It was reported on Tuesday 24 October 2017 that an arbitration panel has dismissed Queens Park Rangers’ claim that the English Football League’s 2012 Financial Fair Play Regulations (the “2012 Regulations”) were unlawful and that the sanction imposed by the Football League on QPR for its breach of those Regulations was disproportionate.

A brief background to financial fair play

The concept of financial fair play was first established by UEFA (the governing body for football in Europe) in 2009. The goal of financial fair play was to prevent professional football clubs spending more than they earn in the pursuit of success and, in doing so, getting into financial problems that might threaten their long-term survival. The financial fair play principles were incorporated into UEFA’s Club Licensing and Fair Play Regulations (the “UEFA Regulations”), which apply to any club wishing to apply for a licence to participate in UEFA competition (i.e. the UEFA Champions League and the UEFA Europa League).

The principles set out in the UEFA Regulations were then imposed into the rules and regulations of the European countries’ domestic football leagues, including the Premier League and the English Football League (i.e. the Championship, League One and League Two). This means that, in short, any club playing in these leagues must comply with the financial fair play rules imposed upon them, absent which they could expect the imposition of a sanction of some nature.

The QPR case

In 2014, QPR were fined an undisclosed amount by the English Football League (it has been suggested that the fine may be as much as £58 million) for its breach of the spending limits set out in the 2012 Regulations.

Under the 2012 Regulations, football clubs participating in the Championship were allowed to make a maximum loss of £8 million in the 2013-2014 season without sanction. If a club’s losses exceeded that maximum threshold in that playing season, they would be the subject of a player transfer embargo or, if promoted to the Premier League, to a fine. The 2012 Regulations provided a sliding scale of fines for losses between £8 million and £18 million, while losses that exceeded £18 million would be punished by a fine that would be imposed on a pound-for-pound basis.

It was reported at the time that QPR had made a loss in the 2013-2014 season of £9.8 million, though the club had also written off £60 million in loans as an “exceptional item”. This was the reason for the size of the fine that was imposed on the club by the English Football League.

QPR sought to appeal the Football League’s decision, alleging that it was unlawful and that the sanction imposed upon it was disproportionate. That appeal has now come to naught, with the arbitration panel reportedly upholding the lawfulness of the 2012 Regulations and the proportionality of the fine imposed on the West London club (note that the content of the decision of the arbitration panel remains confidential and has not been published).

QPR Chief Executive Lee Hoos stated that the club are “understandably disappointed with the decision and will be appealing.” Conversely, the Chief Executive of the Football League, Shaun Harvey, has said that:

“This decision vindicates the approach of the EFL board in defending this challenge. The board will continue to enforce our rules on clubs to protect the interests of those that do comply.”

Pending any successful appeal against the decision or some form of settlement, the Hoops will now need to find a way to make payment of the fine that was imposed upon them. Whether they would be able to negotiate some form of payment by instalments remains to be seen.

It is worth noting that the 2012 Regulations are no longer in force. The position set out in the current edition of the Football League Financial Fair Play Regulations is as follows:

  • Clubs are assessed over a three year period (as in the Premier League), rather than on a one year period (as in the 2012 Regulations);
  • The maximum loss threshold is now £13 million per Championship season (or £5 million in circumstances where a club’s owner does not inject equity into the club to cover its losses); and
  • The assessment of a club’s finances is done by looking both at historic figures for the previous completed season and at the season presently taking place.

Yet the changes to the 2012 Regulations do not mean that the legal challenges to financial fair play will cease.

Further challenges to financial fair play?

As noted by Mr. Hoos, the decision of the arbitral panel may not be the end of QPR’s challenge to the 2012 Regulations. This is not surprising. The size of the reported sanction imposed on QPR alone might be considered sufficient to render an appeal worthwhile. Yet the mooted appeal is also unsurprising from a point of principle. QPR’s challenge is not the first time financial fair play has been challenged at a conceptual level.

In May 2013, Jean Louis-Dupont, a Belgian lawyer who had worked on the ground-breaking Bosman case, launched a legal challenge against UEFA’s financial fair play rules on the grounds that they might restrict the income of his client, a Beligan registered agent named Daniel Striani. Striani was reported to have stated that:

“The rules will lead to restrictions in terms of investment, will diminish the number of player transfers that take place and will also bring down the revenues of player agents… This rule also impacts on the right to free movement of capital, to free movement of workers and to the free availability of services. Financial fair play will further increase the gap between big clubs and smaller teams. I mainly work with the latter, hence my concerns. I don’t know whether other agents share my opinion or whether clubs will follow my example, but I’m confident about the outcome.”

Striani initially brought his claim to the European Commission but this challenge was rejected, the Commission having found that Striani lacked a legitimate interest in the rules and that it any event lacked the jurisdiction to deal with the matter. Striani had also commenced separate proceedings in the Belgian courts. The Belgian court found that it did not have jurisdiction to deal with the challenge so ultimately referred the matter to the Court of Justice of the European Union (“CJEU”). The CJEU in turn found that the referral was “manifestly inadmissible”.

Thus, while Striani’s appeals have to date failed to bear fruit, there has yet to be a material decision as to the legality of the relevant UEFA rules (Striani’s challenges having all been rejected on technical bases).

Given the sums involved and the serious consequences for a club that may flow from a breach of the relevant rules, it would hardly be surprising if QPR’s were the last challenge to the financial fair play rules, either at home or abroad.