Pushing Boundaries: The Future of UEFA’s Rules on Multi-Club Ownership

By Alex Harvey, Chris Paget and Daniel Geey

“The rise of multi-club investment has the potential to pose a material threat to the integrity of European club competitions”. That’s how UEFA recently described the growing trend of multi-club ownership structures in their annual Benchmarking Report, emphasising the “growing risk of seeing two clubs with the same owner or investor facing each other on the pitch”.

With the two frontrunners for the Manchester United takeover - Qatar’s Sheikh Jassim bin Hamad Al Thani and INEOS’ Sir Jim Ratcliffe – both having close ties to other European football clubs (PSG and OGC Nice respectively), UEFA’s stance on multi-club ownership is likely to come under intense scrutiny once again.

In this Sheridans Sport long read, we take a closer look at the driving forces behind the multi-club ownership trend, before going on to consider whether UEFA’s rules (and its application of those rules to date) provide suitable protection against the integrity risks which they say multi-club investment groups pose.

⚽ Multi-Club Ownership on the Rise

UEFA’s Benchmarking Report describes the sharp increase in multi-club ownership as “one of the most notable trends in football investment” over the past few years, with over 180 clubs worldwide (involving 6,500+ registered players) now operating as part of a multi-club investment structure, compared with less than 40 clubs just a decade ago.

City Football Group (CFG) currently lead the way in terms of numbers, with ownership stakes in 11 different clubs across five continents. And it doesn’t stop there; across the Premier League, the owners of Arsenal, Brentford, Brighton, Crystal Palace, Leicester, Nottingham Forest, Southampton and West Ham all have ties to other football clubs, whilst in the Championship a further six clubs (Cardiff, QPR, Sheffield United, Sunderland, Swansea and Watford) operate as part of a multi-club ownership model. The trend rings true across Europe too, with 33% of clubs from the ‘Top Five’ leagues forming part of wider multi-club structures.

⚽ What are the Key Drivers?

UEFA suggests that the trend is primarily being fuelled by US-based investment funds, which are “racing to invest in clubs that are perceived to be undervalued assets”. According to European football’s governing body, a third of all multi-club investment groups (27/81) originate from across the pond. This perhaps stems from a culture of wider sports investment portfolios in the US. Arsenal’s owner, Stan Kroenke, for example, has a franchise portfolio which includes the Denver Nuggets (NBA), the Colorado Rapids (MLS), the Los Angeles Rams (NFL) and the Colorado Avalanche (NHL), whilst Liverpool’s FSG have a stake in the Boston Red Sox (MLB) and Pittsburgh Penguins (NHL).

Others point out that, in the UK at least, Brexit has been a key factor, with club owners eager to find ways around the post-Brexit Governing Body Endorsement (GBE) work permit rules. As The Athletic highlights, “there is a reason why UK-based clubs are looking for teams in Belgium, Portugal, Turkey and the Netherlands — and it is to do with their position in the GBE system”.

You can also see how multi-club ownership groups benefit from diversifying their business portfolio, reducing financial risk, creating synergies across marketing and service functions, building global exposure and facilitating player transfers. In respect of player movement in particular, UEFA’s Benchmarking Report notes “a steady increase in transfer activity within such groups in the last ten years”, with the vast majority of transfers consisting of loans and free transfers.

Typically, ownership groups tend to use pyramid structures, consisting of one or two so-called ‘bigger’ clubs and several ‘smaller’ clubs from lower divisions in other jurisdictions. Younger players from the bigger clubs are then often loaned out to the smaller clubs to get first-team experience, and talented players at the smaller clubs are able to move seamlessly up the career ladder. The KPMG Football Benchmark graphic in this excellent piece illustrates Red Bull’s strategy of moving players including Dayot Upamecano and Konrad Laimer from their second-division Austrian club (FC Liefering) to their first-division Austrian club (RB Salzburg) and then on to their first-division German club (RB Leipzig). The nuances regarding Red Bull’s ownership structure are explored in more detail below.

⚽ Back to Basics – the Rationale

It is important to briefly set out the rationale for UEFA’s rules.

The primary concern is the potential conflict, or at least the perceived conflict, which arises when two clubs operating under common ownership are competing in the same competition. For example, imagine a situation where two co-owned teams (Teams A and B) are due to play against each other, with Team A needing to beat Team B to qualify for the next round. If Team B was not in a position to qualify for the next stage, or had already secured qualification, would the co-owners put pressure on Team B’s manager to field a weakened team? Governing bodies are understandably eager to ensure such a situation can never arise.

Indeed, the Court of Arbitration for Sport (CAS) and the UEFA Club Financial Control Body Adjudicatory Chamber (CFCB) have both assessed the importance of protecting the integrity of UEFA’s club competitions and at its core is the desire to ensure such integrity cannot be threatened by common ownership: “commonly-owned clubs could conspire to obtain results that were mutually beneficial to them, at the expense of other teams” and “supporters’ perception of a particular game could be damaged by the differing business aims of two clubs in the same competition in which the same person or company has an interest” (para 30 of the CFCB Redbull Decision).    

Further, in the ENIC decision (CAS 98/200), CAS determined that the rule preventing one entity owning shares in several European football clubs was “an essential feature for the organization of a professional football competition and is not more extensive than is necessary to serve the fundamental goal of preventing conflicts of interest which would be publicly perceived as affecting the authenticity, and thus the uncertainty, of results in (UEFA) competitions.” (CAS 98/200 para 136).

The interesting section of the above quote relates to publicly perceived conflict prevention and the inherent need to protect the unpredictability of outcome. Any public perception of an owner having (even the potential) power to influence and dictate club policy was seen by the relevant judicial bodies as unattractive. This was ultimately to stem any accusations of a conflict of interest where notions of fair play could be eroded.

Interestingly, UEFA also appear to be concerned by the potential distortive effects on the transfer market: “The growth in multi-club investment has the potential to distort transfer activity, with an increasing percentage of transfers being executed within multi-club investment groups at prices that suit investors, rather than at fair values, to the detriment of trainer clubs (which receive less compensation in the form of solidarity payments).”

⚽ So, what exactly are the Rules?

At a domestic level, most national associations have stringent rules in place which prevent any multi-club ownership within that particular jurisdiction. In England, for example, a prospective owner of a Premier League football club must pass the ‘Owners and Directors Test’, which prevents somebody becoming an owner or director if for example they are “involved in or have any power to determine or influence the management or administration of another [EPL] Club or Football League club”, or if they “hold or acquire any Significant Interest [i.e. 30% or more] in a Club”.

The situation becomes a little more nuanced when it comes to multi-club ownership across different jurisdictions. The default position is that it is permitted. However, as alluded to above, governing bodies such as UEFA can impose restrictions preventing clubs with a common ownership competing in the same cross-border competition (for example the UEFA Champions League or Europa League).

Under Article 5 of its Champions League regulations, for example, UEFA prevents two clubs with the same ownership from playing in the same UEFA competition. The European governing body is also alive to the risk of its regulations being bypassed by convoluted and opaque company structures and commercial arrangements. Its regulations therefore also include the following ‘catch-all’ provision: “No individual or legal entity may have control or influence over more than one club participating in a UEFA club competition, such control or influence being defined in this context as… being able to exercise by any means a decisive influence in the decision-making of the club”.

The question of what constitutes “decision influence” was at the heart of the Red Bull case.

⚽ Red Bull and the UEFA Champions League

UEFA’s regulations relating to multi-club ownership and “decisive influence” were put to the test in 2017 when both Red Bull Salzburg (RBS) and RB Leipzig (RBL) qualified for the 2017/18 Champions League. Initially, a UEFA-commissioned report concluded that “the existence of several links between Red Bull and the Clubs (as well as between the Clubs themselves) points to Red Bull having ‘decisive influence’ over each of Salzburg and Leipzig”. UEFA therefore ruled that both clubs couldn’t compete in the same competition.

In particular, UEFA were concerned by the significant revenues from Red Bull sponsorship deals, a formal cooperation agreement between RBS and RBL, strikingly similar kit and branding, unusually high levels of player movement between the two clubs, RBS renting its stadium from a Red Bull subsidiary, and individuals who were connected to Red Bull being involved in the operation of both clubs.

In order to address these concerns, RBS implemented a number of key changes to distance itself from Red Bull, including:

(i)       Removing certain individuals who were allegedly linked to Red Bull (and who were also simultaneously involved with RBL) from the club’s General Assembly;

(ii)      Terminating certain loan agreements between RBS and Red Bull;

(iii)     Terminating the cooperation agreement between RBS and RBL; and

(iv)     Amending the sponsorship agreement between RBS and Red Bull (reducing the rights granted to Red Bull and the amounts paid by Red Bull).

RBS also gave commitments to UEFA that it would address the situation regarding the lease of its stadium from a Red Bull-related entity and the issue of similar branding.

In light of those wholesale changes, UEFA’s Adjudicatory Chamber came to the conclusion that “the Red Bull and [RBS] relationship resembles only a standard sponsorship relationship” and, therefore, that “Red Bull does not have decisive influence over [RBS]”. RBS and RBL were therefore both permitted to compete in the 2017/18 Champions League campaign.

⚽ What Next?

With the sale of Manchester United in the offing, UEFA’s stance on multi-club ownership is likely to be put to the test once again; but this time with some of Europe’s richest and most influential stakeholders involved. It will be fascinating to see whether UEFA stick to their guns and enforce their current regulations, or whether they instead decide to relax their rules in the face of growing pressure from wealthy ownership groups.

Only a few weeks ago, UEFA’s president Aleksander Ceferin suggested they may be taking the latter approach in an interview with Gary Neville:

“We have to speak about these regulations and see what to do about it. There is more and more interest in this multi-club ownership. We shouldn’t just say no for the investments for multi-club ownership, but we have to see what kind of rules we set in that case, because the rules have to be strict… The options are that it stays like that or that we allow them to play in the same competition. I’m not sure yet.”

However, bearing in mind CAS’s forceful words in needing to “protect public confidence in the authenticity of results” and the desire “to preserve the reputation and quality of the football product” (CAS 98/200 para 129), UEFA will need to be mindful of any such dilution of its regulations to maintain confidence in European club competitions.

So, how could UEFA look to amend its regulations to potentially allow such multi-club ownership? To many it will be difficult to see how such dilution could possibly retain the ‘integrity of competition’ guardrails that have been relatively sacrosanct for decades. In Gary Neville’s Overlap chat with Alexander Ceferin, Neville commented that he couldn’t foresee a position where players wouldn’t try to win. As such, he couldn’t initially see why loosening the regulations would be an issue. The wider point, however, is that it’s the team to be picked and the pressure or potential pressure put on a manager or coach that would be the ultimate risk.

The ENIC and Redbull cases stress the need for the perception of fair competition to be upheld. Any weakening of the regulations could therefore lead to potential selection controversies around the strength of teams, rotation and subjective assessments around fielding understrength teams. Many will think these types of controversies need to be avoided at all costs.  

One way or another, Mr Ceferin and UEFA will be making decisions which could significantly impact the multi-club landscape in Europe for decades to come.