This latest blog sets out how clubs will be sanctioned and the timing of such sanctions for breach of the break-even provisions under the UEFA Financial Fair Play Licensing regulations. The rules leave the possibility of allowing clubs in breach of the break-even criteria to participate in that season’s UEFA club competition.
In order for UEFA Financial Fair Play (FFP) to be taken seriously many believe that UEFA needs to sanction non-compliant clubs appropriately. No doubt FFP compliant clubs would agree. For a summary of UEFA FFP, click here. The below sections set out what sanctions can be imposed by UEFA and how they will be imposed.
What sanctions can be imposed?
FFP is already in action and has allowed UEFA to sanction a number of clubs including Malaga as recently as this week. The initial step for all clubs wanting to play in UEFA competition is to submit various documents and approvals required as part of the licensing documentation to their national football association (FA). The FA then makes the licensing decision which is then communicated to UEFA. For the break-even calculations, clubs submit their financial information direct to UEFA.
UEFA, through its Club Financial Control Body (CFCB), has the power to conduct club audits and ask further questions to ensure that the national FA approval/rejection system is applied correctly. If the Panel believes that the FFP rules have not been correctly applied, it has the disciplinary power to sanction clubs in breach. It is important to bear in mind that FFP applies not only to ensure that clubs break-even, but it covers a wide range of licensing conditions, including requirements to ensure clubs pay their debts in a timely manner. Such sanctions include a reprimand, a fine, withholding of prize monies, points deductions, refusal to register players for UEFA competition, reducing a club’s permitted squad size, disqualification from competitions in progress and/or exclusion from future competitions.
Sanctions as explained above, will take many forms. It should be stressed that it is far from certain that a club that breaches the FFP regulations will be automatically excluded. Although the above are all possible sanctions, it appears likely from the outset (from the 2013-14 season) that a raft of sanctions will be imposed and not just the harshest sanctions for breaching the rules. This is unless, presumably, there is a blatant flouting of the rules (i.e. someone posting a loss similar to Chelsea’s £140m loss in the 2004/5 season). High profile club sanctions should not be ruled out, but exclusion will certainly be saved for only the most blatant offenders.
When can sanctions be imposed?
For the first 13-14 monitoring period, a club’s 2011-12 (T-1) accounts must be submitted by 15 July 2013. This will be the first time that UEFA has collected such detailed financial information for actual compliance purposes from its applicant clubs. Significantly, the CFCB cannot impose any sanctions on clubs for break-even purposes in the Summer of 2013 because clubs are only required to provide their 12-13 accounts by October 2013 (if their accounting year ends in June) or March 2014 (if their accounting year ends in December). Only with both sets of accounts for the 13-14 monitoring period will the CFCB be able to verify the break-even situation.
This is important as it practically means that initial UEFA CFCB decisions on break-even sanctions for non-compliant clubs will only occur at the very earliest from April/May 2014. For example, a club will be able to participate in the Champions League or Europa League in this coming season (13-14), so long as it fulfills the other UEFA licensing requirements, even if they fall well outside of the break-even criteria because UEFA will not have the requisite information in time for the start of the competition. A club that has significantly overspent may only be sanctioned as late as April 2014 which may be only weeks before the final games of the tournament. The practical effect will presumably mean clubs who fall foul of break-even will be likely sanctioned based on the following UEFA season competition.
There are at least three sanctioning scenarios which appear to take shape:
- Club A is knocked out in, for example, the group stages of the 13-14 Champions League competition and has fallen outside of the acceptable deviation provisions in the break-even test based on their 11-12 and 12-13 accounts. They will likely be sanctioned for the 14-15 season;
- Club B gets to the semi-final of the Europa League in May 2014. The CFCB announce that they have not complied with the break-even requirement before the semi-final. Significant sporting issues as to whether club B should be expelled from a competition in progress (which is a power the CFCB possess) becomes a difficult judgment call for the CFCB. Any subsequent appeal to CAS leaves question marks as to whether UEFA or CAS would allow the competition to continue with the non-compliant team able to participate subject to the appeal outcome.
- A CFCB decision could possibly occur after the final game of the competition. If a non-compliant club wins the Champions League in May 2014, they could be sanctioned by having their title removed. The licensing requirements would not however bar that club from participating in the competition in the first place.
From UEFA’s perspective, it is difficult to see how they can get the requisite financial information earlier in order to make decisions before the UEFA competitions get into full swing. To many, however such ‘late in the day’ sanctioning may still be seen as somewhat unsatisfactory.