The Financial Fair Play Regulations (FFP) were introduced by UEFA back in 2009 with a view to prevent professional football clubs from spending more than they earn.
The aim of such Regulations is to safeguard the existence of football clubs and attempt to prevent them from folding over due to uncontrollable debt.
Such FFP were implemented with effect from the 2011-2012 season and provide for sanctions of various degrees to be taken against those clubs who exceed spending over a period of several seasons within a set budgetary framework.
Amongst the heftiest of sanctions, clubs face the prospect of being disqualified from participating in European competitions, large fines, withholding of prize money and also player transfer bans.
In essence, clubs having an annual income or expenses over €5 million are required to break even over three reporting periods, essentially not spending more than they earned during such three year period, subject to acceptable deviation in certain specified circumstances, the most recent of which concerned the COVID-19 pandemic.
The UEFA Club Financial Controlling Body (CFCB) is UEFA’s investigatory and adjudicatory arm to investigate club’s spending patterns under the FFP Regulations. The CFCB is also able to take, and has taken in some cases, a “rehabilitative” approach rather than a punitive approach, by reaching settlement agreements with clubs, which require clubs to make certain financial contributions while at the same time imposing various restrictive conditions on them, with the intention of assisting the club to reach break-even in the foreseeable future.
This was seen in the case of Marseille in June 2019 which was allowed to break even the following season by the CFCB. Unfortunately, Marseille did not break even in the agreed season and subsequently on March 5 was reported to the CFCB adjudicatory chamber for further punishment, the outcome of which is to date still to be determined.
Whilst the FFP were designed in order to encourage greater financial caution in football, and these were generally well received by clubs, criticism has nonetheless still be directed against same with some claiming that the regulations are illegally limiting the internal market, failing to reduce football club debt and protecting the status quo.
The most high profile sanction imposed by the CFCB to date was the decision reached in February 2020 to ban Manchester City from all UEFA competitions for two years and fine the club €30 million for overstating its sponsorship revenue during the 2012-2016 period and a result of which the club exceeded its break even deficit.
Such case only came to light following the publication of leaked e-mails by a German news publisher which claimed that circa £60 million of Etihad’s annual sponsorship to the club was excluded from the relevant earnings of the club.
Manchester City appealed UEFA’s decision in front of the Court for Arbitration for Sport (CAS) by denying any wrongdoing throughout the process and dismissing UEFA’s investigation as “flawed” and “prejudicial”.
Such appeal made the court case one of the most followed and anticipated CAS judgement delivered to date.
On July 13, the CAS panel overturned City’s two year ban from European competitions as well as reduced the penalty imposed on the club to €10 million for the club’s failure to co-operate with UEFA’s investigation, leaving City celebrating in style and serious questions being asked about UEFA’s FFP regulations.
In a short statement published by CAS, the court held that City “did not disguise equity funding as sponsorship contributions” and that the alleged breaches of FFP Regulations were “either not established or time-barred”.
The decision to allow Manchester City to compete in European competitions means that the club now avoids an estimated £200 million loss in earnings as well as do away with fears of mass star player exodus.
It also gives the club another chance to win the only major trophy that they are yet to place in their trophy cabinet following the Abu Dhabi-led takeover back in 2008, despite spending well over £1 billion over the course of the last twelve years!
Such judgement will inevitably have far-reaching consequences for European football, with governing body UEFA suffering a historic defeat which could irreparably damage the standing of their flagship FFP Regulations.
One of the biggest flaws of UEFA’s actions was the fact that many of the alleged breaches were time-barred due to the five-year time prescription period foreseen in UEFA’s regulations.
Another damming exposure was the fact that such misconduct was only investigated by the CFCB following the publication of leaked e-mails by a German tabloid newspaper and not by a proper investigation initiated by UEFA in accordance with the FFP regulations.
Although in acknowledging the CAS verdict UEFA insisted that they “remain committed” to the FFP rules, they will undoubtedly be facing several questions on the scope of such regulations after having their disciplinary procedures and financial policy severally undermined.
Whether such rules will be completely scrapped or revised, one will have to wait and see.
UEFA must now act fast to address any shortcomings to continue stressing the importance of clubs balancing their books.
If UEFA loses control, clubs will inevitably overspend, with some clubs potentially heading towards complete financial ruin and eventually non-existence.