In 2009, under the presidency of President Michel Platini (2007-2015), the Union of European Football Associations’ (UEFA) Executive Committee passed a brand-new set of financial rules and regulations, commonly known as Financial Fair Play, with the purpose of counterattacking the global financial and economic crisis that had also impacted on the European clubs. Not only for this reason, but also the trend of Russian, American, and state-related entities buying European clubs who were willing to spend millions for players in the transfer market forewarned UEFA of a possible ‘financial doping’. Therefore, trying to limit the potential increase in the cost of players was another indirect consequence of these new regulations. Analysts have pointed out that this has not been possible due to the increasing value of broadcasting rights. Last June 1st a new version of these rules, now renamed as Club Licensing and Financial Sustainability Regulations, entered into force, following its approval on the last UEFA Executive Committee held in April this year. This new reform is set to be the “first major reform” (Solkehol, 2022) since its creation.
UEFA’s Financial Fair Play regulations examine the economic performance of the clubs participating in the main UEFA competitions: Champions League, Europa League, and Conference League. Analyzing the most recent version of the Club Licensing and Financial Sustainability Regulations (CLFSR) we can review the extent of these measures. The main rules set on these rules is the Stability requirement by which UEFA tries to control and prevent clubs from falling into a deficit situation. In order to reach this goal, it assesses a club’s revenues and costs. UEFA only considers relevant revenues for this analysis the main sources of revenues of clubs (Article 84 and Annex J of CLFSR). Amongst others: broadcasting rights, sponsorship deals, match revenues, commercial activities, prizes and, obviously, player transfer revenue. Whereas regarding relevant expenses UEFA considers, amongst others, cost of sales and materials, employee related expenses including players and governing bodies, the cost for early contract termination, or cost of new players. Nonetheless, youth and community development investments, women’s football expenses, depreciation of intangible assets or taxes are exempt and not to be included as an expense for UEFA. Bearing this in mind, in a period of 3 years, clubs aren’t allowed to have and aggregated deficit of over €5 million in the prior 3 years period, this is popularly called the three-year rule. However, this limit can be raised to a total €60 million if the club’s ownership can cover with contributions or equity the excess deficit. Extra €10 million can be allowed if the club can prove it is not has not been sanctioned for financial reasons, it is not under a settlement agreement regime, and complies with having a positive equity and quick ratio, a sustainable debt and going concern (See Annex J.6 CLFSR for more details).
Under the Financial Fair Play the acceptable deviation was limited to €30 million. This summer, UEFA will review the club’s performances over the 2019, 2020, and 2021 period.
To this rule now we get to add two brand new rules. The first one relating overdue payments which aims at ensuring a better creditor protection, as UEFA named it: Solvency requirements (Articles 80-83 CLFSR). Clubs will need to submit to UEFA a quarterly report ensuring that it does not have overdue payments to other clubs, when it refers to transfers; employers from those which derive from a contractual or legal obligations, social or tax authorities; UEFA as a result of obligations or financial contributions set by the Club Financial Control Body.
The second new rule that UEFA has implemented is the squad cost limit rule by which clubs will only be able to spend a 70% of their revenue on transfers, wages and agent fees (Article 90 CLFSR). Unlike the previous rules which are calculated on a football season period, this is calculated on a yearly period. The implementation of this rule will not be immediate, starting the 2023/24 season the squad limit will be set on 90%, the next season 80% whereas the following (2025/26) the 70% will be fully operational.
In the event of not complying with these rules the UEFA Club Financial Control Body is the entitled committee to take legal internal action, according to the Procedural Rules governing the UEFA Club Financial Control Body (PR-CLFCB). This body is composed of two chambers: the First Chamber and the Appeals Chamber. The former is competent to determine in first turn the legal consequences of any action, and the latter must hear the appeals over the First Chamber’s decisions, whenever it is entitled to.
When a complaint has been filled, it is the chairman of the First Chamber who must designate a reporting member, who is in charge of collecting the evidence relevant for the case. Once the reporting member has collected the evidence and the facts are set, the defendant may submit other written observations, and a hearing may be arranged. When approaching deliberations, the First Chamber has the competence of taking either of the following decisions: dismissing the case, accepting or rejecting the club in a UEFA competition or a request for an exemption of the three-year rule, reach a voluntary agreement with the club according to the Financial Fair Play rules, reach a settlement with the defendant or impose disciplinary measures.
An appeal can be made to any decision except for those which end up in reprimands, warnings, fines lower than €10,000, decisions on the exemption of the three-year rule or those which were determined to be particularly urgent. The Appeals Chamber can, similarly to the First Chamber, dismiss the case, uphold, reject, or overturn the First Chamber’s decision, accept, or reject the club’s admission to the UEFA competition, impose disciplinary measures.
The disciplinary measures that the First and Appeals Chambers are entitled to impose are: warning, reprimand, fine, deduction of points, withholding of revenues from UEFA competitions, prohibition, or restriction, of registering new players in UEFA competitions, disqualification from competitions in progress or future competitions, withdrawal of title or award (Article 29 PR-CLFCB), and in the event of individuals: suspension for a number of matches, or ban of exercising any football-related activity. Sanctions are not limited by the Procedural rules for the Committee and must be fixed according to the circumstances of the case (Article 28 PR- CLFCB).
Those decisions considered to be “Final decisions”: taken by either of the two Chambers are only appealable to the Court of Arbitration for Sport (CAS).
References:
Sroka, R. (2022). Financial Fair Play and the Court of Arbitration for Sport, Journal of Global Sport Management, DOI: 10.1080/24704067.2022.2032258.
Solhekol, K. (2022, 7 April). UEFA’s new financial sustainability regulations to replace FFP: All you need to know. Sky Sports. Retrieve June 18, 2022, from https://www.skysports.com/football/news/11095/12584543/uefas-new-financial-sustainability-regulations-to-replace-ffp-all-you-need-to-know
UEFA (2021). Procedural rules governing the UEFA Club Financial Control Body – Edition 2021. Retrieve June 18, 2022, from https://documents.uefa.com/v/u/elrjBoO4LADeQxc8~nVpDg
UEFA (2022). UEFA Club Licensing and Financial Sustainability Regulations. Retrieve June 18, 2022 from https://documents.uefa.com/viewer/book-attachment/LjQqEb3_Iy8CFzkDqPkK2Q/iNmz4rlOep4cHxCTPdhAMQ