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• David Conn-24 January 2012
UEFA has said it will defend in court any penalties imposed on clubs which breach its financial fair play rules, including most seriously the possibility of clubs being excluded from the Champions League.

.Governing body will defend in court any penalties challenged
• Clubs could be excluded from Champions League

After European football's governing body released a report showing clubs across Europe's top divisions lost a total of €1.6bn (£1.34bn) in 2009-10, Alasdair Bell, its director of legal affairs, was emphatic that the rules, which require loss-making clubs to move towards breaking even, comply with European law and will be upheld if challenged by clubs.

Uefa's belief is that because the rules are designed to have the positive objective principally of "protecting the long-term viability and sustainability of European club football", a court would uphold that as reasonable. In answer to what has become the Manchester City and Chelsea question, the clubs which lost £197m and £78m respectively according to their most recent accounts, Bell said Uefa will have to impose proportionate sanctions, which would have to be substantial where clubs are in serious breach of the rules. "The system is not going to have much credibility if a big club that is in serious breach of the rules is not punished in an effective way," Bell said. "The sanctions need to be effective enough that clubs come into compliance with the system."

Bell set out for the first time publicly the legal groundwork supporting Uefa's financial fair play rules, which limit the losses clubs can make to a total of €45m (£37.6m) if covered by an owner, in this financial year and 2012-13. The principles, that clubs must limit their losses, in effect by restraining spending on players' wages, while being encouraged to invest in stadiums, academies and other long-term infrastructure, are designed to improve football's overall financial stability and comply with European legal principles.

Uefa set out the range of sanctions which will be available to a semi-independent panel depending on how seriously a club is in breach: they range from a reprimand, to a fine, withholding by Uefa of money, deducting points, preventing clubs fielding certain players in European competitions and ultimately to a ban.

The €1.6bn loss was principally due to inflating wages and transfer fees – the clubs' income actually increased, from €12bn in 2008-09 to €12.8bn. Gianni Infantino, Uefa's general secretary, explained: "We have to stop this negative spiral of clubs making losses and having huge debts. If we did not act, we could have a similar crisis to the one in the European economy as a whole."

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