Jack Anderson: Man City result dispiriting for UEFA but not a gamechanger for Financial Fair Play

Jack Anderson: Man City result dispiriting for UEFA but not a gamechanger for Financial Fair Play

It may go down as one of Manchester City’s greatest away wins in Europe. 

On Monday, the club succeeded in convincing sport’s self-styled supreme court, the Court of Arbitration for Sport based in Switzerland, to strike down a two-year ban imposed on the club by UEFA for breaches of its Financial Fair Play (FFP) regulations.

The origins of the dispute go back to November 2018 when the German magazine Der Spiegel published “leaked” emails that seemed to suggest that Manchester City’s owner, Sheikh Mansour bin Zayed al-Nahyan of the Abu Dhabi ruling family, was engaged in a conspiracy amounting to a serious breach of UEFA’s FFP regulations.

The underlying idea of UEFA’s FFP regulations is to put some order on the finances of football or to use the buzzword so beloved of football and other business executives — to assist clubs in becoming financially “sustainable”.

UEFA’s FFP regulations are in some ways a salary cap for clubs and are designed to avoid reckless spending on player wages and transfer fees. In essence, it works by way of a “live within your means” ratio regulating expenditure against genuine commercial revenues raised and brought in by the club and including sponsorship income.

The key allegation made by UEFA against Manchester City’s owners was that the £67.5m annual sponsorship of the club’s jersey stadium and academy by the airline, Etihad, was in fact a ruse behind which Sheikh Mansour bin Zayed al-Nahyan could directly fund the club beyond the reach of FFP.

In legalese, the charge against Man City was that of “dishonest concealment of equity funding”.

Based on the Der Spiegel documents and having carried out their own investigation, UEFA’s disciplinary system banned City for two years from the Champions League, deeming the club to be in serious breach of the FFP regulations, as aggravated by City’s uncooperative, obstructive behaviour throughout.

Manchester City, as other powerful clubs such as AC Milan and Paris St Germain have done in the past, appealed UEFA’s ruling to CAS who released a summary of their decision yesterday.

Most sports lawyers expected City to lose and speculated upon where they might subsequently appeal the CAS decision.

City had, of course, deep pockets to underwrite their legal preparations for this arbitration. This was never going to a Father Ted-like, “the money was only resting in my account”, defence.

And City considered every legal argument you could think of on the matter.

Initially, there were hints that City would use procedural arguments that UEFA’s disciplinary system lacked independence and had prejudged the matter and were even biased against Manchester City from the start.

There were further hints that City’s lawyers would argue that the leaked nature of the evidence against them, as published in the German press, would mean that that evidence, given the way it was gathered, should have been deemed inadmissible and not relied upon by UEFA.

Further it seemed that City might directly attack the very essence of FFP arguing that it was in breach of competition law. Put simply, if City’s owners had the near limitless means to invest in their business, what right had UEFA, a private entity, to unreasonably restrict the owners’ spending.

Failing that, there was speculation that City might argue against the proportionality of the sanction, in that two years was not just a time ban but would result in severe economic detriment to the club by, for example, key players not renewing contracts.

We remain unsure to what extent any of the above arguments were made at the CAS hearing, which was in private. Moreover, the full reasoned award has yet to be published.

What we do know from a press release by CAS is that the key issue in City’s favour was much more mundane in nature. Under UEFA’s regulations it has five years in which to investigate breaches of FFP. CAS noted that UEFA breached their own regulations and went outside the limit and thus much of the case against City was time barred.

To use the rugby analogy, CAS noted that UEFA’s investigators had a set period in which “to use it or lose it”; UEFA didn’t use it and CAS had no choice but to penalise them to City’s advantage. To return to football, this was an own-goal by UEFA.

While the principal charge against City — concealment of sponsorship — fell away, the secondary charge — failure to cooperate — seems to have been upheld. CAS did not think however that the second charge was of itself enough to justify a ban on City but that a fine was merited. Even on this, UEFA’s victory was partial only and CAS considered it appropriate to reduce UEFA’s initial fine by two thirds, i.e. to €10 million, City can afford it. It equates to about half of Kevin De Bruyne's annual salary; a player who had equivocated as to whether he might stay on at City if the two-year ban had been upheld.

Overall, while this may be a dispiriting defeat for UEFA, it is not the end of FFP. 

City’s victory, though comprehensive, was based on technical legal arguments and it would be surprising if the full CAS award says anything critical, or even anything at all, on the substance or merits of FFP as a policy.

What is of more immediate interest is that the CAS Panel acknowledged that the UEFA investigatory units in question had limited resources and thus there is a "stick or twist" decision now to be made by UEFA. Given the huge sums and club resources they are dealing with in assessing FFP compliance (and it's not just City) UEFA will either have to invest heavily in their investigatory capability or row back from the FFP as policy.

City and its fans will not care about any of this and will now look forward to a last-16 Champions League second-leg against Real Madrid unencumbered with legal doubt, As for UEFA, if they were ever in the unfortunate position of having to ask me for advice, I would say they should consider establishing an all-encompassing integrity unit to investigate FFP compliance, combining it with its existing anti-matchfixing unit and including under its remit issues such the monitoring of, ahem, poor governance standards by football associations under UEFA’s remit.

A bit like the full CAS award, we might leave analysis of that last issue for another day.

- Jack Anderson is Professor and Director of Sports Law Studies at the University of Melbourne

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Wednesday, September 22, 2021

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