enforceable (at 14546). (f) Number of Offences

77.

In Gyri CAS distinguished the case from PAOK and Bursaspor on the basis that in Gyri the club had committed two offences. It had overdue payables and it had failed to disclose those payables. It was, however, also relevant that Bursaspor had not yet been decided by the UEFA Appeals Body. For those reasons it had not been established that the sanctions were disproportionate (see 159-161). Similarly, in hearing Bursaspor, the CAS referred back to the fact that Gyri had involved two breaches rather than one in assessing the proportionality of the sanctions that had been imposed (at 135). The assessment of whether a disqualification ought to have been suspended for a probationary period will be subject to similar considerations (see, for example, Bursaspor at 31). (g) Late Payment

78.

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79.

The CDB found in Bursaspor that the fact that the club was financially robust and had paid the amount owing to PFC as soon as disciplinary proceedings were issued was treated as mitigation (at 24). However, the Appeals Body found that the fact that a club pays its debt only after a disciplinary procedure had been opened could not be considered a mitigating circumstance (at 29). (h) The number and total amount of overdue payables

80.

The Appeals Body distinguished Bursaspor from Gyri on the basis, among other things, that the latter involved fewer overdue payables (see Bursaspor at 29). CAS noted that of the cases considered above, only Besiktas involved a situation where the club ought not to have been granted a licence and had failed the monitoring test at both dates with multiple significant overdue payables (at 126). (i) balancing sanctions?

81.

82.

In two of the cases CAS substituted the original sanctions with less restrictive disqualifications but at the same time increased the relevant fine. This reflects CAS desire to arrive at an effective but proportionate decision overall.

Current appeals 83. On 21 December 2012, the CFCB Adjudicatory Chamber published its first decisions in the cases of nine clubs that had been referred to it by the CFCB chief investigator, Mlaga CF, HNK Hajduk Split, NK Osijek, FC Rapid Bucureti, FC Dinamo Bucureti, FK Partizan, FK Vojvodina, FC Arsenal Kyiv and KKS Lech Pozna. The case of Mlaga is interesting because it has appealed to CAS. Mlaga was excluded from participating in the next UEFA club competition for which it would otherwise qualify in the next four seasons (i.e. 2013/14, 2014/15, 2015/16, 2016/17). In addition, Mlaga will be excluded from the subsequent UEFA competition for which it would otherwise qualify (in the next four seasons) if has not proved by 31 March 2013 that it has no overdue payables towards football clubs or towards employees and/or social/tax authorities, in accordance with the FFP Regulations. Mlaga was also fined 300,000. The prize money withheld on 11 September 2012 (as a conservatory measure) was released. In response, Mlaga issued the following statement: Mlaga Club de Futbol wish to communicate their total disagreement with todays Uefa decision. The measures taken against the club are absolutely disproportionate and unjustified given the clubs situation. We consider that the club is being punished unfairly and used as an example to others. Given the total and absolute indignation and consternation on the part of the club, Mlaga CF wishes to state that it will work energetically and without rest to achieve justice, using all available necessary means. Mlaga CF wish to add that they do not understand, and consider totally incomprehensible and abusive, that after having received this judgement they must now wait an unknown period of time to know the evidence upon which it was taken.

84. 85.

86.

87.

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88.

The hearing of Mlagas appeal will take place on 4 June 2013 (according to the CAS website).

Challenging the FFP Regulations themselves 89. Article 101(1) TFEU prohibits agreements and concerted practices between undertakings, and decisions by associations of undertakings, which have the object or effect of distorting competition and which affect trade between EU Member States. Such agreements or decisions may be justified under Article 101(3) TFEU where they produce efficiencies, are indispensable for that purpose and do not exclude any competitors. Where they cannot be justified, such agreements or decisions are void under Article 101(2) TFEU. In developing the FFP Regulations, UEFA was clearly sensitive to the risk of a challenge under EU law and sought to involve the Commission at an early stage. The Commission had in fact flagged its potential support for such rules in 2007, in the Staff Working Document which accompanied the White Paper on Sport (at 2.1.5 of Annex I). In the event, UEFA and the Commission issued the following Joint Statement on 21 March 2012 which stated, among things, as follows (at 5): the FFP rules that monitor and enforce the financial obligations that clubs owe towards other football clubs, towards employees (in particular, to players) social and tax authorities and to other creditors are also important elements in the overall financial regulatory structure of football and are to be supported.9 92. Following this Joint Statement, the EU competition commissioner Mr Almunia commented as follows: I am a football fan and I hope that future generations will also be able to watch and enjoy first class professional football based on solid grounds. I am deeply concerned by the increasing level of indebtedness of many European clubs. This situation is not sustainable. Both EU state aid rules and UEFA objectives help introduce discipline and rationality in football club finances.10 93. Nevertheless, as noted above, Mr Striani made his complaint to the Commission regarding the FFP Regulations on 6 May 2013. Mr Striani is represented by JeanLouis Dupont, who acted for Mr Bosman in his landmark case before the CJEU in 1995. Significantly, the complaint challenges the restrictions on competition caused by the break-even rule only (Article 57 of the FFP Regulations). No complaint is made regarding the rules on overdue payables.

90.

91.

94.

10

http://ec.europa.eu/competition/sectors/sports/joint_statement_en.pdf http://europa.eu/rapid/press-release_IP-12-264_en.htm?locale=en

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95.

According to the published summary of the complaint,11 the claim is that the breakeven rule imposes on clubs that participate in the UEFA Champions League or in the Europa League an obligation not to overspend even if such overspending aims at growing the club and making it more competitive. According to Mr Striani, the break-even rule (which is an agreement between undertakings for the purposes of Article 101 TFEU) generates the following restrictions of competition: (1) (2) restriction of investments; fossilization of the existing market structure (i.e. the current top clubs are likely to maintain their leadership, and even to increase it); reduction of the number of transfers, of the transfer amounts and of the number of players under contracts per club; deflationary effect on the level of players salaries; and consequently, a deflationary effect on the revenues of players agents (depending on the level of transfer amounts and/or of players salaries).

96.

(3)

(4) (5)

97.

At the same time, argues Mr Striani, because of the aforementioned restraints, the break-even rule also infringes other EU fundamental freedoms: free movement of capital (as far as club owners are concerned), free movement of workers (players) and free movement of services (player agents). Consequently, such restriction of competition and violation of EU fundamental freedoms cannot be justified by the objectives put forward by UEFA (long term financial stability of club football; and integrity of the UEFA interclub competitions). Moreover, according to the complaint, detailed legal and economic analysis shows that, even if the break-even rule may appear initially a plausible concept, the rule is not able to achieve efficiently its objectives as presented by UEFA (whereas other means are available to attain such objectives). As far as the integrity of the UEFA competition is concerned, Mr Striani argues that in order to avoid the risk that club X would jeopardize the smooth running of the competition because its owner stops mid-season providing funds (the overspending), it is not necessary to prohibit such overspending (as implemented by the break-even rule), when it is sufficient to require overspending to be fully guaranteed (for instance, by means of bank guarantees) before the start of the competition and for its whole duration. In short, argues Mr Striani, the current prohibition, even assuming it to be justifiable in the light of the pursued objective (i.e. integrity), is in practice illegal because the rule is not proportionate (since it can be replaced by another measure, equally efficient but less damaging as far as EU freedoms are concerned). Mr Striani requests

98.

99.

100.

11

http://www.financialfairplay.co.uk/latest-news/legal-challenge-to-uefa-ffp-rules-by-bosman-lawyer

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that the Commission take a decision that the break-even rule breaches Article 101(1) TFEU and is therefore null and void under Article 101(2) TFEU. 101. In view of the Commissions considered and declared support for the FFP Regulations it is unlikely that it will make such a finding. The statements by the Commission set out above are not, of course, binding on anyone and the Commission is required to examine this complaint with fresh eyes and an open mind. Nevertheless, it is more likely that the real challenge will be Mr Strianis application to annul the Commission decision which dismisses his complaint. Such a challenge would be brought to the General Court of the EU (from which there is a right of appeal to the CJEU). In the European Court, the principles set out in Meca Medina would be applied.12 As Mr Striani says, it is very likely that UEFA and its members in this context would be found to be undertakings for the purposes of Article 101(1) TFEU. Their activities in this regard are plainly economic and have very significant economic implications.13 Similarly, it is likely that UEFA is for these purposes an association of undertakings.14 The real dispute will come at the next stage, namely whether the break-even rule restricts competition within the meaning of Article 101(1) TFEU. This will depend on a consideration of the following factors derived from the Wouters judgment of the CJEU:15 (1) the overall context in which the rule was adopted or produces its effects and its objectives; whether the restrictions caused by the rule are inherent in the pursuit of the objectives; and whether the rule is proportionate in light of the objective pursued.

102.

103.

(2)

(3) 104.

A number of Mr Strianis points are plainly arguable. The break-even rule appears clearly to favour the established and wealthy clubs which can call upon their fans to pay higher ticket prices and upon their sponsors for increased funds e.g. Real Madrid, Barcelona, Bayern Munich and Manchester Utd. Such clubs are already at the top of European football and do not need a wealthy benefactor to make large one-off payments to give them an opportunity to play at the highest level. On its face at least, this appears to restrict competition between the top clubs and those aspiring clubs which might otherwise have posed a competitive threat with the benefit of exceptional funding not earned from normal revenues. One further point which may have particular merit relates to the effect of the breakeven rule on players remuneration. If the rule operates as a sort of salary cap, as Mr

105.

106.

Case C-519/04P Meca Medina v Commission [2006] ECR I-6991 Case T-193/02 Piau v Commission [2005] ECR II-209, 69 14 Commission decision of 23 July 2003, Case 37398 Joint selling of the commercial rights of the UEFA Champions League, OJ 2003 L 291/25, (UEFA CL) 15 Case C-309/99 Wouters [2002] ECR I-1577
12 13 13

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Striani alleges, as a matter of EU competition law it probably ought to have been negotiated with the players representatives.16 There is no indication that players representatives were involved in the drafting of the FFP Regulation; their consent was certainly not sought before the Regulations were implemented. 107. Finally, if the break-even rule cannot be policed effectively, that will provide a further basis for challenging its proportionality (as not being able to secure the legitimate objective). Concerns have been expressed regarding sponsorship deals held by Manchester City for example. The clubs main deal is with Etihad airlines apparently worth 400m over ten years, and a further three of its sponsors (Etisalat, Aabar and Abu Dhabi Tourism Authority) are run by the United Arab Emirates Government, of which owner Sheikh Mansour is a minister and member of the ruling family.17 Paris Saint-Germain is paid by way of sponsorship 200m per season by the Qatar Tourism Authority, which appears to have close links with the Qatar Investment Authority that owns the club. The fact that Mr Striani may well lose before the Commission should not give UEFA too much comfort. The landmark case of Meca-Medina began with the Commission dismissing the swimmers complaint that certain IOC and FINA doping control rules violated competition and free movement rules. The CFI dismissed their appeal but on further appeal, the CJEU subjected the FINA rules to very close and detailed scrutiny. It remains to be seen whether the break-even rule can survive such scrutiny.

108.

109.

Brian Kennelly 23rd May 2013

Case C-67/96 Albany [1999] ECR I-5751 at 59 http://bleacherreport.com/articles/1632009-5-reasons-why-the-uefa-financial-fair-play-regulations-are-a-badidea#/articles/1632009-5-reasons-why-the-uefa-financial-fair-play-regulations-are-a-bad-idea/page/3

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