MCFC, UEFA, FFP and the CAS
On 7 March 2019 UEFA’s Club Financial Control Body announced that its Investigatory Chamber had opened an investigation into Manchester City FC (“MCFC”) for alleged ‘Financial Fair Play violations’ and which ‘will focus on several alleged violations of FFP that were recently made public in various media outlets’. On 14 February 2020 UEFA’s Club Financial Control Body announced that its Adjudicatory Chamber had reached a decision in respect of those allegations against MCFC:
‘Following a hearing held on 22 January 2020 the Adjudicatory Chamber of the UEFA Club Financial Control Body [(“CFCB”)]… has today notified [MCFC] of the final decision on the case which was referred by the CFCB Chief Investigator.
The Adjudicatory Chamber, having considered all the evidence, has found that [MCFC] committed serious breaches of the UEFA Club Licensing and Financial Fair Play Regulations by overstating its sponsorship revenue in its accounts and in the break-even information submitted to UEFA between 2012 and 2016.
The Adjudicatory Chamber has also found that in breach of the regulations the Club failed to cooperate in the investigation of this case by the CFCB.
The Adjudicatory Chamber has imposed disciplinary measures on [MCFC] directing that it shall be excluded from participation in UEFA club competitions in the next two seasons (i.e. the 2020/21 and 2021/22 seasons) and pay a fine of €30 million.
The decision of the Adjudicatory Chamber is subject to appeal to the Court of Arbitration for Sport (CAS). If [MCFC] exercises that right the full reasoned decision of the Adjudicatory Chamber will not be published prior to publication of the final award by the CAS’.
As suggested in the final paragraph in that quotation, MCFC had the right to appeal against the CFCB’s Adjudicatory Chamber’s decision to the Court of Arbitration for Sport (“the CAS”), which is a right MCFC exercised. MCFC’s appeal against the CFCB’s Adjudicatory Chamber’s decision took place before the CAS’s Appeals Arbitration Division by video conference on 8-10 June 2020.
The difficulties with attempting to analyse the CFCB’s Adjudicatory Chamber’s decision and the prospects on the outcome of MCFC’s appeal against the same are (i) the CFCB’s Adjudicatory Chamber’s full reasoned decision has not yet been published and will not be published until after the CAS make a final award (decision) on MCFC’s appeal; and (ii) it is not known on what grounds MCFC is appealing against the CFCB’s Adjudicatory Chamber’s decision.
Conscious of those limitations, this article will (i) explain the known circumstances of and the legal framework applicable to the investigation and the adjudication into MCFC’s alleged ‘Financial Fair Play violations’; and (ii) consider the supposed arguments MCFC may make to the CAS in support of its appeal and the timeframe of that appeal.
The CFCB’s investigation and referral
The basics
The beginning is UEFA’s Club Licensing and Financial Fair Play Regulations (“CLFFPR”), which were introduced in their first edition in 2010, and which have been updated over the years. The 2018 and current edition of the CLFFPR can be accessed in UEFA’s library.
The CLFFPR apply ‘whenever expressly referred to by specific regulations governing club competitions to be played under the auspices of UEFA’ (see article 1 of the CLFFPR), meaning that the CLFFPR apply only to clubs’ participation in the UEFA Champions League and the UEFA Europa League competitions and, from the 2020/2021 season, the UEFA Women’s Champions League. Moreover, and generally, the CLFFPR (i) define the licence and criteria clubs are required to obtain and comply with to enter UEFA club competitions (see article 1.2 of the CLFFPR); and (ii) govern the ‘rights, duties and responsibilities of all parties involved in the UEFA club monitoring process… to achieve UEFA’s financial fair play objectives’ (see articles 1.3 and 2.2 of the CLFFPR).
There are also the Procedural Rules governing the CFCB (“PRCFCB”), which were introduced in their first edition in 2014, and which have been updated over the years. The 2019 and current edition of the PRCFCB can also be accessed in UEFA’s library. The PRCFCB, together with the CLFFPR and the UEFA Statutes, provide the jurisdiction, procedure and powers of the CFCB.
The CFCB is responsible for determining whether, amongst other things, licence applicant clubs have fulfilled licensing criteria (see parts 1 and 2 of the CLFFPR) at the time a club licence has been granted, and, in respect of those clubs to whom a club licence has been granted, monitor clubs’ continued fulfilment of those criteria and monitoring requirements (see parts 2 and 3 of the CLFFPR).
It should also be noted that the CFCB is made up of (i) the Investigatory Chamber, which deals with the monitoring and investigatory stages of proceedings, and (ii) the Adjudicatory Chamber, which deals with the judgment stage of proceedings.
The requirements of the CLFFPR
The CAS decision dated 15 November 2019 that considered the admissibility of an appeal made by MCFC in respect of the CFCB’s Investigatory Chamber’s investigation into MCFC’s alleged FFP violations confirmed: ‘the 2015 edition of the [CLFFPR] and the 2015 edition of the [PRCFCB] are applicable’ and that ‘UEFA Statutes (2017 edition)’ are applicable.[1] (That decision of the CAS will be explained later.) Accordingly, the 2015 edition of the CLFFPR, the 2015 edition of the PRCFCB and the 2017 edition of the UEFA Statutes are the focus of this article. Save where stated otherwise, references to the CLFFPR and the PRCCB hereon will be in respect of the 2015 editions of each, and references to the UEFA Statutes hereon will be in respect of the 2017 edition of the same.
For those without an understanding of the requirements imposed upon clubs pursuant to the CLFFPR then the remainder of this subsection, which provides quotations of the relevant parts of the CLFFPR, is worth reading. For those with an understanding, the remainder of this subsection may be nothing more than teaching your grandmother how to suck eggs and you may therefore wish to skip the same.
In satisfaction of the licensing criteria of the CLFFPR licence applicant clubs were required to comply with article 13 and Part 2, Chapter 3 of CLFFPR (see article 16 of the CLFFPR), which provides, amongst other things, that:
‘The licence applicant must submit a legally valid declaration confirming the following… it will abide by and observe the [CLFFPR]… all submitted documents are complete and correct… it authorises the competent national club licensing administration and national club licensing bodies, the UEFA administration and the UEFA Organs for the Administration of Justice to examine any relevant document and seek information from any relevant public authority or private body in accordance with national law’ (see article 43.1(f), (i) and (j) of the CLFFPR);
‘The licence applicant must provide the licensor with information of the legal group structure at the [financial year end date]… prior to the deadline for the submissions of the application to the licensor. It must be presented in a chart and duly approved by management… (see article 46(1) of the CLFFPR);
‘The licence applicant determines and provides to the licensor the reporting perimeter, i.e. the entity or combination of entities in respect of which financial information (e.g. single entity, consolidated or combined financial statements) has to be provided in accordance with Annex VII B and assessed in accordance with Annex IX’ (see article 46bis(1) of the CLFFPR);
‘Annual financial statements in respect of the [financial year end date] prior to the deadline for submission of the application to the licensor and prior to the deadline for submission of the list of licensing decisions to UEFA must be prepared and submitted… the annual financial statements must meet the minimum disclosure requirements as set out in Annex VI and the accounting principles as set out in Annex VII…’ (see article 47(1) and (4) of the CLFFPR);
‘The licence applicant must prove that as at 31 March preceding the licence season it has no overdue payables (as defined in Annex VIII) towards other football clubs as a result of transfers undertaken prior to the previous 31 December’ (see article 49 of the CLFFPR);
‘The licence applicant must prove that as at 31 March preceding the licence season it has no overdue payables (as defined in Annex VIII) in respect of its employees as a result of contractual or legal obligations that arose prior to the previous 31 December’ (see article 50 of the CLFFPR);
‘The licence applicant must prove that as at 31 March preceding the licence season it has not overdue payables… towards social/tax authorities as a result of contractual or legal obligations in respect of its employees that arose prior to the previous 31 December’ (see article 50bis of the CLFFPR); and
‘… the licence applicant must make written representations to the licensor… that all documents submitted to the licensor are complete and correct’ (see article 51 of the CLFFPR).
Further, beyond licence applicant clubs being granted a licence and then qualifying for a UEFA club competition, in satisfaction of the monitoring requirements of the CLFFPR (now) licensee clubs were required to comply with article 56 and Part 3, Chapter 2 of CLFFPR, which provides, amongst other things:
‘The licensee must: (a) cooperate with the licensor and the [CFCB] in respect of their requests and enquiries; (b) provide the licensor and the [CFCB] with all necessary information and/or relevant documents to fully demonstrate that the monitoring requirements are fulfilled, as well as any other document requested and deemed to be relevant for club monitoring decision-making…’ (see article 56 of the CLFFPR);
‘All licensees that have qualified for a UEFA club competition must comply with the monitoring requirements, i.e. with the break-even requirements… and with other monitoring requirements’ (see article 57.1 of the CLFFPR);
‘A licensee that demonstrates it has relevant income and relevant expenses… below EUR 5 million in respect of each of the two reporting periods ending in the two years before commencement of the UEFA club competitions is exempt from the break-even requirement…’ (see article 57.2 of the CLFFPR);
‘Relevant income and relevant expenses are defined in Annex X’ (see article 58 of the CLFFPR);
‘A monitoring period is the period over which a licensee is assessed for the purpose of the break-event requirement. As a rule it covers three reporting periods: a) the reporting period ending in the calendar year that the UEFA club competitions commence (hereinafter: reporting period T); and (b) the reporting period ending in the calendar year before commencement of the UEFA club competitions (hereinafter: reporting period T-1); and (c) the preceding reporting period (hereinafter: reporting period T-2). As an example, the monitoring period assessed in the licence season 2015/2016 covers the reporting periods ending in 2015 (reporting period T), 2014 (reporting period T-1) and 2013 (reporting period T-2)’ (see article 59 CLFFPR);
‘The difference between relevant income and relevant expenses is the break-even result which must be calculated in accordance with Annex X for each reporting period… The aggregate break-even result is the sum of the break-even results of each reporting period covered by the monitoring period (i.e. reporting periods T, T-1 and T-2)… if the aggregate break-even result is positive (equal to zero or above) then the licensee has an aggregate break event surplus for the monitoring period. If the aggregate break-even result is negative (below zero) then the licensee has an aggregate break-even deficit for the monitoring period… In the case of an aggregate break-even deficit for the monitoring period, the licensee may demonstrate that the aggregate deficit is reduced by a surplus (if any) resulting from the sum of the break-even results from the two reporting periods prior to T-2 (i.e. reporting periods T-3 and T-4)’ (see article 60.1 and 60.4-60.6 of the CLFFPR);
‘The acceptable deviation is the maximum aggregate break-even deficit possible for a club to be deemed in compliance with the break-even requirement as defined in Article 63… The acceptable deviation is EUR 5 million. However, it can exceed this level up to EUR 30 million if such excess is entirely covered by contributions from equity participants and/or related parties’ (see article 61.1-61-2 of the CLFFPR);
‘The break-even requirement is fulfilled if… the licensee has a break-even surplus for reporting periods T-2 and T-1’ (see article 63(1) of the CLFFPR);
‘The break-even requirement is fulfilled… if… the licensee has an aggregate break-even surplus for reporting periods T-2, T-1 and T; or… the licensee has an aggregate break-even deficit for reporting periods T-2, T-1 and T which is within the acceptable deviation… having also taken into account the surplus (if any) in the reporting periods T-3 and T-4’ (see article 63.2 of the CLFFPR);
‘The break-even requirement is not fulfilled if the licensee has an aggregate break-eve deficit for reporting periods T-2, T-1 and T exceeding the acceptable deviation… having also taken into account the surplus (if any) in the reporting periods T-3 and T-4’ (see article 63.3 of the CLFFPR);
‘As at 30 June and as at 30 September of the year in which the UEFA club competitions commence, the licensee must not have any overdue payables (As specified in Annex VIII) towards other football clubs as a result of transfers undertaken up to 30 June and up to 30 September respectively’ (see article 65 of the CLFFPR);
‘As at 30 June and as at 30 September of the year in which the UEFA club competitions commence, the licensee must not have any overdue payables (as specified in Annex VIII) in respect of its employees’ (see article 66 of the CLFFPR); and
‘As at 30 June and as at 30 September of the year in which the UEFA club competitions commence, the licensee must not have any overdue payables… towards social/tax authorities as a result of contractual or legal obligations in respect of its employees’ (see article 66bis of the CLFFPR).’
The CFCB
For those without an understanding of the CFCB then this subsection is worth reading, as it provides an overview of the jurisdiction, procedures and powers of the CFCB. Again, for those with an understanding, the remainder of this subsection may be nothing more than teaching your grandmother how to suck eggs and you may therefore wish to skip the same.
The CLFFPR identifies that the CFCB ‘carries out its duties as specified in the present regulations and in the [PRCFCB]’ and that the ‘monitoring process starts on submission by the licensor of the list of licensing decisions to the UEFA administration and end at the end of the licence season’ (see articles 53.1 and 53.1 of the CLFFPR). Article 54.2 of CLFFPR also identifies the minimum key steps of the monitoring process:
‘(a) issuing of the monitoring documentation to the licensor and licensee;
(b) return of the required completed monitoring documentation by the licensee to the licensor;
(c) assessment and confirmation of the completeness of each licensee’s documents by the licensor;
(d) submission of the validated documentation by the licensor to the UEFA administration;
(e) assessment of the documentation by the [CFCB];
(f) if appropriate, request for additional documentation by the UEFA administration or [CFCB];
(g) decision by the [CFCB] as specified in the relevant provisions of the [PRCFCB]’.
The PRCFCB requires members of the CFCB to ensure ‘complete confidentiality of all facts that come to their attention in the course of their duties and, in particular, refrain from divulging the contents of deliberations’ (see article 10 of the PRCFCB). Further, the limitation period applicable to prosecution of breaches of the CLFFPR is five years from the date of the alleged infringement (see article 37 of the PRCFCB).
Investigations can be opened on the CFCB’s own accord or upon request (see article 12.2 of the PRCFCB) and the CFCB chief investigator leads the investigation proceedings or assigns them to a member of the Investigatory Chamber (see articles 12.1 and 12.4 of the PRCFCB). During the investigation, the CFCB chief investigator or other assigned member of the CFCB establishes the facts and collects all relevant evidence (see article 12.3 of the PRCFCB). Any type of evidence may be considered by the CFCB chief investigator, such as witness statements, expert reports and on-site inspections, and they may, at their own initiative, convene a hearing as part of their investigation (see articles. 13.1-13.2 of the PRCFCB). The defendant to investigatory proceedings is entitled to consult any case files and will be invited to submit their own observations and evidence (see articles 13.3-13.4 of the PRCFC).
Pursuant to article 14.1 of the PRCFCB, once the investigation is completed, the chief investigator consults with the other members of the Investigatory Chamber and then decides to either (i) dismiss the case; (ii) enter a settlement agreement (see also article 15 of the PRCFCB); (iii) impose disciplinary measures limited to a warning, reprimand or a fine up to €100,000, or (iv) refer the case to the Adjudicatory Chamber.
Once a decision is made by the Investigatory Chamber, the defendant and the CFCB chairman are notified of the same (see articles 14.2-14.3 of the PRCFCB). If the chief investigator makes a decision of (i)-(iii) above, the Adjudicatory Chamber is entitled to review such decisions with regard to the existence of ‘a manifest error of assessment’ (see articles 16 and 27(d) of the PRCFCB). Further, where the chief investigator makes a decision of (ii) or (iii), such a decision is published. Where the chief investigator has decided to refer a case to the Adjudicatory Chamber, the decision of the chief investigator is required to contain a concise summary of the facts, an outline of the evidence gathered, a description of the alleged infringements and the relevant provisions of the CLFFPR and proposals as to the appropriate sanctions to be imposed (see article 17.1 of the PRCFCB).
Proceedings in the Adjudicatory Chamber are conducted by the CFCB chairman (see article 19.2 of the PRCFCB). In addition to having the aforementioned referral decision from the chief investigator, the Adjudicatory Chamber will invite the defendant to submit written observations within a set deadline, but the defendant will have no authorisation to produce any further documents after that deadline (see article 20 of the PRCFCB). Nevertheless, the Adjudicatory Chamber has an absolute discretion when regarding evidence relied upon and may request any further evidence it considers appropriate from the Investigatory Chamber or the defendant (see article 23 of the PRCFCB). Proceedings in the Adjudicatory Chamber may take place in writing but the chairman of the Adjudicatory Chamber may, on her own initiative or at the request of the defendant, decide to hold an oral hearing (see article 21.1 of the PRCFCB). If an oral hearing takes place, the defendant and their legal and professional advisers are entitled to attend (see articles 21.2 and 40 of the PRCFCB), and a member of the Investigatory Chamber is required to present the case to the Adjudicatory Chamber, who may be assisted by legal counsel (see article 18 of the PRCFCB). Witnesses and experts may also be required to attend an oral hearing (see article 21.4 of the PRCFCB). Once the Adjudicatory Chamber has considered the written cases, and the oral pleadings where required, it deliberates and reaches a decision.
The Adjudicatory Chamber will make a ‘Final decision’ to either (i) dismiss the case; (ii) accept or reject a club’s admission to a UEFA club competition; or (iii) impose sanctions (see article 27 of the PRCFCB). The Adjudicatory Chamber has discretionary powers when determining the type and extent of any sanction to be imposed, which may also be suspended in whole or in part (see article 28 and 30 of the PRCFCB). The decision of the Adjudicatory Chamber is made by a simple majority of members present but must be reached by at least three of the Adjudicatory Chamber’s members, inclusive of the CFCB chairman, and in the event of a tie the CFCB chairman has the casting vote (see article 25 of the PRCFCB). When a decision is reached, the Adjudicatory Chamber issues its decision in writing and the Defendant is notified of the same (see articles 31.1 and 33.1 of the PRCFCB). Decisions of the Adjudicatory Chamber are published within twenty-one days from the date of their communication to the Defendant, unless they are appealed (see article 33.3 of the PRCFCB).
Decisions of the CFCB are final (see article 58 of the UEFA Statutes). However, article 62 of UEFA Statutes and article 34 of the PRCFCB allow for final decisions of the CFCB to be appealed against to the CAS, subject to the procedures stated in articles 62-63 of the UEFA Statutes (i.e. that an appeal to the CAS must be made within the 10-day time limit from the date of receipt of the decision in question).
A previous encounter between MCFC and the CFCB
MCFC was subject to an investigation by CFCB pursuant to the CLFFPR in 2014 (pursuant to the 2012 edition of the CLFFPR and the 2014 edition of the PRCFCB) which resulted in the CFCB and MCFC entering into a settlement agreement dated 16 May 2014 to ‘ensure [MCFC] becomes break-even compliant’ (“the May 2014 Settlement Agreement”). The details of the basis for the investigation that led to the May 2014 Settlement Agreement are unknown, but MCFC was consequently required for seasons 2013/2014, 2014/2015 and 2015/2016 to, amongst other things:
Undertake to report a maximum break-even deficit of €20,000,000 for the financial year ending in 2014 and a maximum break-even deficit of €10,000,000 for the financial year ending in 2015;
Agree that revenues from the sale of assets within MCFC’s group company structure would not be included in future break-even calculations;
Not to increase employee benefit expenses for, at a minimum, the financial year ending in 2015;
Be subject to a limitation on the number of players and the number of new players that it could include in its “A” list of players for the purposes of participation in UEFA club competitions;
‘[Significantly] limit spending in the transfer market for seasons 2014/2015 and 2015/2016’; and
To pay a part-suspended fine of €60,000,000 (to be withheld from revenues earnt from participating in UEFA club competitions rather than being paid directly and in any event for €40,000,000 of this fine to be returned to MCFC if MCFC fulfils its side of the May 2014 Settlement Agreement).
The May 2014 Settlement Agreement also stated that (i) ‘[MCFC’s] compliance with the [May 2014] Settlement Agreement will be subject to on-going and in depth [sic] monitoring, in accordance with the applicable rules’; and (ii) should MCFC ‘[fail] to comply with any of the terms of [the May 2014 Settlement Agreement], the UEFA CFCB Chief Investigatory shall refer the case to the Adjudicatory Chamber’.
Football Leaks to investigation to referral
The beginning of this article indicated that CFCB’s Investigatory Chamber had opened an investigation into MCFC in March 2019 for alleged ‘Financial Fair Play violations’ which ‘will focus on several alleged violations of FFP that were recently made public in various media outlets’ (emphasis added). Those allegations were the so-called “Football Leaks” published by Der Spiegel and others. From 5-8 November 2018 Der Spiegel published ‘Manchester City Exposed’, a four-chapter series on MCFC to ‘expose the dirty tricks behind the team’s success’, which can be found here: (i) Chapter One; (ii) Chapter Two; (iii) Chapter Three; and (iv) Chapter Four. The allegations, apparently based upon internal emails and other documents from MCFC, include:
MCFC ‘has managed to cheat its way into the top echelon of European football and create a global, immensely profitable football empire, ignoring rules along the way’.
‘Internal analysis compiled by club leadership are explosive… a document titled "Summary of Owner Investment" dated May 10, 2012… By this time, the management installed by [Sheikh Mansour bin Zayed Al Nahyan, the MCFC owner,] had been with the club for just three years and eight months -- and they calculated that the owner from Abu Dhabi had already invested 1.1 billion pounds, around 1.3 billion euros, in the club. One section of the document is particularly consequential. It bears the heading: "Supplement to Abu Dhabi partnership deals”’.
‘City, though, was in danger of violating [UEFA’s CLFFPR]. "We will have a shortfall of 9.9m pounds in order to comply with UEFA FFP this season," Man City's Chief Financial Officer Jorge Chumillas wrote in an internal email. "The deficit is due to RM (eds: a reference to Roberto Mancini) termination. I think that the only solution left would be an additional amount of AD (eds: Abu Dhabi) sponsorship revenues that covers this gap."’
‘To dodge UEFA sanctions, Man City management came up with a few creative proposals. "We could do a backdated deal for the next two years (...) paid up front," suggested club executive Simon Pearce. CEO Ferran Soriano, meanwhile, suggested having sponsors pay the team the contractually obligated bonus for winning the FA cup -- even though Man City hadn't won’.
‘These activities in Spring 2013 raise doubts as to whether the Abu Dhabi-based companies are really the independent sponsors Man City representatives have consistently claimed them to be. As early as April 2010, when Pearce negotiated the sponsorship deal with Aabar, he wrote a telltale [sic] email to the firm's leadership. According to the contract, the investment company was to pay the club 15 million pounds annually. But that apparently isn't the full story. "As we discussed, the annual direct obligation for Aabar is GBP 3 million," Pearce wrote. "The remaining 12 million GBP requirement will come from alternative sources provided by His Highness."’
‘If the club goes on a shopping spree with [Sheikh Mansour’s] money, those expenditures must be declared, which quickly puts the balance sheet in the red. If, however, that money can be disguised as sponsoring money, it looks like revenues and Man City can afford larger expenditures without fear of UEFA sanctions’.
‘Manchester City financial reports were a web of lies; the team walked all over the Financial Fair Play rules. Etihad Airways, one of the world's largest airlines, also plays along. "Etihad's direct contribution remains constant at 8m," wrote Simon Pearce in December 2013. At that time, Etihad's contractual sponsoring obligation was 35 million Pounds’.
‘[Companies] like Etihad in Abu Dhabi wait for the Abu Dhabi United Group (ADUG), the holding company that belongs to Sheikh Mansour and which also owns Manchester City, to wire them money. That money is then "routed through the partners and they then forward onto us," wrote Finance Director Andrew Widdowson in an email. That, at least, is how things were done in 2015: At the time, the deal with Etihad was bringing in 67.5 million pounds annually. But Chief Financial Officer Chumillas emphasized in an email to Pearce: "Please note that out of those 67.5m pounds, 8m pounds should be funded directly by Etihad and 59.5 by ADUG."’
‘Manchester City negotiated settlements with UEFA in 2014 to avoid possible exclusion from the Champions League due to rules violations… [UEFA] wasn't even entirely aware of the degree to which it had been deceived. It could not have known, for example, that Manchester City had set up a secret project aimed at hiding costs’.
‘UEFA… showed Manchester City far too much lenience. The European football association was aware that it let City off the hook with a ludicrously low penalty, despite the club's far-reaching deception. What UEFA didn't know, however, was the vast extent of Manchester's deceit -- mendacity that began the moment in 2008 when Sheikh Mansour purchased the club’.
‘In 2012, one year before the FFP rules went into effect, Man City's bookkeepers sounded the alarm. "Without significant additional revenues (...), UEFA FFP compliance WILL NOT be achieved," noted an internal presentation. Avenues to avoid non-compliance "need to be pursued aggressively."’
‘A concept paper shows that Fordham Sports Management is merely one element in a closed payment loop: Sheikh Mansour's holding company, Abu Dhabi United Group, transferred money to the Rowlands for the purchase of the marketing rights and to pay Man City's players for their marketing appearances. The money transfers were coordinated by Manchester City itself. Fordham, in other words, was merely a vehicle for hidden capital injections from Abu Dhabi’.
‘… the negotiations between UEFA and City didn't address Fordham at all. Rather, the focus was on the value of the team's sponsoring contracts and other company entities that had been outsourced. In other words, the team's violation of the Financial Fair Play rules was far more egregious than thought’.
It is understood from the CAS decision dated 15 November 2019 that considered the admissibility of an appeal made by MCFC in respect of the CFCB’s Investigatory Chamber’s investigation into MCFC’s alleged FFP violations (“the CAS 15 November 2019 Decision”), that following the Football Leaks:
The CFCB chief investigator ‘wrote to MCFC [on 10 December 2018] about these “Football Leaks”, attaching extracts of publications and inviting MCFC to comment on the accuracy thereof’.[2]
The CFCB chief investigator notified MCFC on 7 March 2019 that ‘further to our letters for your attention dated 14th and 19th February 2019, your club’s response dated 1st March 2019 and subsequent information and documents recently made public in various media outlets, an investigation is hereby informally opened in accordance with Article 12(2) of the [PRCFCB] – Edition 2015’ (“the Investigation”).[3]
On 28 March 2019 and 11 March 2019 hearings took place before the CFCB’s Investigatory Chamber (see articles 13.3-13.4 of the PRCFC).[4]
On 15 May 2019 the CFCB’s Investigatory Chamber issued a referral decision to the CFCB’s Adjudicatory Chamber (see article 14.1 of the PRCFCB) (“the Referral Decision”).[5] A copy of the Referral Decision is unavailable and is omitted from the CAS 15 November 2019 decision.
The CAS 15 November 2019 Decision was made following, amongst other things, MCFC seeking to appeal against the Referral Decision.
In addition to the overview of the jurisdiction, procedures and powers of the CFCB provided above, it should be noted that the CAS’s Code of Sports-Related Arbitration (“the Code”) provides the procedural rules for appeals dealt with by the CAS’s Appeals Arbitration Division (for a full overview of the CAS see this Football Law overview). The Appeals Arbitration Division of the CAS hears disputes arising from a decision taken by a sports body, such as UEFA or FIFA, so long as that sports body’s statutes or regulations allow the same. Article R47 of the Code states:
‘An appeal against the decision of a federation, association or sports-related body may be filed with CAS if the statutes or regulations of the said body so provide or if the parties have concluded a specific arbitration agreement and if the Appellant has exhausted the legal remedies available to it prior to the appeal, in accordance with the statutes or regulations of that body’ (emphasis added).
MCFC’s appeal against the Referral Decision sought to annul the Referral Decision on the following bases, amongst others[6]:
The Referral Decision was a ‘final decision’ of the CFCB’s Investigatory Chamber (“IC”). MCFC submitted that the Referral Decision was a ‘final decision’ for the purposes of articles 58 and 62 of the UEFA Statutes and article 34 of the PRCFCB, and therefore the CAS had jurisdiction to consider the appeal.
The IC had exceeded its jurisdiction in making the Referral Decision. MCFC submitted that the Referral Decision made no reference to the reporting periods 2016-2017 and 2017-2018, which were the only reporting periods that the IC had jurisdiction over as earlier reporting periods were covered by the May 2014 Settlement Agreement, which ran to the end of reporting period 2015-2016, and in any event ‘the IC… [had] formally released [MCFC] from the [May 2014] Settlement Agreement’. MCFC also submitted that the IC is time-barred from reopening matters that were more than five years before the Referral Decision and/or concluded by the May 2014 Settlement Agreement and MCFC’s release from the same (see article 37 of the PRCFCB).
The Referral Decision was made improperly and prematurely whilst the Investigation was still ongoing despite the IC only being able to refer a case to the CFCB’s Adjudicatory Chamber at the end of an investigation. MCFC submitted that the Referral Decision itself states that ‘the Investigation is still ongoing’ whereas a referral to the CFCB’s Adjudicatory Chamber can only be made at the end of an investigation (see article 14.1 of the PRCFCB).
UEFA’s response sought a declaration that MCFC’s appeal against the Referral Decision was inadmissible on the following bases, amongst others[7]:
The Referral Decision was not a ‘final decision’ and therefore MCFC’s appeal against the Referral Decision was premature and inadmissible. UEFA submitted that the IC is responsible for the investigation stage of proceedings, while the CFCB’s Adjudicatory Chamber (“AC”) is responsible for the judgment stage. In other words, the IC had merely presented the case to the AC and no final decision had been made.
The bases put forward by MCFC should first be presented to the AC within the judgement stage of proceedings. UEFA submitted that arguments of limitation and procedural correctness should be put to the AC first; the AC should not be skipped and such arguments be put to the CAS first.
The CAS, in considering those arguments, stated:
‘… a decision rendered by the [IC] to refer a case to the [AC] is not final and can therefore in principle not be appealed to CAS directly, because the [AC] is competent to take any of the decisions listed in Article 27 [of the PRCFCB], that are described as being final. It follows from the above that a referral decision issued by the [IC], in principle, does not qualify as a final decision that can be appealed to CAS and that only once the [AC] renders one of the decisions listed in Article 27 [of the PRCFCB] has a final decision been rendered that can be appealed to CAS.
…
… the matter in dispute before the [AC] remains identical to the one before the [IC] that was referred to the [AC]. Thus, the [AC] may still decide to dismiss the entire case against MCFC, in which case MCFC would be exonerated. Therefore, until the [AC] issues its final decision, the legal remedies of MCFC are not exhausted and an appeal to CAS is, in principle, premature.[8]
The CAS then went on to decide that:
‘… there can be exceptions to the general rule that internal legal remedies must be exhausted. An exception would be warranted in case irreparable harm would be incurred prior to the issuance of the final decision…
The Panel, however, does not find that the proceedings in the present matter brought before the [AC] are illusory, inadequate or ineffective for MCFC. The high threshold for an appeal to CAS… is not met here.
…
The Panel does not consider it appropriate to enter into a detailed analysis of the alleged deficiencies in the [IC] proceedings, so as not to prejudice issues that are currently pending before the appropriate forum, i.e. the [AC]…
…
However, this finding by the Panel also implies that the [AC] will seriously address and assess MCFC’s procedural complaints as promised by UEFA in its submissions before this Panel in these CAS proceedings. In any event, such alleged procedural deficiencies will be reviewable in the context of an admissible appeal to CAS against a decision of the [AC]’.[9]
Accordingly, MCFC’s appeal against the Referral Decision was found to be inadmissible because MCFC had (i) failed to exhaust the internal legal remedies before making its appeal to the CAS, i.e. a judgment on proceedings before the AC was still available; and (ii) failed to prove that an exception to that general rule was warranted.[10]
The CFCB’s adjudication and the present appeal to the CAS
Again as noted at the beginning of this article, the AC delivered a ‘final decision’ on 14 February 2020, and whilst the AC’s full reasoned decision is not yet available, the summary provided by the CFCB highlights that MCFC ‘committed serious breaches of the [CLFFPR] by overstating its sponsorship revenue in its accounts and in the break-even information submitted to UEFA between 2012-2016’ and by failing ‘to cooperate in the investigation of this case by the CFCB’ (“the AC Decision”). An over-stating of sponsorship revenue and break-even information, and a failure to cooperate, have a notable echo of the Football Leaks allegations stated above.
Further, and yet again as noted at the beginning of this article, whilst MCFC has appealed the CAS 15 November 2019 Decision, it is not known on what basis MCFC has made that appeal. A club statement released by MCFC on 15 February 2015 stated:
‘… this is a case initiated by UEFA, prosecuted by UEFA and judged by UEFA. With this prejudicial process now over, the Club will pursue an impartial judgment as quickly as possible and will therefore, in the first instance, commence proceedings with the Court of Arbitration for Sport at the earliest opportunity’.
The CAS has full (de novo) power to review the facts and the law and may issue a new decision to replace the challenged decision or annul the challenged decision and refer the case back to the CFCB (see article R57 of the Code). Accordingly, any allegations of impartiality will be overcome in any event by MCFC appealing against the AC Decision to the CAS. Further, considering that the CAS 15 November 2019 Decision did not consider MCFC’s substantive arguments in respect of limitation and procedural correctness, MCFC may have submitted those same arguments for consideration by the CAS this time around. This author is of the opinion that there would be limited prospects of success in respect of those arguments for the following reasons:
MCFC’s reliance upon the five-year limitation period and the ‘release’ from the May 2014 Settlement Agreement appears misjudged. The May 2014 Settlement Agreement expressly states that the same ‘will be subject to on-going and in depth monitoring, in accordance with the applicable rules’ and that if MCFC ‘fails to comply with any of the terms of [the May 2014 Settlement Agreement], the… CFCB Chief Investigator shall refer the case to the [AC], as foreseen in Art. 15 (4) [of the PRCFCB]’. The mere opening of proceedings is sufficient to stop time from running.[11] The Investigation commenced in March 2019, fewer than five years after the May 2014 Settlement Agreement. Further, if the CLFFPR violation allegations against MCFC are proven – as the AC Decision indicates they are – then MCFC was never entitled to a ‘release’ from the May 2014 Settlement Agreement and the CFCB was entitled to commence the Investigation/make the Referral Decision against MCFC.[12] This encapsulates a basic legal principle that no one shall benefit from their own wrongdoing.
Additionally, the CAS 15 November 2019 decision heavily emphasised that the AC ‘will seriously address and assess MCFC’s procedural complaints as promised by UEFA in its submissions before this Panel in these CAS proceedings’.[13] It is difficult to imagine from that that any procedural arguments would not have been fully argued before, considered by and decided upon by the AC.
Beyond those supposed substantive arguments, and as an insurance argument should all else fail for MCFC, it is also fair to assume that one of the bases of MCFC’s appeal against the AC Decision would have been that the sanctions of a two-year ban from UEFA club competitions and a €30,000,000 fine were disproportionate. However, the CAS has stated in other appeals:
‘With respect to the proportionality of the sanction, UEFA refers to jurisprudence of CAS and in particular to CAS 2012/A/2762, according to which, allegedly, “[t]he measure of the sanction imposed by a disciplinary body in the exercise of the discretion allowed by the relevant rule can be reviewed only when the sanction is evidently and grossly disproportionate to the offence”. CAS thus has a very limited and restricted competence in this respect’.[14]
‘… the Panel finds that its powers to review the facts and the law of the case are neither excluded nor limited… the Panel is mindful of the jurisprudence according to which a CAS panel “would not easily ‘tinker’ with a well-reasoned sanction, i.e. to substitute a sanction of 17 or 19 months’ suspension for one of 18. It would naturally [...] pay respect to a fully reasoned and well-evidenced decision of such a Tribunal in pursuit of a legitimate and explicit policy. However, the fact that it might not lightly interfere with such a Tribunal’s decision, would not mean that there is in principle any inhibition on its power to do so” (cf. CAS 2010/A/2283 para. 14.36; CAS 2011/A/2518 para. 15; CAS 2011/A/2645 para. 44)’ (emphasis added).[15]
Further, while there may be comparable cases demonstrating a lesser sanction being imposed for a club’s breach of the CLFFPR to that imposed on MCFC by the AC Decision, each case turns on its own facts. As noted by the CAS in Kardemir Karabükspor Kulübü Dernegi v UEFA: ‘two cases are rarely entirely similar to each other, and it is therefore very difficult to compare the sanction imposed in one case to a sanction imposed in another case without taking the circumstances of each case into consideration’.[16] More forebodingly for MCFC, the AC has previously highlighted the fluidity of sanctions with an explanation that correlates to the CAS’s policy point quoted and emphasised above:
‘It also needs to be borne in mind that UEFA’s club licensing and financial fair play regime is a developing area, so that the requirement for sanctions to provide a real incentive to ensure compliance may require the type and seriousness of disciplinary measures to change over time’.[17]
It is this author’s opinion in respect of any “proportionality of sanction” argument (if that is what the appeal ultimately comes down to) that MCFC is unlikely to escape with anything less than a one-year ban from UEFA club competitions.
Timeframe of the present appeal and what next
MCFC’s appeal against the AC Decision took place by video conference from 8-10 June 2020. A media release from the CAS on 10 June 2020 indicated that the CAS’s decision will be issued ‘during the first half of July 2020 [and the] exact date will be communicated in advance’.
The rapidity with which the CAS is dealing with MCFC’s appeal will be appreciated for those eager to see finality of this issue, but it should not be ruled out that MCFC or UEFA could appeal a decision by the CAS to the Swiss Federal Tribunal should either consider that the decision can be appealed on the available limited grounds (see article R59 of the Code and article 190(2)(d)-(e) of the Swiss Federal Code on Private International Law in particular). Notwithstanding that, the ramifications of MCFC being unsuccessful will be tremendous. Amongst other things, MCFC could face disciplinary proceedings from the FA Premier League for breach of J.7 of the FAPL’s rules (which can be found at pg. 134 of the Premier League Handbook):
‘Any Club, Authorised Signatory or other Official making a false statement (whether made verbally or in writing) in or in connection with an application for a UEFA Club Licence or falsifying a document produced in support of or in connection with such an application shall be in breach of these Rules and shall be liable to be dealt with in accordance with the provisions of Section W of these Rules (Disciplinary)’.
Watch this space.
Footnotes
[1] CAS 2019/A/6298 Manchester City FC v UEFA, [81].
[2] ibid, [8].
[3] ibid, [9].
[4] ibid, [10].
[5] ibid, [11].
[6] ibid, [49] and [53].
[7] ibid, [51].
[8] ibid, [90] and [95].
[9] ibid, [107]-[112].
[10] ibid, [122].
[11] CAS 2013/A/3297 Public Joint-Stock Company “Football Club Metalist” v UEFA & PAOK FC, [8.17]-[8.24].
[12] cf. CAS 2018/A/5977 FC Rubin Kazan v UEFA, [89]-[100].
[13] (n1), [112].
[14] CAS 2013/A/3139 Fenerbahçe SK v UEFA, [144].
[15] CAS 2018/A/5808 AC Milan v UEFA, [135].
[16] CAS 2016/A/3692, [7.37].
[17] AC-01/2016 Galatasaray Sportif Sinai ve Ticari Yatirimlar A.S., [110].
12 June 2020