By Andrew MERCER
Legal Counsel and Venue Director at UEFA
UEFA’s financial fair play programme was approved in 2010 following an extensive consultation process with a variety of stakeholders across Europe and the first financial assessments under the UEFA Club Licensing & Financial Fair Play Regulations (CL&FFP Regulations) were carried out in 2011.
In the early years of the project, clubs were only required to prove that they had no overdue payables towards other football clubs, their employees (including players) and social/tax authorities at certain dates during the football season (the Overdue Payables Requirements).
On the face of it, this might seem like a simple idea, but it represented an important first step in improving the standard of governance at football clubs and implementing financial fair play in European football - to ensure that clubs pay their bills on time.
Later, in 2013, clubs also began to be assessed under the break-even rules, which require clubs to balance their expenditure with their income and seek to restrict clubs from building up unacceptable losses (the Break-even Requirement). In another development, clubs who had breached the financial monitoring requirements were now also able to enter into settlement agreements in order to establish a roadmap for their future compliance with the financial fair play rules.
Thus, UEFA took several other important steps in achieving financial fair play - the implementation of rules aimed at promoting sustainable finances and encouraging clubs to live within their means, backed-up by mechanisms designed to encourage timely compliance with the rules for the long-term benefit of football.
Last year, UEFA introduced the latest edition of the CL&FFP Regulations. As well as introducing various provisions to further encourage responsible investment and sustainable growth (including measures that target clubs which are undergoing business restructuring), this update also introduced the possibility for clubs which have not qualified for UEFA’s competitions (but which anticipate qualification) to enter into voluntary agreements in order that they might take appropriate action to bring about future compliance with the CL&FFP Regulations.
In doing so, UEFA took its latest step - the expansion and evolution of the financial fair play principles, both in response to, and in anticipation of, developments in football and also the wider, changing economic environment in Europe.
So, as the latest era in UEFA’s financial fair play programme begins, we are presented with an ideal moment in which to review the activities of the Adjudicatory Chamber of the UEFA Club Financial Control Body (CFCB) over the past three years and to consider some of the guiding principles in the case law generated by this judicial body during this period.
Enforcement of the CL&FFP Regulations
In 2012, the UEFA Executive Committee approved the creation of the CFCB to replace the UEFA Club Financial Control Panel, which (in conjunction with the UEFA Organs for the Administration of Justice) previously had responsibility for supervising/enforcing UEFA’s club licensing and financial fair play matters. Logically, given the nature of the CL&FFP Regulations, it was considered necessary to put a more specialised/technical body in place in order to properly oversee the application and enforcement of the rules.
The CFCB is made up of the Investigatory Chamber, which has primary responsibility for the investigation stage of the proceedings (i.e. establishing facts and collecting evidence), and the Adjudicatory Chamber, which has primary responsibility for the judgment stage of the proceedings (i.e. primarily to decide on the cases referred to it by the Investigatory Chamber).
This two tier structure is designed to ensure that the CFCB’s decision making is as resilient as possible. UEFA has put in place not one, but two dedicated and expert chambers to draw upon, with an established procedure of analysis and review. The outcome is a sophisticated and efficient legal process culminating in the production of robust and well-reasoned decisions which are tailored to the circumstances of each case.
When a club is suspected of breaching the CL&FFP Regulations, based on an analysis of the club’s own submissions, the CFCB process starts to work. Proceedings are opened by the Investigatory Chamber and a formal investigation is started. Evidence and facts are collected, analysed, discussed and preliminary conclusions drawn.
Where there is a case to answer, there are a number of possible outcomes:
- The Investigatory Chamber may decide to impose certain limited disciplinary measures itself - principally fines of up to EUR 100,000. It should be noted, however, that these powers have not been exercised to date.
- Alternatively, the Investigatory Chamber might decide to conclude a settlement agreement with a club. Such agreements will typically comprise various financial targets, together with financial and sporting restrictions, and have the primary objective of bringing the relevant club into compliance with the CL&FFP Regulations within an appropriate timeframe. So far, twenty three settlement agreements have been entered into with clubs.
- Finally, the Investigatory Chamber may decide to refer a case to the Adjudicatory Chamber and it is at this point that what might be described as the judicial stage of the enforcement of UEFA’s financial fair play rules begins.
To date, the majority of breaches of the CL&FFP Regulations have been dealt with by the Adjudicatory Chamber, so much so that the Adjudicatory Chamber can now boast an extensive body of case law on both Overdue Payables Requirement and Break-even Requirement matters.
The Adjudicatory Chamber
That such a comprehensive volume of case law has been generated will come as no surprise when you consider the background of the members of the Adjudicatory Chamber.
The Chairman of the CFCB is the experienced judge Mr José Narciso da Cunha Rodrigues - a former general prosecutor of the Portuguese Republic, a former European Court of Justice judge, a former expert member on the Human Rights Steering Committee of the Council of Europe and a former member of the Supervisory Committee of the European Union Anti-Fraud Office.
Assisting him are two vice-Chairmen. Christiaan Timmermans from the Netherlands, another former European Court of Justice judge, a professor of law and the former deputy director-general of the Legal Service at the European Commission, and Louis Peila, an experienced judge from Switzerland.
Completing the membership are Charles Flint from England, a highly regarded commercial barrister, mediator and arbitrator specialising in banking and financial services, and Adam Giersz, an experienced economist and the former sports minister of Poland.
This is indeed a distinguished roll of members and it is clear that the Adjudicatory Chamber can draw upon significant legal expertise, something which has led to detailed legal analysis and high standards. It also means that the structure of the legal process and case management is highly formalised and efficient, with an expeditious turnaround for procedural matters and decision-making.
The disciplinary measures imposed by the Adjudicatory Chamber
The most notable outcome of cases before the Adjudicatory Chamber is of course the imposition of disciplinary measures. Warnings, reprimands, fines, disqualifications/exclusions from UEFA club competitions and the withholding of revenues are some of the more conventional measures available. Other measures of a more sporting nature may also be imposed, such as the deduction of points and limits on player registrations. The range of available sanctions, and the possibility of combining sanctions, allows the disciplinary measures imposed by the Adjudicatory Chamber to be balanced and proportionate, but also effective.
Some statistics might be helpful here:
- 33 cases against clubs were heard by the CFCB Adjudicatory Chamber between 2013 and 2015;
- In these cases, fines totalling approximately EUR 2 million were imposed;
- 8 immediate exclusions from UEFA club competitions were imposed - arguably the toughest of sanctions. Red Star Belgrade, Dynamo Moscow and CSKA Sofia are some of the clubs that have been sanctioned in this way;
- In addition, the imposition of suspended exclusions also proved to be a popular approach amongst the members of the Adjudicatory Chamber. In these cases, an exclusion is imposed, with the caveat that it will not take effect if a particular action is carried out by a fixed deadline. The required action usually involves the payment of certain overdue payables. In total, 17 suspended exclusions were imposed on clubs in the last three years, with 8 taking effect because the relevant condition was not satisfied.
It is clear then that the Adjudicatory Chamber is prepared, where appropriate, to exclude a club from UEFA’s club competitions when it has failed to comply with the CL&FFP Regulations. Indeed, 16 of the 33 cases brought before the Adjudicatory Chamber have ultimately ended with a club being excluded from competing. Accordingly, we can conclude that if a club is referred to the Adjudicatory Chamber, there is a real possibility that an exclusion, immediate or otherwise, will be imposed. Any suggestions that the CL&FFP Regulations and the CFCB are ‘toothless’ are clearly wide of the mark.
Staying on the topic of exclusions, it is also interesting that even when given what might be termed a ‘second chance’ with a suspended exclusion - as has happened on 17 occasions in the past three years - almost half of the clubs given such a chance ultimately failed to comply with the relevant condition and were therefore excluded. This serves to highlight the continuing importance of the Overdue Payables Requirements which focus on the prompt payment of monies owed.
The importance of the objectives of the CL&FFP Regulations
Any consideration of the case law of the Adjudicatory Chamber must begin with the objectives of the CL&FFP Regulations. These are key and their importance is stressed by the members of the Adjudicatory Chamber in every case, without exception.
The underlying objectives can be found in Article 2 of the CL&FFP Regulations - Edition 2015, as follows (emphasis added):
“These regulations aim:
d) to protect the integrity and smooth running of the UEFA club competitions;
e) to allow the development of benchmarking for clubs in financial ... criteria throughout Europe.
Furthermore, they aim to achieve financial fair play in UEFA club competitions and in particular:
a) to improve the economic and financial capability of the clubs, increasing their transparency and credibility;
b) to place the necessary importance on the protection of creditors and to ensure that clubs settle their liabilities with employees, social/tax authorities and other clubs punctually;
c) to introduce more discipline and rationality in club football finances;
d) to encourage clubs to operate on the basis of their own revenues;
e) to encourage responsible spending for the long-term benefit of football;
f) to protect the long-term viability and sustainability of European club football.”
This is what the CL&FFP Regulations aim to achieve in the context of financial fair play and, when the members of the Adjudicatory Chamber sit to consider a case, everything - all facts, all evidence, all acts and omissions of the relevant club - is considered through the lens of these objectives.
In fact, this principle is itself embodied in the CL&FFP Regulations - Edition 2015 at Article 72 (emphasis added):
“The UEFA Club Financial Control Body at all times bears in mind the overall objectives of these regulations, in particular to defeat any attempt to circumvent these objectives.”
Whilst this provision stops short of being a ‘spirit clause’ in the strictest sense, it nevertheless empowers the Adjudicatory Chamber to consider the broader picture of a defendant’s behaviour.
With this in mind, it is clear that the CFCB Adjudicatory Chamber’s analysis is not simply an accounting exercise. Having regard to the background of the members, it is clear that a case before the Adjudicatory Chamber is anything but another financial audit. The members of the Adjudicatory Chamber take a truly holistic approach, involving a detailed consideration of the relevant club’s past and projected behaviour and looking beyond the form into the substance of a club’s acts and financial data.
The Adjudicatory Chamber has made it clear in a number of cases that UEFA’s financial fair play rules are underpinned by the principle that all of the clubs that compete in UEFA’s club competitions must be treated equally.
Indeed, this principle is expressly stated in the CL&FFP Regulations - Edition 2015 at Article 53 (emphasis added):
“In carrying out these responsibilities, the UEFA Club Financial Control Body ensures equal treatment of all licensees and guarantees full confidentiality of all information provided.”
This might appear to be a straightforward concept, but in practice the application of this principle can be rather complex.
The Adjudicatory Chamber must of course consider matters of equal treatment amongst the clubs that are sanctioned by the CFCB. That is, like all judicial bodies, the members will attempt to ensure a fairness and consistency of approach when it comes to the imposition of disciplinary measures.
However, the principle of equal treatment applies to all participating clubs, not just those that have breached the CL&FFP Regulations. Accordingly, its application must also be extended to ensure fairness for the clubs who have complied with the CL&FFP Regulations. That is, any disciplinary measures imposed must be an effective penalty and serve as a sufficient deterrent to discourage clubs from breaching the rules.
In this regard, the Adjudicatory Chamber has explained on a number of occasions that the principle of equal treatment has particular importance for the Break-even Requirement, primarily because a breach of this requirement can directly affect the competitive position of a club and, in doing so, adversely affect other clubs who participate in UEFA’s competitions in full compliance with the CL&FFP Regulations.
As I have explained, a wide range of disciplinary measures may be imposed on clubs that have breached the CL&FFP Regulations. The Adjudicatory Chamber therefore has the flexibility to impose a sanction which properly addresses the seriousness of the relevant breach(es).
In this regard, the CFCB Adjudicatory Chamber is of course obliged to bear in mind the requirement of proportionality and also the need for consistency with other decisions on similar facts and circumstances.
However, in the context of financial fair play matters, it is impossible to draw easy comparisons between different cases when carrying out a factual and legal analysis. No two clubs are in the same position - whether geographically, economically or even politically - and the relevant factors to be considered by the Adjudicatory Chamber can vary greatly.
Similarly, when it comes to sanctioning, there can be no rigid benchmark for analysis. The reasons why the relevant club is in breach, whether it has remedied or tried to mitigate the breach and its chances of future compliance with the CL&FFP Regulations will vary greatly.
In this regard, the Court of Arbitration for Sport has recognised that UEFA’s financial fair play rules do not provide for standard sanctions and that the sanctions regime in respect of club licensing/financial fair play is established within the discretionary powers of UEFA, based on its assessment of the facts and circumstances of each case.
It is important for clubs to remember that simply because a different sanction might have been imposed by the Adjudicatory Chamber in a particular case, it does not mean that the sanction that is actually imposed is automatically disproportionate. As you would expect, under the Procedural Rules governing the UEFA Club Financial Control Body - Edition 2015 (the Procedural Rules), it is for the Adjudicatory Chamber to decide on the appropriate sanction to impose, taking into account the circumstances of the particular case.
It also needs to be borne in mind that UEFA’s club licensing and financial fair play regime is still a developing area, so that the requirement for sanctions to provide a real incentive for clubs to comply with the CL&FFP Regulations (in order to further the underlying objectives of the programme) may require the nature and severity of the disciplinary measures imposed by the Adjudicatory Chamber to change over time.
Under part (e) of Annex XI of the CL&FFP Regulations - Edition 2015, the Adjudicatory Chamber is entitled to “take into account extraordinary events or circumstances beyond the control of the club which are considered as a case of force majeure.”
The Adjudicatory Chamber has stressed on a number of occasions that, according to the Court of Arbitration for Sport, force majeure “implies an objective, rather than a personal, impediment, beyond the control of the ‘obliged party’, that is unforeseeable, that cannot be resisted, and that renders the performance of the obligation impossible. In addition, the conditions for the occurrence of force majeure are to be narrowly interpreted, since force majeure introduces an exception to the binding force of an obligation.”
Further, as the Court of Arbitration for Sport has also stated, “the mere reference to a general situation of troubles in a concrete place is not enough to justify a breach on the basis of exceptional circumstances as the force majeure. The party asking for its application shall duly identify and accredit which specific and precise fact prevented it to perform a certain activity.”
The benchmark for successfully asserting a force majeure defence to a breach of the CL&FFP Regulations before the Adjudicatory Chamber is therefore a high one and the burden is on the club to provide specific evidence of the impact of the relevant event(s) and/or circumstance(s) on its performance of the relevant obligation(s).
In case AC-02/2014, FC Dnipro - which concerned certain club licensing provisions relating to overdue payables - the Adjudicatory Chamber found that although FC Dnipro had breached the CL&FFP Regulations, such breach was fully attributable to a force majeure event. The club was able to provide clear evidence that its bank had refused to make the relevant payment (on more than one occasion), at a time when the club had sufficient funds to support the payment. Despite repeated efforts by the club, the bank consistently stated that it was unable to proceed with the transfer of foreign currency and it was clear, therefore, that it was the bank (and not the club) which had impeded the payment of the relevant amount, (most likely) because of the political and financial instability in Ukraine at the time. Accordingly, the conditions required for FC Dnipro to plead a force majeure argument were deemed to have been satisfied.
We can effectively contrast the specifics of this case with a more recent matter, also involving FC Dnipro. In case AC-07/2015, LLC Football Club Dnipro, similar force majeure arguments were not accepted by the Adjudicatory Chamber. In the decision, the Adjudicatory Chamber noted, inter alia, that the club’s problems with its bank could no longer reasonably be said to be unforeseeable, that the situation in Ukraine had changed and that, in the interim period, the club could reasonably have found an alternative means of making overseas payments or another way around the problem. At the very least, the Adjudicatory Chamber considered that the club could have refrained from putting itself in a position where it undertook new commitments in full knowledge that it would have difficulties making good on its financial obligations. Against this background, the Adjudicatory Chamber concluded that the high benchmark for pleading a force majeure defence under the wording of the CL&FFP Regulations (and in light of the Court of Arbitration for Sport case law) had not been reached.
Whilst this article has not dwelled on the individual facts of any one particular case heard by the Adjudicatory Chamber in any detail, it has, I would hope, served to highlight some of the general matters considered by the Adjudicatory Chamber when conducting its analysis.
Above all, through analysing the statistics of the period 2013 to 2015, what emerges is a clear sense that the Adjudicatory Chamber is a highly formalised and expert body. An entity that is reasonable in its approach and committed to furthering the underlying objectives of UEFA’s financial fair play programme.
In this regard, it is important to remember that the guiding principle of UEFA’s financial fair play regime - and therefore the primary goal of the CFCB - is not to punish, but to bring clubs into compliance with the CL&FFP Regulations for the long-term wellbeing of football in Europe. This is perhaps best illustrated by the number of suspended measures imposed by the Adjudicatory Chamber in the period covered by this article.
Recent statistics released by the UEFA Administration indicate the overwhelmingly positive impact of the implementation of UEFA’s financial fair play rules. Notably, overdue payables reduced by 91% in the period between 2011 and 2015, and the aggregate losses of football clubs reduced by two thirds between 2011 and 2014.
As the focal point for the enforcement of the CL&FFP Regulations, it must be concluded that the Adjudicatory Chamber has played a significant part in such success through the imposition of proportional, yet dissuasive disciplinary measures and by upholding a fair and transparent legal process.
 See Article 14 of the Procedural rules governing the UEFA Club Financial Control Body - Edition 2015
 See Article 15 of the Procedural rules governing the UEFA Club Financial Control Body - Edition 2015
 See Articles 29 and 30 of the Procedural rules governing the UEFA Club Financial Control Body - Edition 2015
 By way of example, see par. 49 and 50 of case AC-03/2015, Professional Football Club CSKA AD
 By way of example, see par. 79 and 80 of case AC-02/2015, CJSC Football Club Dynamo Moscow
 See CAS 2012/A/2821, Bursaspor v. UEFA (par. 144)
 See CAS 2012/A/2821, Bursaspor v. UEFA (par. 143)
 See CAS 2012/A/2702, Gyori v. UEFA (par. 160)
 See CAS 2012/A/2824, Besiktas v. UEFA (par. 127)
 Article 28 of the Procedural rules governing the UEFA Club Financial Control Body - Edition 2015
 See CAS 2006/A/1110, PAOK FC v. UEFA (par. 41)
 See CAS 2008/A/1621, Iraqi Football Association v. FIFA & Qatar Football Association (par. 62)
 See par. 43 to 50 of the decision
 See par. 38 to 47 of the decision
 Club Licensing Ten Years On, UEFA Club Licensing Unit, 2015, UEFA, Nyon, Switzerland (p. 12, 13, 42 and 43)