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

Introduction

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 These regulations by UEFA were

brought in to stop, what has now is referred as, ’financial doping’ in football. This term was

popularized by the Arsene Wenger, who used it in the context of Chelsea winning the

Premiere League in 2005. Further he also accused clubs like Real Madrid and Manchester

City for buying their way through football. 2 The term refers to the situation where a club’s

investor uses his own personal income to buy talented players for the purpose of winning

competitions instead of relying on the club’s own revenue generation, drawing an analogy

with regular doping which refers to enhancing the abilities of oneself by use of external

substances like pharmaceuticals and steroids. In this article the author with empirical

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

for Sports(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

City3, PSG, and Galatasaray who entered into such agreements.

1
Article 2 of UEFA Club Licensing and Financial Fair Play Regulations Edition 2018
2
Jeremy Wilson, ‘Arsene Wenger accuses Manchester City and Real Madrid of 'financial doping', The
Telegraph, 2009. <https://www.telegraph.co.uk/sport/football>
3
UEFA CFCB, ‘Decision of the Chief Investigator of the CFCB Investigatory Chamber: Settlement Agreement
with Manchester City Football Club Limited,’ May 2014.
Challenges To Financial Fair Play Regulations

One of the first cases to come to CAS regarding FFP was of Galatasaray. 4 Galatasaray was

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

govern the Club Financial Control Body F(CFCB)CB. The adjudicatory body first analysed

and disregarded UEFA’s claim that TFEU Treaty on the Functioning of European Union

(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. 5

The competition law argument was made by Galatasaray and the court while applying the

principle of proportionality enshrined David Meca-Medina and Igor Majcen v Commission of

the European Communities,Meca-Medina6 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. 7 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

<https://www.uefa.com/MultimediaFiles/Download/OfficialDocument/uefaorg/ClubFinancialControl/02/10/69/
00/2106900_DOWNLOAD.pdf> accessed on 11 April 2019
4
CAS/2016/A/4492 Galatasaray v. UEFA
5
ibid
6
Case C519/04 P Meca-Medina and Majcen v Commission [2006] ECR I6991 accessed
<https://www.ippt.eu/files/2006/IPPT20060718_ECJ_Meca-Medina_and_Majcen_v_Commission.pdf Supra
note 16
7
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
latest case that could have gone to CAS but didn’tdid not 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. 8 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.9 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.

Empirical Evidence against FFP

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 10 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.11 This was never in doubt that the regulations are

not helping clubs improve their financial health because it has been reported that FFP has
8
‘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
9
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
10
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
11
Ibid
tremendously improved the financial position of major clubs.(net debt is reduced from 65%

to 35%). 12

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.”13

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.14 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.

Conclusion & Alternatives to FFP

12
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
13
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 2019Supra note 28
14
Article 2 of UEFA Club Licensing and Financial Fair Play Regulations Edition 2018Supra note 1
There have been now many studies15 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.

Few of the ways through which UEFA can achieve this is to have more stricter sanctions

towards the big clubs. Sanctions like restricting the squad members etc. don’t have an effect

on big clubs. There needs to be sanctions which would hamper their success in the leagues.

Raheem Sterling recently asked for a 9-point deduction against racial abuse. A points

deduction sanction and disqualification from league would tend to be scarier than monetary

sanctions. and give more levy of losses to the smaller clubs.

One of the other ways could be something like luxury tax or a salary cap which is used in

NBA. So, if a team is spending more than the cap fixed by the league, then the team has to

pay a certain amount of tax to the league and this money should be redistributed to other

clubs.

There also seems to exist an influence that the top European clubs have on UEFA. This can

be seen when top clubs threatened UEFA to come together and form another league. 16 Thus a
15
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
16
Matt Scott, Top European clubs threaten to break away from FIFA and UEFA’, The Guardian, 2011.
<https://www.theguardian.com/football/2011/jul/27/european-clubs-breakaway-fifa-uefa> accessed on 29 April
2019
there is no reason a topflight club would present a challenge towards FFP in recent future. It

has to be a small club which is going to be the voice against the current FFP regime.

Alternatively, if such a regime is continued it would be sad to see that there will no other

season like the 2015-16 Premiere League season which witnessed a team like Leicester City

lifting the title and the league would be converted into an ‘oligopoleague’.17

17
Oligopoly in Leagues, where a few teams dominate the league.