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Who is going to sue Uefa first?

By Tony Attwood

Why so many articles about Uefa and Financial Fair Play?

Two reasons really.  One is that it is just about the biggest thing happening in football at the moment, apart possibly from the issue of corruption.  The other is that a full and proper implementation of FFP will cause problems for some clubs and benefits for others.  Arsenal is definitely on the benefit side.

So Uefa has said it will look closely at Chelsea, Manchester City and PSG in terms of their sponsorship deals to ensure that no one has broken the rules on  investments from related parties.

In effect this means that they may have broken the rule that says that clubs can’t  count income from such sources as being exempt from money considered under FFP, unless it is at a “fair market value”.

So if Manchester City (to name but a few) were to sign a 10-year £350million stadium and shirt sponsorship contract (to take a number at random) with  airline Etihad (to choose an example at out of the blue), which is based in Abu Dhabi (to choose a country by just opening the atlas and seeing what page we get to), and we find that the ruling family of that country also owns the club (by some wild coincidence), then Uefa has to say if this deal is a deliberate attempt to get around the rules, or is set at a fair market price.

And then again if we take a figure like £200million-a-year (chosen of course by spinning a wheel) and take a club (let’s say, for the sake of example and nothing more, PSG), and note that their owners are the Qatari Investment Authority, and let us say, oh, just for no reason than its there, that the money comes from the Qatar Tourism Authority, which (we might conjecture), handles 23 tourists a year from France, we can say, well, that’s fine then.  All straight and above board.  Nothing to worry about.  Hunky dory.  Tickety boo.

Now we won’t know what Uefa thinks, until it has a thought, but basically if they let either of these deals go through, then FFP is not so much dead, as merely a twinkle in someone’s eye which was never born and has never got off the ground.

So what does Uefa think?  General secretary Gianni Infantino said, of the clubs,  “They have to demonstrate that they can cover their costs with the revenues that they generate without cheating. If the result is that something went wrong then sanctions will be taken.”

In Uefa’s defence we have to note that they have excluded a few clubs from its competitions, including Portsmouth, Malaga and Besiktas for breaking some details of FFP – although not the little details that Man C and PSG are alleged by some wild and thoughtless bloggers to have broken.

So Uefa has set up an independent “chamber” which will impose sanctions if they are needed.  And that could start legal action over the true and reasonable meaning of the phrase “fair market value”.

Mr Infantino continued,“We were always worried – and I say this with a smile – with clubs that were telling us, ‘We will sue you if you dare take sanctions against us for Financial Fair Play regulations’, [because] we have the other clubs who will sue us if we don’t take sanctions against those who have breached the rules.”

Uefa has however released the 2011 Club Licensing Benchmarking Report, which shows quite clearly that (to take an example at random) Chelsea and Manchester City would have be expelled from the Champs League two years back if the limited loss rule had been in force two years ago.  And to show that  it is not just an English thing, so would 18 other clubs that exceeded the maximum €45 million losses over three years.

But what would these sanctions be, I hear you cry.  Anything from fines (which are of course meaningless to Chelsea and Manchester City), to expulsion from the Champions League and Europa League, which might make Mr Abramovich pack up his yacht and toddle off to somewhere less boisterous than the King’s Road.

Mr Infantino added that, “Last year… when we published this benchmarking report for the clubs, we were saying that it’s a wake-up call for the clubs. But I think the clubs are really ‘up’, that the Financial Fair Play rules show that they have teeth and that those are biting now.”

So there we have it.  Whatever Uefa do, someone is going to sue them.   Which by and large should be rather interesting.  One might say that the future of European football depends totally on who wins the legal battle.

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EC demands reform of the transfer system. The pressure is mounting.

By Tony Attwood

The European Commission has recommended reform of the football transfer system.  And what the EC wants the EC usually gets (as with for example the Bosman ruling).

The new plan involves limiting what the EC sees as “inflated” transfer fees and a levy (interestingly being call a “fair play” levy) on fees rising above a set level.

The argument is that the EC has allowed football to be an exception from various standard EU regulations on competition so long as it is possible for clubs to move up and down the leagues through promotion and relegation.

Naturally anything that affects income and expenditure could also have an impact on ticket prices.  We all know that Arsenal tickets are hard to come by and have been said (wrongly) by some to be the most expensive in the Premier League.  This could affect us all.

The EC now suggests that the cost of salaries and transfers of top players players means that in effect there is a closed league at the top level with the same clubs always occupying the top slots.  Only 2% of transfer fees actually reaches the smaller clubs, according the to EC review.

And – and this is the bit that is of particular interest – there is a concern about criminal activity.  If you have seen the occasional forays into corruption in football written by myself and colleagues on Untold you will know that we see match fixing by gamblers as only one part of the corruption problem.  One of the other major areas is the way football clubs and transfers can be used as a front for money laundering.  And what do you know…  The EC is getting rather exercised about “criminality in the transfer market”.

As a result the EC is now putting forward a series of proposed changes for the transfer market including…

1:  Transfer fees on players who extend their contract limited to “70% of the gross salary owed to the player for the entire period of his contract”

2: The regulation of buy-out clauses “to prevent abusive practices”.

3: A “fair play levy” on transfer fees over a fixed minimum, with this money being given to the poorer clubs.

4: An official channel which records the movement of players so that everyone can see exactly where the money is going, and ensure that everything happens according to the rule book.

5: A campaign to ensure that players and clubs are aware of their rights and duties.

6: A EU wide limit on the maximum number of players per club.

7:  Regulation of the loan transfer system across the EU (it is virtually unregulated at the moment)

8:  Officially ending third-party ownership in all EU countries.

9:  Financial Fair Play to be introduced and supported.

The report says that since 1995 (when Bosman came in) the annual transfer spend by clubs has increased from €403m to €3bn in 2010-11 with the number of transfers going up 300%.  The vast majority of this spending comes from a very tiny number of clubs.

In drawing up its proposals the EC has consulted with Fifa, Uefa and the European Club Association.

This does not mean the EC will radically change the system of transfers.  Instead Androulla Vassiliou the Commissioner responsible said, “The European Commission fully recognises the right of sports authorities to set rules for transfers, but our study shows that the rules as they are do not ensure a fair balance in football or anything approaching a level playing field in league or cup competitions.   We need a transfer system which contributes to the development of all clubs and young players.”

Kea, the Brussels-based consultancy involved in the study said, “Seventeen years after the Bosman ruling and 11 years after the informal agreement between Fifa, Uefa and the European Commission on the transfers of players, the document reveals that sporting regulation in relation to transfers has contributed to the increase of free movement of professional players without, however, managing to curb the amount of certain transfer fees.

“The study proposes measures to encourage transfer rules that contribute to more balanced and fair competition. While redistribution of transfer expenditures to clubs training players constitutes one of the justifications for the transfer rules, redistributive impacts linked to the transfer market remain limited. Indeed training compensation and solidarity mechanisms only account for 1.84% of the total agreed transfer fees within Europe.”

The Kea report highlighted key issues that the study showed were major problems.

1:  Huge debts that threatens the financial stability of numerous clubs.

2:  The criminality which Untold has been publicising.  It added to our list of corruption, money laundering and illegal activities relating to gambling, also introducing the trafficking of players and abusive terms of employment.

3:  Forms of investment in players, including third party ownership, which take power away from clubs and the regulatory authorities.

4: The inability of organisations like the FA to organise and regulate football in the face of the larger clubs, which are run like businesses and have an obligation to deliver financial results to their shareholders.

The cases of Leeds United’s and Portsmouth’s collapse, the money laundering problems that are still surrounding Birmingham, and the huge amounts of money pouring into Chelsea, Manchester City, and PSG, are all cause for concern.

The report also says that, “The turnover of the first division championships of the 53 Uefa member countries increased from €9bn in 2006 to €12.7bn in 2010. But overall net losses increased steadily over the period 2006-2010 to reach €1.64bn in 2010. 56% of the clubs concerned are reporting net losses for the year 2010….

“In general the transfer market suffers from a lack of transparency in transactions [which] is encouraging a competitive imbalance. Therefore, the transfer matching system from Fifa and financial fair play from Uefa constitute very key developments whose implementation should be encouraged. They show the willingness of sporting bodies to tackle in a serious manner abuses related to some extent to the transfer market.”

The EU Expert Group on “Good Governance in Sport” will take up the issue in April.  This is the same group that is already discussing match-fixing.  The report is expected to go to EU sport ministers before the end of the year, and changes should be announced in 2014, for implementation thereafter.

So what will all this mean for football fans? Greater competition yes, and quite possibly a decline or at least stabilisation of ticket prices once the EC gets its hands on the issue of competition.

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A fair and balanced competition. The EU is about to act.

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