How does Premier League financial fair play and penalties work? There are big differences from UEFA rules

The Premier League attack on Manchester City is already drawing on the scandal of the year in European football. How it will end, no one knows. Like 2.5 years ago, when the club defeated UEFA in a similar dispute and withdrew its suspension? Or harsh punishment?

We delve into the rules of internal English FFP.

Brief background

Based on the Football Leaks materials published in 2018, UEFA and the Premier League initiated their own investigations. By February 2020, the European Football Association’s Club Financial Control Arbitration Chamber, chaired by José da Cunha Rodrigues, found that “Manchester City committed serious violations of UEFA’s club licensing and financial fair play rules by overstating sponsorship revenues in accounting and break-even reports from 2012 to 2016-1. The fact that the club “did not cooperate in the investigation” was considered an aggravating factor.

UEFA suspended Manchester City from any UEFA club competition for the next two seasons and issued a fine of 30 million euros. City filed an appeal with CAS and in the summer of 2020 got the ban lifted, which allowed the club to continue playing in the Champions League.

Nothing was heard about the parallel investigation of the nuclear submarine until the beginning of 2023. Perhaps someone thought that after the CAS verdict, it was completely stopped. But no.

In early February, the Premier League confirmed that Manchester City were suspected of violating the Premier League’s financial rules between 2009 and 2013 on 113 counts.

Some of the accusations are identical to those considered by UEFA. They are based on all the same Football Leaks publications. But more recent claims were added to them: in April 2022, the same Der Spiegel, citing another batch of Football Leaks leaks, published another article about fraud in Manchester City. Among the latest facts – participation in international transfers of underage players, as well as fraud with payments under the contract to the club’s ex-coach Roberto Mancini.

Another part of the accusations concerns violations of the rules for the provision of financial reporting and false information about club finances.

If the allegations are found to be true, Man City face sanctions. There are many options – from a suspended sentence and a fine to expulsion from the Premier League or the removal of points with a ban on registering new players for a certain period.

How are Premier League financial rules different from UEFA financial fair play?

The Premier League has its own financial rules – this is a rather voluminous document, including 164 points (and a bunch of sub-points). These include both club restrictions and the league’s revenue sharing guidelines.

The rules are based on UK Company Law. Every year the Premier League clubs meet to make changes and additions to this document. For example, in recent years, one of the most discussed issues is the provision for parachute payments to clubs relegated from the Premier League and the procedure for transferring money to clubs in the lower leagues.

Some points copy (but not 100%) the provisions of UEFA Financial Fair Play. In England, they were included in the list of financial rules for clubs in 2013. In some nuances, the English rules are even more liberal. For example, UEFA adopted a rule in 2022 requiring clubs to ensure that theirspending on salaries and transfers does not exceed 90% of revenue. By the 2025/26 season, the level should drop to 70%.

In November 2022, the Premier League decided that they would not introduce such a limit at home. The logic is that the leading clubs participating in European competitions will already comply with UEFA requirements so as not to run into sanctions. And for the middle peasants and outsiders, the absence of this limit will allow them to spend a larger percentage of their own budget on players, which will increase their competitiveness within the Premier League.

Another difference is in the threshold of loss. Under the new UEFA rules, the allowable loss threshold for clubs is 60 million euros over three seasons. In the Premier League it is twice as high – £105m in the same three seasons. But at the same time, the club that received losses? must provide the league with guarantees that the resulting loss will be compensated in subsequent seasons from a profit of at least 22 million pounds each year.

But the main difference from the financial fair play of UEFA is that the English document describes any financial transactions of clubs in general, requiring them to be fully transparent and detailed reporting within strictly prescribed deadlines. Details of the execution of contracts for players, coaches, payments to agents – clubs must provide all information about this to the league.

Some of these requirements may not apply at all to compliance with the UEFA FFP, but their violation will be regarded as an attempt to circumvent the provisions of UK corporate law. And that is why the decision that will be made in the Manchester City case cannot be challenged in CAS. Because from the point of view of English law, this is a case involving possible violations of national law. As if the case was about illegal tax optimization or providing false financial information to the tax authorities.

Can the Premier League’s decision differ from the UEFA and CAS verdict?

This is a key question, because the essence of the charges is the same. But there are two important details. CAS’s decision to lift Manchester City’s ban was based on the expiration of the statute of limitations for violations. According to UEFA rules, it is 5 years. In addition, the arbitration took into account that evidence of violations was obtained by UEFA from “improper sources”, which were recognized as publications in Der Spiegel and Football Leaks.

This does not at all mean an excuse for Manchester City. The decision of the court is a recognition that it does not have the necessary amount of evidence of the defendant’s guilt, obtained legally. This can be compared, for example, with the CAS verdict on the restoration of the results of 28 Russian athletes at the Sochi Olympics, which were canceled due to a doping scandal. That decision did not mean at all that the court established innocence. The medals were returned due to the fact that from the CAS point of view, the allegations based on the testimony of the former head of the Moscow anti-doping laboratory, Grigory Rodchenkov, and the documents submitted by him, are not 100% proven.

But the handling of such cases in the UK is different. Firstly, in England there is no statute of limitations for such violations. And secondly, the approach of British judges in cases of commercial disputes is much less formal than in most countries of the world.

What the courts of other countries consider “improper sources”, English judges will take into account. In the courts of other countries, the parties need to confirm the theses with correctly signed and certified documents. You can come to an English court without any documents at all, initiating a case on the basis of a violation of even verbal agreements. The court pays attention to the logic, the meaningfulness of the testimony and the general meaning.

For this reason, the London Court of International Arbitration is very popular for resolving financial disputes between Russian businessmen, when some of the agreements were reached not on paper, but in words.

Thus, information from Football Leaks may be enough to punish Manchester City.

Who will make the verdict of the Premier League and can it be challenged?

The Manchester City case will be considered by an independent three-member panel, which will be formed by the head of the refereeing board of the Premier League, Murray Rosen. This is a lawyer with the status of a judge of the royal court with more than 40 years of experience. He has been an international referee at CAS since 2016, however he was not part of the panel that ruled on Manchester City in 2020. The British tabloids have already learned that he has a subscription to Arsenal matches, but his impartiality is not in dispute – the lawyer has an excellent track record and an impeccable reputation.

The Premier League Refereeing Commission is a body independent of the league and clubs, which includes 15 experienced lawyers. They are not employees of the Premier League and are assembled when cases arise that require legal expertise at the request of the Premier League board.

There is no regulation limiting the commission on time. Therefore, no one knows when the verdict will be delivered. British media suggest that a decision will be made before the end of the season. Commission meetings will be held behind closed doors, which means that there will be no leaks.

After the decision, either party (the Premier League and Manchester City) have the right to appeal. It will not be considered by CAS, such a case is not within the powers of international sports arbitration, but by a specially created appeal commission, composed by Rosen from other judges.