Will FFP Sustain A Claim In Court of Arbitration for Sports?

Financial Fair Play Regulations (FFP) were introduced by UEFA in 2010 to ensure that

football clubs do not end up in huge financial losses. 1 In this article the author with empirical

evidence attempts to analyse whether they could sustain a challenge in Court of Arbitration

for Sports(CAS), Lausanne.

This issue is not unexplored. There have been appeals filed in CAS, but no one has ever been

successful in challenging these regulations. In 2014, UEFA introduced the option of

voluntary settlements which allowed a club to spend money more than they make with the

promise of being break even compliant in the next few years. This is contingent on the clubs

being able to show that they had complied with the regulations in the previous years and has

gone a massive change in ownership in 12 months. Most notable examples are Manchester

City2, PSG, and Galatasaray who entered into such agreements.

One of the first cases to come to CAS regarding FFP was of Galatasaray. 3 Galatasaray was

found to be in breach of the voluntary settlement under Article 15 of the procedural rules that

govern the CFCB. The adjudicatory body first analysed and disregarded UEFA’s claim that

TFEU will not be applicable here since the club is a from turkey. The court held that even if

the club is from turkey the UEFA Champions League as an economic activity was part of

European Union and TFEU was held to be applicable. 4

1
Article 2 of UEFA Club Licensing and Financial Fair Play Regulations Edition 2018
2
UEFA CFCB, ‘Decision of the Chief Investigator of the CFCB Investigatory Chamber: Settlement Agreement
with Manchester City Football Club Limited,’ May 2014.
<https://www.uefa.com/MultimediaFiles/Download/OfficialDocument/uefaorg/ClubFinancialControl/02/10/69/
00/2106900_DOWNLOAD.pdf> accessed on 11 April 2019
3
CAS/2016/A/4492 Galatasaray v. UEFA
4
ibid
The competition law argument was made by Galatasaray and the court while applying the

principle of proportionality enshrined Meca-Medina5 ruled that the plaintiff has neither

submitted any analysis nor it has provided any empirical evidence to further its claim.

There have been other cases where the CAS has always relied on lack of evidence and has

also held the rules to be promoting competition. 6 One case perhaps that had empirical

evidence was the case against the financial rules of Football Association of England. But here

also the evidence which was given was by UEFA and not QPR.

These cases were decided when FFP was fresh and new and thus there was a lack of study

done by academics in the field and thus there was no empirical or economic evidence. The

latest case that could have gone to CAS but didn’t was of PSG. When PSG signed Neymar

and Mbappe in the same season there were high speculations that they had flouted the FFP

rules and thus an investigation was opened by UEFA. Although, UEFA reached the

conclusion that there was no breach of rules and PSG had complied with all financial

regulations, the fact that there was an attempt to reopen investigation by UEFA later in the

same year shows some guilty conscious on the part of UEFA. 7 The reopening was appealed

by PSG in CAS, and it was held that UEFA cannot reopen the investigation since there was a

delay in time.8 But if the investigation was opened it and it was found that PSG were in

breach of FFP then it would have been interesting to see that whether PSG now with the help

of empirical evidence could have proved FFP to be violative of TFEU.

5
Supra note 16
6
Mark Hovell, ‘A review of key Financial Fair Play cases through the lens of the CAS’, LawInSport, 2018.
<https://www.lawinsport.com/topics/sports/item/a-review-of-key-financial-fair-play-cases-through-the-lens-of-
the-cas> accessed on 15 February 2019
7
‘UEFA reopens financial fair play investigation into Paris Saint-Germain’
<https://www.theguardian.com/football/2018/sep/24/uefa-reopens-financial-fair-play-investigation-psg>
accessed on 20 March 2019
8
UEFA, ‘UEFA statement on CAS decision in the Paris Saint-Germain case’, March 2019.
<https://www.uefa.com/insideuefa/about-uefa/news/newsid=2596531.html> accessed on 20 April 2019
Since, it has been established that the essential factor that could help to sustain a claim in

CAS is empirical and economic evidence, the author will now proceed with providing the

same.

In a recent study by Thomas Peeters and Stefan Szymanski titled European football 9 the

authors show develop a sample mathematical model and simulate results taking in account all

factors. They reach the conclusion that FFP is very important tool and serves its purpose in

improving the financial stability of clubs.10 This was never in doubt that the regulations are

not helping clubs improve their financial health because it has been reported that FFP has

tremendously improved the financial position of major clubs.(net debt is reduced from 65%

to 35%). 11

The authors of the same study also concluded that

“the break-even rule does far less to improve seasonal competitive balance. Furthermore, the

break-even rule protects the success of the traditional big-market top teams, because it

reduces the scope for challenges by smaller teams which may be financed by a wealthy

owner. Our results therefore show how FFP would shift rents from the players to the owners

without delivering gains for consumers in the form of an improvement in the intensity of on-

field competition.”12

9
Thomas Peeters and Stefan Szymanski, ‘Financial fair play in European football’, April Issue, Economic
Policy, 2014. <https://deepblue.lib.umich.edu/bitstream/handle/2027.42/107369/ecop12031.pdf?
sequence=1&isAllowed=y> accessed on 15 February 2019
10
Ibid
11
UEFA, ‘Ten Years of Football facts, Figures and finance’, March 2019.
<https://www.uefa.com/insideuefa/protecting-the-game/club-licensing-and-financial-fair-play/index.html>
accessed on 26 April 2019
12
Supra note 28
One of the defences that UEFA could put against such an argument is that of the regulations

not being in promotion of competitive balance but only for ‘discipline and rationality’ in club

finances.13 But UEFA forgets that if competitive balance is reduced and there is a lack of

intensity in football matches would result in there being less audience for the matches. This

would lead to the media rights and broadcasting rights going for low sums of money. Thus, if

very less people are watching football, very less people will start paling football and thus the

‘long term benefit of football’, which also is the objective of FFP, will be affected.

There have been now many studies14 in the same field and almost every study has held that

FFP in some way or another will ensure the dominance of big clubs and would not let the

small clubs rise. Thus, after considering both economic and empirical evidence the author

would like to argue that there is enough evidence now to object to FFP in CAS and we could

see a major overhaul in FFP in the coming years.

13
Supra note 1
14
This paper applies Game Theory to reach to the conclusion of how FFP harms the competitive balance:
Preuss, Holger & Haugen, Kjetil & Schubert, Mathias, ‘UEFA financial fair play – the curse of regulation’,
European J. of Sport Studies, 2014.
<https://www.researchgate.net/publication/260852265_UEFA_financial_fair_play_-
_the_curse_of_regulation_in_European_J_of_Sport_Studies> accessed on 13 March 2019
also researched in Sass, M. (2012), ‘Long-term Competitive Balance under UEFA Financial Fair Play
Regulations’, working paper 5/2012, Otto von Guericke Universität Magdeburg, Faculty of Economics and
Management. <http://www.fww.ovgu.de/fww_media/femm/femm_2012/2012_05-EGOTEC-
jq3c558nh8pk1lv5rr7k87pitq1vicso.pdf> accessed on 20 April 2019