Living within your means is the basis of accounting but it has not been the basis of football for years now– Michel Platini, Former President, Union of European Football Associations
Did you know that the recent Manchester's City case at the Court of Arbitration for Sport started way back? Yes, it is a continuation of a previous case decided in 2014 in which the football club was penalized for violating UEFA's Club Licensing Financial Fair Play Regulations.
Asides Manchester City, it is noteworthy to mention that the likes of Rubin Kazan, Paris Saint-Germain, AC Milan have also encountered such issues with UEFA.
Are you wondering what this case is all about? This article provides an overview of the Financial Fair Play, what the Rule seeks to achieve, and also undiluted facts of the Manchester City v Club Financial Control Body (CFCB) case.
Ready? Let's get right to it.
What exactly was Manchester City accused of doing that contravened the FFP?
In May 2014, English Premier League Club, Manchester City Football Club(MCFC) was fined for 50million pounds and also squad capped by the Union of European Football Associations (UEFA) for breaching UEFA's Club Licensing Financial Fair Play Regulations.
The club accepted the disciplinary measures imposed by UEFA, hence, entered into a settlement agreement with UEFA.
However, this case was reopened in November 2018 by the Investigative Chamber of UEFA Club Financial Control Body when the ”Football Leaks” publication in Der Spiegel(a German Magazine) revealed that Manchester City's owner, His Highness Sheik Mansour had disguised equity financing as sponsorship contributions (reason).
Following investigations of these allegations, the investigative chamber of the UEFA Club Financial Control Body(UCFB) referred the case to the Adjudicatory Chamber of the UCFB and the Adjudicatory Chambers decided that MCFC disguised equity financing by its owner, His Highness Sheik Mansour, as sponsorship contributions so that these amounts will falsely reflect in the financial statements submitted to UEFA.
Thus, the court held that Manchester City football Club violated the following provisions of the UEFA's Club Licensing Financial Fair Play Regulations:
Article 13 which provides the general responsibilities of the licensee (Manchester City Football Club)
Article 46 which provides for Declaration in respect of participation in UEFA club competitions.
Article 56 of the Club Licensing and Financial Fair Play Regulations.
Article 58 which provides for Notion of relevant income and expenses.
Article 62 which provides for Break-even information.
What is the position of UEFA as regards this?
The logical basis for the implementation of the UEFA's Club Licensing Financial Fair Play Regulations is the break-even requirement as provided in Article 58 of the regulations.
In compliance with these regulations, football clubs in Europe are mandated not to expend above the income received in the previous financial year and also ensure that they balance their financial sheets every three years.
According to UEFA, the regulations on financial fair play in European football are meant to:
improve the economic and financial capability of the clubs, increasing their transparency and credibility;
place the necessary importance on the protection of creditors and to ensure that clubs settle their liabilities with employees, social/tax authorities, and other clubs punctually;
introduce more discipline and rationality in club football finances;
encourage clubs to operate based on their revenues;
encourage responsible spending for the long-term benefit of football; and
protect the long-term viability and sustainability of European club football.
Thus, to ensure that all these aims are implemented, Article 29 of the Procedural Rules governing the UEFA Club Financial Control Body provides for a list of disciplinary measures that can be imposed on clubs found guilty of contravening any of the provisions in the UEFA's Club Licensing Financial Fair Play Regulations.
These disciplinary measures are Warning, fines, reprimand deduction of Points, withholding of revenues from a UEFA competition, limitations on the number of players a club can register for UEFA competitions, disqualification from competitions in progress and prohibition from participating in future competitions Withdrawal of a Title or award.
How was UEFA's Club Licensing Financial Fair Play Regulations applied in this case?
The decision of the CFCB was based on the disciplinary measures laid down in Article 29 cited above. Contrary to the decision given in 2014, where the team was fined for a sum of money, and restriction was placed on the number of players that could be registered for UEFA Competitions.
This time around, an appeal of the CFCB's decision to the Court of Arbitration for Sport (CAS) saved the club from being banned for two consecutive seasons (2020/2021 and 2021/2022) from the UEFA Champions League competition; paying a fine of 30 million euros and also payment of legal costs incurred by CFCB.
The CAS set aside the decision issued on 14 February 2020 by the Adjudicatory Chamber of the CFCB. The CAS held the club guilty of contravening Article 56 of the UEFA's Club Licensing and Financial Fair Play Regulations which provides for responsibilities of the licensee.
CAS also held that the club should pay a fine of 10 million euros to UEFA for failing to cooperate with UEFA's Club Financial Control Body (CFCB) when the authorities were investigating the case.
Conclusion
Before, European Football clubs outspent what they made as income in their previous financial year. Barcelona, Real Madrid, Paris Saint-Germain, Manchester City, and Chelsea are examples of teams who did this frequently in the past.
However, with the enactment of the Financial Fair Play Rule, there was a limit to the amount clubs can spend, which contextualizes their net spend and profit of the previous financial year.
Over the past ten years, UEFA's Club Licensing and Financial Fair Play Regulations have achieved remarkable success in stabilizing the finances of teams all over Europe, and it is hoped that teams in Europe will keep complying with the regulations or otherwise face the consequences.
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