Brian Kennelly- 07 January 2014 1. This paper addresses (1) challenges against sanctions imposed on clubs under the UEFA Club Licensing and Financial Fair Play Regulations (“the FFP Regulations”);

and (2) the potential for challenging the FFP regime itself under EU law.

2. As regards the first, advisers and clubs are not assisted by the fact that UEFA does

not publish the decisions of the Club Financial Control Body (“CFCB”) Adjudicatory

Chamber. There is, however, a right of appeal from such decisions to the Court of

Arbitration for Sport (“CAS”)1 and CAS has published a number of decisions in

appeals under the FFP Regulations. Although those cases involved the pre-June 2012

regime (with decisions taken by the Control and Disciplinary Body or “CDB”), they

provide some guidance as to the likely approach to be adopted by the CAS and

(potentially) the CFCB Adjudicatory Chamber.

3. As regards the second, as has been widely reported, a Belgian football agent Daniel

Striani has made a formal complaint to the European Commission (“the

Commission”) to the effect that the FFP Regulations violate EU law. His argument is

based principally but not exclusively on EU competition law.2 Although the

Commission has informally blessed the FFP Regulations, Mr Striani’s complaint

cannot be easily dismissed. It appears to raise points which are at least arguable and

are likely to require determination by the European Court.3

Challenging UEFA decisions under the FFP Regulations

4. As has been explained, in June 2012, the CFCB replaced the Club Financial Control

Panel (“CFCP”), which had monitored clubs since the first introduction of the FFP

Regulations in May 2010. The main change is that the CFCB is now an UEFA “Organ

for the Administration of Justice”, which means that the only appeal which lies from

its rulings is to CAS.

5. Nevertheless, the approach of CAS to the cases involving the CFCP may provide

some indication of how the Lausanne tribunal will treat the rulings of the CFCB in

Nyon.

6. I examine three cases in particular, involving the clubs Györi ETO, Bursaspor and

Besiktas.

(1) CAS 2012/A/2702 Györi ETO v. UEFA (8 May 2012)

7. In February 2009 Györi ETO (“Györi”), a Hungarian professional football club,

entered into an agreement with Estonian club FC Flora Tallin (“Flora”) for the

transfer of the player Jarmo Ahjupera. Flora agreed to transfer the Player to the

Appellant in exchange for a fee of EUR 100,000 to be paid in two installments

“according to the Transferring Club’s invoices and transferred by bank transfer …” (at §7 of

the CAS decision).

8. Following an agreed extension in relation to the first invoice and further delay, the

Estonian Football Association (“EFA”) asked FIFA to intervene on Flora’s behalf.

EFA could not agree with the Hungarian Football Federation (“HFF”) whether any

part of the UEFA Club Licensing Regulations 2008 had been breached (“the 2008

Regulations”).4 FIFA Subsequently informed UEFA that the transfer fee due from

Györi had not been paid (at §18).

9. Györi stated that on receiving the first invoice dated 17 February 2009 the debt was

recorded in its accounts and included in its 2010/12 license application as an

overdue payable. The application included an overdue payable in the amount of

13,542,000 Hungarian Forint, equivalent to EUR 50,000. Györi was granted a UEFA

club competition license and took part in the Europa league 2010-11 receiving EUR

360,000 from UEFA as participation fee.

10. On 31 March 2010, Györi paid Flora the sum of EUR 50,000 as a first installment.

Flora acknowledged the payment but informed the HFF of the amount outstanding,

including interest, which was contested by Györi (at §25). The second installment of

EUR 50,000 was paid in stages between 20 September 2010 and 17 November 2010.

On 18 May 2011, the CFCP issued its report into the matter. The CFCP found that

Györi had failed to meet a number of criteria in the 2008 Regulations and opened

disciplinary proceedings with the CDB.5

(a) The decision of the CDB

11. The CDB found both Györi and the HFF guilty of violating the 2008 Regulations and

issued the following sanctions (at §34):

(1) The HFF was fined EUR 100,000, half of which was suspended for a

probationary period of two years; and

(2) Györi was disqualified from taking part in the next UEFA competition for

which it qualified for the next three seasons, 2011-14.

12. The decision was based on the following grounds (at §34):

(1) Györi had failed to prove that it had no overdue payables on 31 December of

the year preceding the season to be licensed.

(2) Györi had committed a serious offence. The absence of any previous

infringement was not a decisive factor. The importance of the UEFA club

licensing system, which aimed at protecting the integrity of UEFA club

competitions, had to be taken into account.

(3) The fact that Györi had received EUR 360,000 from UEFA for taking part in

the 2010-2011 UEFA Europa League and the fact that its participation was

based on a license given on the basis of misleading documents were relevant

considerations.

(4) The HFF was liable for failing to undertake due diligence, and for granting

Györi a license despite the latter’s failure to meet the criteria.

(b) The decision of the UEFA Appeals Body

13. The HFF and Györi each appealed against the decision of the CDB. On 29 November

2011, the UEFA Appeals Body upheld the appeals in part, holding that:

(1) The suspension decision should be replaced. Györi was to be suspended from

the UEFA club competition for the 2011-2012 and 2012-2013 seasons, in the

event that it qualified. The 2013-14 disqualification was to be suspended for a

probationary period. The original sanctions would be reactivated if Györi

committed a further offence during the licensing procedure for the 2012-2013

season.

(2) The fine of EUR 50,000 was upheld.

(3) Györi and the HFF were jointly and severally liable for the legal costs related

to the UEFA appeal proceedings EUR 6,000.

14. The decision of the Appeals Body was based, among other things, on the following

grounds:

(1) The original disqualification was excessively harsh because Györi had trusted

the HFF, which, despite being informed of the existence of the overdue

payment did not bother to seek Györi’s explanation.

(2) Pursuant to Article 14.1 of the UEFA Disciplinary Regulations, a disciplinary

body has wide discretion to impose fines ranging between EU 100 and EUR

1,000,000. Given the fact that Györi had unduly received EUR 360,000 in

participation fees, the fine imposed by the UEFA Disciplinary Decision was

appropriate.

15. Györi subsequently sought to challenge the Appeals Body decision before CAS.

Györi claimed, among other things, that since the transferring club had not issued a

proper and original invoice in compliance with the EC VAT rules, they could not

have paid the invoice without facing criminal sanctions in Hungary.

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16. Györi further argued that the sanctions imposed were disproportionate and

inconsistent with UEFA’s approach in the cases of PAOK6 and Bursaspor.7

17. UEFA alleged that the club had given false information in its application. It had

indicated that an amount of EUR 50,000 only was due in relation to the player’s

transfer and made no mention of the total EUR 100,000 due.

(c) The CAS judgment

18. CAS found that the club was required to disclose the relevant payables which were

certain and enforceable irrespective of the potential threat of criminal sanction on

payment (at §§145-146).

19. CAS noted that in assessing the sanctions, reference had to be made to Article 56 of

the UEFA Club Licensing Regulations: “[a]ny breach of these regulations may be

penalised by UEFA in accordance with the UEFA Disciplinary Regulations.”8

20. Article 17.5 of the Disciplinary Regulations provides that:

‘[i]f the party charged has committed multiple disciplinary offences, the disciplinary

body assesses the sanction according to the most serious offence and increases it

accordingly.’

21. Noting that the Disciplinary Regulations permitted the imposition of a fine of

between EUR 100 and EUR 1,000,000, CAS held that the decision-making body had a

wide measure of discretion when issuing sanctions (at §154). On the facts of the case

it could not be said that the fine of EUR 50,000 was disproportionate.

22. CAS noted that the club had failed to act with transparency and diligence by (1)

playing in the Europa League 2010-11 having failed to disclose its correct and true

overdue payables; (2) having known that it had financial problems, not disclosing

them; and (3) having paid the second instalment of the transfer fee only after the

relevant deadline. It further noted that the lightest non-monetary sanction available

was a warning with the most severe being the withdrawal of a license (at §158).

23. The cases of Bursaspor and PAOK were distinguished on their facts. Györi had

committed two breaches: (1) it had overdue payables; and (2) it had failed to disclose

those payables (at §159). Furthermore, the Bursaspor case was, at the time, awaiting

determination by the UEFA Appeals Body.

24. Accordingly, it had not been established that the imposition of the sanctions was

inconsistent or disproportionate (at §§159-161).

(2) CAS 2012/A/2821 Bursaspor Kulübü Dernegi v. UEFA (22 June 2012)

25. Bursaspor Kulubu Dernegi (“Bursaspor”) is a Turkish Professional football club and

member of the Turkish Football Federation (“TFF”). In July 2007, Bursaspor entered

into an agreement with the English club Portsmouth FC (“PFC”) for the transfer of

the player Collins Mbesuma for a fee of EUR 500,000 to be paid in four instalments.

26. In August 2007 and October 2007, PFC received the first two instalments of the fee. In

2008 a claim was filed before FIFA alleging that Bursaspor had failed to pay part of

the transfer fee: namely the instalments due in April and August 2008.

27. On 25 March 2011, Bursaspor applied for a license to the TFF. In the application the

club listed an overdue payable to the sum of EUR 400,000. On 25 March 2011,

Bursaspor applied to the TFF for a UEFA license.

28. On 1 June 2011, Articles 53 to 56 and 64 to 68 of the relevant edition of the FFP

Regulations came into force and introduced a monitoring process.

29. On 9 June, the TFF granted Bursaspor a license for the 2011-12 season and the club

took part in the UEFA Europa League club competition for the 2011-12 season,

receiving EUR 180,000 in participation fees. The TFF subsequently submitted the

payables information from the club to the CFCP.

30. On 23 November 2011, Bursaspor paid PFC EUR 350,979,45 corresponding to the

outstanding instalments.

31. Prior to the payment the CFCP requested further information from Bursaspor. It

subsequently issued its report, which concluded that the club had failed to meet a

number of criteria laid down in the FFP Regulations. As a result, the CFCP and the

CDB opened disciplinary proceedings.

(a) The decision of the CDB

32. The CDB issued the following sanctions against Bursaspor:

(1) a fine of EUR 200,000; and

(2) exclusion from one UEFA club competition for which it qualified in the next

four seasons. Exclusion was suspended for a probationary period of three

years.

33. The decision was reached on the following grounds (at §24):

(1) Bursaspor had failed to meet the requirements of Article 65 on account of the

overdue payable in favour of Portsmouth as of 30 June 2011.

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(2) Bursaspor had failed to meet the requirements set out in Article 49 in failing

to disclose the overdue payment in the licensing process.

(3) Bursaspor had not complied with an essential obligation. The monitoring

system was held to be one of the pillars of the FFP system and any breach

“constitutes a serious offence”. The absence of any previous disciplinary offence

in this regard was not a decisive factor. The fine imposed was approximately

the amount the club had gained during the 2011/12 UEFA competition and

was proportionate in the circumstances of the case. The facts that the club was

financially robust and had paid the amount to PFC as soon as it appeared that

it had to face disciplinary proceedings were taken in account by way of

mitigation.

(4) It would be disproportionate, relative to other cases, for the exclusion not to

be suspended for a probationary period.

34. On 28 February 2012, UEFA, acting through its disciplinary inspector, appealed

against the CBD decision. UEFA argued that the facts of the case were too serious for

the exclusion to be suspended for a probationary period. Bursaspor submitted a

reply which included a cross-appeal requesting that the sanctions be annulled or

scaled down.

(b) The decision of the UEFA Appeals Body

35. The UEFA Appeals Body upheld the appeal in part:

(1) Bursaspor was excluded from one UEFA club competition for which it

qualified in the subsequent three seasons; and

(2) Bursaspor was fined EUR 50,000 with payment of the fine suspended for a

probationary period of three years;

36. The decision was based on the following grounds (at §29):

(1) The FFP Regulations (edition 2010) applied even if the dispute between

Bursaspor and Portsmouth began in 2008.

(2) Bursaspor had failed to provide the information required relating to the

payments due to Portsmouth;

(3) Bursaspor had “grossly violated the applicable Regulations” by creating the false

impression that it had no overdue payables on 31 March 2011 despite the fact

that there had never been any question of a debt less than EUR 300,000.

(4) The exclusion of Bursaspor from UEFA competitions should not be

suspended for a probationary period. The first instance body showed

unjustified leniency for the following reasons:

(a) Bursaspor announced wrongly that the amount owed to PFC was a

contested debt;

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(b) it failed to indicate the existence of the overdue payables;

(c) in Györi the Appeals Body had already ruled, and the CAS upheld, that

an immediate exclusion from a UEFA competition, with no suspension

or probationary period, should be imposed (that case involved smaller r

overdue payables and the club had already been awarded a licence);

(d) the fact that a club pays its debt only after a disciplinary procedure has

been opened against it cannot be considered a mitigating circumstance;

(e) there was was nothing in the file or in argument to justify the CDB

departing from its approach in Györi. Doing so would risk violating not

only the principle of proportionality but also that of equality of

treatment.

37. Bursaspor appealed the decision to CAS. It argued, among other things, that the

Appeals Body decision wrongly justified the measurement of the sanction using an

alleged similarity with Györi. The case was distinguished on the basis that Bursaspor

had disclosed the dispute over the overdue payable in its license application. It had

been registering the amount claimed by PFC since 2008.

(c) The CAS judgment

38. In assessing whether the UEFA Appeals Body lacked jurisdiction to impose

sanctions, CAS summarised the licensing system under the FFP Regulations at §§88-

108. CAS concluded that UEFA had jurisdiction under Article 72 of the FFP

Regulations to impose sanctions under the Disciplinary Regulations (at §107).

39. CAS found that the club had been in breach of the rules against overdue payables on

account of the EUR 300,000 (plus interest) it owed to PFC although it had complied

with its obligations of disclosure (at §§120-127).

40. In considering the proportionality of the sanctions imposed, CAS again noted the

CDB’s wide discretion when imposing sanctions and its right to take into account

any aggravating or mitigating circumstances (at §134).

41. CAS noted that there had been two breaches in Györi. It found that the failure to

disclose correct and accurate payables had been a decisive element in leading CAS to

conclude that a non-suspended exclusion was proportionate in that case (at §138).

CAS further noted that in the case of Besiktas, although five different overdue

payables were involved amounting to around EUR 4 million, a practical exclusion for

one season only was imposed by UEFA (at §140).

42. CAS found that the breach had occurred during a transitional period between the

new and old rules. They were of the view that the club had established that the

sanction imposed by the Appeal Body had been disproportionate and inconsistent

with previous cases. CAS, therefore, substituted the original exclusion for exclusion

for one UEFA club competition for which the club qualified in the next four seasons,

suspended for a probationary period of three years (at §143).

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43. However, CAS decided that it was appropriate to fine Bursaspor for the amount it

had gained during the 2011/12 UEFA club competition in which it played

notwithstanding that it had an overdue payable.

(3) CAS 2012/A/2824 Besiktas JK v UEFA (29 June 2012)

44. On 22 May 2008 Besiktas JK, a professional Turkish Football Club, entered into a

contract for the transfer of a player (“T”) with another club (“Club X”) for a net

transfer fee of EUR 4,500,000 payable in three installments between July 2008 and

June 2010 inclusive.

45. On 28 May 2008, Besiktas entered into a further contract with Club X for the transfer

of another player (“S”) by way of loan from 1 July 2008 to 30 June 2009 and on a

permanent basis from 1 July 2009. Under the contract Besiktas were to pay EUR

300,000 net by 1 July 2008 in respect of the loan period and a further EUR 4,400,000 in

respect of the final transfer, again in three installments between June 2009 and June

2011 inclusive.

46. On 29 March, there was an agreement that the remaining monies due under each

contract would be paid in a new configuration of installments between June 2010 and

June 2011.

47. Besiktas made a payment of EUR 1,450,000 to Club X. On 31 March 2011, Besiktas

had overdue payables due to Club X in the sum of EUR 1,500,000, and due to Rubin

Kazaan in the sum of EUR 750,000 respect of another transfer. The TTF subsequently

submitted the list of clubs, including Besiktas, to which it had granted licenses for

2011.

48. On 30 June 2011, Besiktas’ transfer payables table indicated that it owed (at §11):

(1) EUR 1,608,000 in relation to S;

(2) EUR 1,669,000 in relation to T;

(3) EUR 365,000 in relation to solidarity contributions for another player (“R”);

(4) EUR 223,000 in solidarity contributions for another player (“M”); and

(5) EUR 750,000 in relation to player F;

49. All listed payables were stated to be disputed. On 30 September 2011, the club

presented the same table save that the figure under (3) was reduced to EUR 364,000

and that under (4) to EUR 103,000 (at §14).

50. TFF subsequently forwarded the information provided by Besiktas to the UEFA CFP.

(a) The decision of the CDB

51. Following a compliance audit conducted by PriceWaterhouse Coopers, on 1 May

2012, the CDB found that the club had breached Articles 65 and 66 of the FFP

Regulations and imposed the following sanctions:

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(1) suspension from the next two UEFA club competitions for which it qualified

to be suspended for a probationary period of five years;

(2) a fine of EUR 600,000 to be paid within 30 days of the communication of the

decision;

52. The decision was to have no effect on the 2012-13 club licensing procedure.

(b) The decision of the UEFA Appeals Body

53. UEFA appealed the decision to the Appeals Body which found as follows:

(1) Besiktas was excluded from the next two UEFA club competitions for which

it qualified in the next five seasons with the exclusion from the second

competition being suspended for a probationary period of five years;

(2) Besiktas was fined EUR 200,000 of which EUR 100,000 was suspended for a

probationary period of five years; and

(3) the costs of the procedure, amounting to EUR 6,000 were to be charged in the

proportions of EUR 4,000 to Besiktas and the rest to UEFA.

54. Besiktas appealed to CAS alleging (1) procedural unfairness; (2) that the sanctions

were disproportionate when compared with other decisions; and (3) that the

Regulations had been misapplied. It was accepted that the club could not have

satisfied the rule against overdue payables and that it should not have been granted

a licence (at §§50-58).

(c) The CAS judgment

55. CAS noted that the objectives of the FFP Regulations were, among other things, “to

protect the integrity of UEFA Club Competitions, to improve the financial capabilities of

clubs, to protect creditors … of clubs and to introduce more discipline in clubs’ football

finances. All of those objectives were there to protect the long-term viability and

sustainability of European club football”.

56. Besiktas had not shown that the disclosed payables were manifestly unfounded, as

they were required to do in order to claim that the debt was contested.

57. In comparing the case with the PAOK, Gyori, and Olympics Volou cases, CAS noted

that the latter case involved match fixing while the others involved breaches of the

FFP Regulations. In relation to the FFP cases, it was noted that some clubs had a

single instance of overdue payables while others had more. The relevant sums

differed as between the cases.

58. Only in the case of Besiktas was it clear that the club should not have been granted a

licence and, additionally, the club failed the monitoring test at both dates with

multiple significant overdue payables (at §126). CAS further noted that Besiktas had

a systematic approach to debts with other clubs; it simply ignored them until forced

to pay by FIFA or CAS.

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59. CAS found that the availability of alternative sanctions was insufficient to render the

actual sanction imposed disproportionate (at §127). In order to succeed on the

proportionality point the club had to demonstrate that the UEFA decision was

“grossly disproportionate”. A club would be within the range of a competition ban

and a fine (at §127) where:

(1) a licence had been wrongly issued due to concealment by listing payables as

disputed where they had not been contested with the other party; and

(2) the club has earned significant revenues that it should not have.

60. CAS had no doubt that the breaches occurred in bad faith (at §127). CAS rejected the

argument that a one competition ban was disproportionate when compared with the

case of Volou which involved the potentially more serious offence of match fixing.

The disparity in treatment (found CAS) was a sign of how seriously UEFA treated

significant breaches of the FFP Regulations (at §128).

Principles to be derived from the FFP Regulations and the CAS judgments

(1) The standard of review

61. The scope of the review conducted by the CAS is set out in Article R57 of the CAS

Code. CAS has full power to review the facts and the law of the case. By way of

remedy, CAS may issue a new decision, that replaces the challenged decision, or may

annul the decision and remit the matter for re-decision.

62. It was noted in all three cases that on the face of the FFP Regulations the decisionmaking

bodies of UEFA have a broad discretion in terms of the type and severity of

the sanctions, which they may impose (see, for example, Besiktas at §127). In

reviewing sanctions the standard of review adopted by CAS has been that of gross

disproportionality.

(2) Proportionality

63. Given the nature of the powers in issue it is unsurprising that the common bases of

challenge are proportionality, inconsistency and unequal treatment. The UEFA

Appeals Body has itself held that, so far as the imposition of sanctions are concerned,

previous decisions ought to be followed to avoid the risk of “violating not only the

principle of proportionality but also that of equality of treatment” (Bursaspor at §26).

64. The availability of less onerous sanctions will not in itself render the actual sanctions

in any given case disproportionate. The club will have to demonstrate that the

sanctions imposed were grossly disproportionate (Besiktas at §127).

65. The UEFA bodies and CAS will take the following categories of factor into

consideration in assessing the proportionality of the sanction imposed:

(a) The seriousness of the offence

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66. CAS has so far been unreceptive to arguments that sanctions imposed for breaches of

the FFP Regulations are disproportionate when compared to those imposed for other

offences, such as match fixing (see Besiktas at §127-128). In Besiktas the CAS reasoned

that any disparity might be due to higher importance given by UEFA to the FFP

Regulations.

67. It was held by the CDB in Bursaspor that in failing to disclose its overdue payables

the club had failed to comply with an “essential obligation”. The monitoring system

was said to be one of the pillars of the FFP system so that any breach constitutes a

“serious offence” (at §24). It was further held by CAS that the failure to disclose the

correct and accurate payables was a decisive element in concluding that a nonsuspended

exclusion is not disproportionate (at §138).

(b) Previous conduct

68. It was held in both Györi (at §34) and in Bursaspor (at §24) by the CDB, that the

absence of any previous infringement would not be a decisive factor in determining

the suitability of sanctions. It was found in Besiktas (at §127) by CAS that the club had

a practice of acquiring credit from other clubs and deferring payment thereby

creating an uneven playing field. On the face of the judgment that fact appears to

have been taken to constitute an aggravating factor. It appears therefore that a clean

record will not necessarily be taken to be a mitigating factor but a poor record may

well be taken to be an aggravating factor.

(c) Fault and restitution-type fines

69. The cases clearly establish a principle that where a club has acquired a licence by

concealment of its overdue payables i.e. either by (1) not listing those overdue

payables; or (2) by listing uncontested overdue payables as disputed, it will be

proportionate to impose a fine by reference to the gains made by the club in

wrongfully participating in a competition. Accordingly, a system of fault-based

liability to fine that is otherwise unapparent on the face of the FFP Regulations

emerges from the case law.

70. In Bursaspor, the CDB imposed a fine that was approximate to the amount the club

had gained during the 2011/12 UEFA competition and was therefore proportionate

in the circumstances of the case. The UEFA Appeals Body similarly found that

Bursaspor had “grossly violated the applicable Regulations by creating a false impression

that it did not have any overdue payables on 31 March 2011 (at §29). CAS similarly

held that it was appropriate to fine Bursaspor for the amount it had gained during

the 2011-12 UEFA Club competition for which it ought to have been found ineligible.

71. Similarly in Besiktas, CAS held that a club would be in the range of receiving both a

ban and a fine, for example, where (1) a licence had been wrongly issued due to

concealment; and (2) the club had earned significant revenue. The implication was

that once that has been established there will be limited scope for a finding that any

particular combination of fine and ban are grossly disproportionate (see Besiktas at

§127).

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72. The CDB found that the offence committed in Györi was a serious one on the basis of

the deception. This was effectively upheld by CAS which noted that the club had

failed to act with transparency and diligence by:

(1) playing in the EUROPA league 2010-11 having failed to disclose the correct

overdue payables;

(2) not having disclosed its financial problems; and

(3) having paid the second instalment of the transfer fee only after the relevant

deadline.

73. Fault appears to include a failure to act with diligence (i.e. a requisite standard of

care) (see Györi at §158) as well as intentional concealment (see Besiktas at §§66).

74. In order to justifiably claim that overdue payables are disputed, a club will have to

show that the disclosed payables were manifestly unfounded (Besiktas at §116).

(d) Reliance on the National Association

75. In Györi the UEFA Appeals Body found that the original sanction had been harsh on

account of the fact that the club had relied on the HFF which had issued a licence and

had not bothered seeking an explanation for the overdue payable despite being on

notice (at §38). That was found to be the case notwithstanding the fact that the

documentation provided by the club had been misleading (at §34).

(e) Other legal measures preventing payment of overdue payables

76. CAS held in Györi that the fact that the club may have been liable to criminal sanction

on payment was not sufficient excuse for non-disclosure. It was sufficient for the

purposes of the duty to disclose that the payables were certain and enforceable (at §145-

46).

(f) Number of Offences

77. In Györi CAS distinguished the case from PAOK and Bursaspor on the basis that in

Györi the club had committed two offences. It had overdue payables and it had failed

to disclose those payables. It was, however, also relevant that Bursaspor had not yet

been decided by the UEFA Appeals Body. For those reasons it had not been

established that the sanctions were disproportionate (see §§159-161). Similarly, in

hearing Bursaspor, the CAS referred back to the fact that Györi had involved two

breaches rather than one in assessing the proportionality of the sanctions that had

been imposed (at §135).

78. The assessment of whether a disqualification ought to have been suspended for a

probationary period will be subject to similar considerations (see, for example,

Bursaspor at §31).

(g) Late Payment

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79. The CDB found in Bursaspor that the fact that the club was financially robust and had

paid the amount owing to PFC as soon as disciplinary proceedings were issued was

treated as mitigation (at §24). However, the Appeals Body found that the fact that a

club pays its debt only after a disciplinary procedure had been opened could not be

considered a mitigating circumstance (at §29).

(h) The number and total amount of overdue payables

80. The Appeals Body distinguished Bursaspor from Györi on the basis, among other

things, that the latter involved fewer overdue payables (see Bursaspor at §29).

81. CAS noted that of the cases considered above, only Besiktas involved a situation

where the club ought not to have been granted a licence and had failed the

monitoring test at both dates with multiple significant overdue payables (at §126).

(i) balancing sanctions?

82. In two of the cases CAS substituted the original sanctions with less restrictive

disqualifications but at the same time increased the relevant fine. This reflects CAS’

desire to arrive at an effective but proportionate decision overall.

Current appeals

83. On 21 December 2012, the CFCB Adjudicatory Chamber published its first decisions

in the cases of nine clubs that had been referred to it by the CFCB chief investigator,

Málaga CF, HNK Hajduk Split, NK Osijek, FC Rapid Bucuresti, FC Dinamo

Bucuresti, FK Partizan, FK Vojvodina, FC Arsenal Kyiv and KKS Lech Poznan.

84. The case of Málaga is interesting because it has appealed to CAS.

85. Málaga was excluded from participating in the next UEFA club competition for

which it would otherwise qualify in the next four seasons (i.e. 2013/14, 2014/15,

2015/16, 2016/17). In addition, Málaga will be excluded from the subsequent UEFA

competition for which it would otherwise qualify (in the next four seasons) if has not

proved by 31 March 2013 that it has no overdue payables towards football clubs or

towards employees and/or social/tax authorities, in accordance with the FFP

Regulations.

86. Málaga was also fined €300,000. The prize money withheld on 11 September 2012 (as

a conservatory measure) was released.

87. In response, Málaga issued the following statement: “Málaga Club de Futbol wish to

communicate their total disagreement with today’s Uefa decision. The measures taken against

the club are absolutely disproportionate and unjustified given the club’s situation. We

consider that the club is being punished unfairly and used as an example to others. Given the

total and absolute indignation and consternation on the part of the club, Málaga CF wishes to

state that it will work energetically and without rest to achieve justice, using all available

necessary means. Málaga CF wish to add that they do not understand, and consider totally

incomprehensible and abusive, that after having received this judgement they must now wait

an unknown period of time to know the evidence upon which it was taken.”

www.blackstonechambers.com 14

88. The hearing of Málaga’s appeal will take place on 4 June 2013 (according to the CAS

website).

Challenging the FFP Regulations themselves

89. Article 101(1) TFEU prohibits agreements and concerted practices between

undertakings, and decisions by associations of undertakings, which have the object

or effect of distorting competition and which affect trade between EU Member States.

Such agreements or decisions may be justified under Article 101(3) TFEU where they

produce efficiencies, are indispensable for that purpose and do not exclude any

competitors.

90. Where they cannot be justified, such agreements or decisions are void under Article

101(2) TFEU.

91. In developing the FFP Regulations, UEFA was clearly sensitive to the risk of a

challenge under EU law and sought to involve the Commission at an early stage. The

Commission had in fact flagged its potential support for such rules in 2007, in the

Staff Working Document which accompanied the White Paper on Sport (at §2.1.5 of

Annex I). In the event, UEFA and the Commission issued the following “Joint

Statement” on 21 March 2012 which stated, among things, as follows (at §5):

“…the FFP rules that monitor and enforce the financial obligations that clubs owe

towards other football clubs, towards employees (in particular, to players) social and

tax authorities and to other creditors are also important elements in the overall

financial regulatory structure of football and are to be supported.”9

92. Following this Joint Statement, the EU competition commissioner Mr Almunia

commented as follows:

“I am a football fan and I hope that future generations will also be able to watch and

enjoy first class professional football based on solid grounds. I am deeply concerned by

the increasing level of indebtedness of many European clubs. This situation is not

sustainable. Both EU state aid rules and UEFA objectives help introduce discipline

and rationality in football club finances.”10

93. Nevertheless, as noted above, Mr Striani made his complaint to the Commission

regarding the FFP Regulations on 6 May 2013. Mr Striani is represented by Jean-

Louis Dupont, who acted for Mr Bosman in his landmark case before the CJEU in

1995.

94. Significantly, the complaint challenges the restrictions on competition caused by the

“break-even rule” only (Article 57 of the FFP Regulations). No complaint is made

regarding the rules on overdue payables.

95. According to the published summary of the complaint,11 the claim is that the breakeven

rule imposes on clubs that participate in the UEFA Champions League or in the

Europa League an obligation “not to overspend” even if such overspending aims at

growing the club and making it more competitive.

96. According to Mr Striani, the “break-even” rule (which is an “agreement between

undertakings” for the purposes of Article 101 TFEU) generates the following

restrictions of competition:

(1) restriction of investments;

(2) fossilization of the existing market structure (i.e. the current top clubs are

likely to maintain their leadership, and even to increase it);

(3) reduction of the number of transfers, of the transfer amounts and of the

number of players under contracts per club;

(4) deflationary effect on the level of players’ salaries; and

(5) consequently, a deflationary effect on the revenues of players’ agents

(depending on the level of transfer amounts and/or of players’ salaries).

97. At the same time, argues Mr Striani, because of the aforementioned restraints, the

“break-even” rule also infringes other EU fundamental freedoms: free movement of

capital (as far as club owners are concerned), free movement of workers (players)

and free movement of services (player agents). Consequently, such restriction of

competition and violation of EU fundamental freedoms cannot be justified by the

objectives put forward by UEFA (long term financial stability of club football; and

integrity of the UEFA interclub competitions).

98. Moreover, according to the complaint, detailed legal and economic analysis shows

that, even if the “break-even” rule may appear initially a plausible concept, the rule

is not able to achieve efficiently its objectives as presented by UEFA (whereas other

means are available to attain such objectives).

99. As far as the integrity of the UEFA competition is concerned, Mr Striani argues that

in order to avoid the risk that club X would jeopardize the smooth running of the

competition because its owner stops mid-season providing funds (the

“overspending”), it is not necessary to prohibit such “overspending” (as

implemented by the “break-even rule”), when it is sufficient to require

“overspending” to be fully guaranteed (for instance, by means of bank guarantees)

before the start of the competition and for its whole duration.

100. In short, argues Mr Striani, the current prohibition, even assuming it to be justifiable

in the light of the pursued objective (i.e. integrity), is in practice illegal because the

rule is not proportionate (since it can be replaced by another measure, equally

efficient but less damaging as far as EU freedoms are concerned). Mr Striani requests

that the Commission take a decision that the break-even rule breaches Article 101(1)

TFEU and is therefore null and void under Article 101(2) TFEU.

101. In view of the Commission’s considered and declared support for the FFP

Regulations it is unlikely that it will make such a finding. The statements by the

Commission set out above are not, of course, binding on anyone and the

Commission is required to examine this complaint with fresh eyes and an open

mind. Nevertheless, it is more likely that the real challenge will be Mr Striani’s

application to annul the Commission decision which dismisses his complaint. Such a

challenge would be brought to the General Court of the EU (from which there is a

right of appeal to the CJEU).

102. In the European Court, the principles set out in Meca Medina would be applied.12 As

Mr Striani says, it is very likely that UEFA and its members in this context would be

found to be undertakings for the purposes of Article 101(1) TFEU. Their activities in

this regard are plainly economic and have very significant economic implications.13

Similarly, it is likely that UEFA is for these purposes an “association of undertakings”.14

103. The real dispute will come at the next stage, namely whether the break-even rule

restricts competition within the meaning of Article 101(1) TFEU. This will depend on

a consideration of the following factors derived from the Wouters judgment of the

CJEU:15

(1) the overall context in which the rule was adopted or produces its effects and

its objectives;

(2) whether the restrictions caused by the rule are inherent in the pursuit of the

objectives; and

(3) whether the rule is proportionate in light of the objective pursued.

104. A number of Mr Striani’s points are plainly arguable. The break-even rule appears

clearly to favour the established and wealthy clubs which can call upon their fans to

pay higher ticket prices and upon their sponsors for increased funds e.g. Real

Madrid, Barcelona, Bayern Munich and Manchester Utd. Such clubs are already at

the top of European football and do not need a wealthy benefactor to make large

one-off payments to give them an opportunity to play at the highest level.

105. On its face at least, this appears to restrict competition between the top clubs and

those aspiring clubs which might otherwise have posed a competitive threat with the

benefit of exceptional funding not earned from normal revenues.

106. One further point which may have particular merit relates to the effect of the breakeven

rule on players’ remuneration. If the rule operates as a sort of salary cap, as Mr

Striani alleges, as a matter of EU competition law it probably ought to have been

negotiated with the players’ representatives.16 There is no indication that players’

representatives were involved in the drafting of the FFP Regulation; their consent

was certainly not sought before the Regulations were implemented.

107. Finally, if the break-even rule cannot be policed effectively, that will provide a

further basis for challenging its proportionality (as not being able to secure the

legitimate objective). Concerns have been expressed regarding sponsorship deals

held by Manchester City for example. The club’s main deal is with Etihad airlines

apparently worth £400m over ten years, and a further three of its sponsors (Etisalat,

Aabar and Abu Dhabi Tourism Authority) are run by the United Arab Emirates

Government, of which owner Sheikh Mansour is a minister and member of the

ruling family.17

108. Paris Saint-Germain is paid by way of sponsorship €200m per season by the Qatar

Tourism Authority, which appears to have close links with the Qatar Investment

Authority that owns the club.

109. The fact that Mr Striani may well lose before the Commission should not give UEFA

too much comfort. The landmark case of Meca-Medina began with the Commission

dismissing the swimmers’ complaint that certain IOC and FINA doping control rules

violated competition and free movement rules. The CFI dismissed their appeal but

on further appeal, the CJEU subjected the FINA rules to very close and detailed

scrutiny. It remains to be seen whether the break-even rule can survive such scrutiny.

Brian Kennelly

23rd May 2013

Footnotes

1 Article 25(2) of the Procedural rules governing the UEFA Club Financial Control Body (Edition 2012)

22 http://www.sportingintelligence.com/2013/05/13/daniel-striani-and-uefas-financial-fair-play-regulationsthe-

new-bosman-130501/; http://www.skysports.com/looktothefuture/story/0,28751,19690_8696959,00.html;

http://www.guardian.co.uk/football/2013/may/06/agent-legal-threat-uefa-financial-fair-play;

http://www.financialfairplay.co.uk/latest-news/legal-challenge-to-uefa-ffp-rules-by-bosman-lawyer

3 Since 1 December 2009, the General Court of the EU and the Court of Justice of the EU (“CJEU”)

4 These were replaced by the FFP Regulations in 2010

5 As aforementioned, the UEFA Club Licensing and Financial Fair Play regulations replaced the UEFA Club

Licensing Regulations 2008.

6 By a decision dated 10 January 2012, the CDB issued penalties to Greek club PAOK FC in relation to violations

of the UEFA club licensing regulations. PAOK was fined €250,000, of which €200,000 was suspended for a

probationary period of three years. In addition, PAOK was excluded from one UEFA club competition for which

they qualified in the following three seasons. The exclusion was also suspended for a probationary period of

three years.

PAOK was required to prove that, by 30 June 2012, they had no outstanding overdue financial obligations

towards employees, tax authorities, social security institutions or other clubs arising from transfer agreements

incurred before 30 June 2012.

7 Considered below.

8 Article 56 of the 2008 Regulations has been replaced by Article 72 under the 2012 Regulations.

9 http://ec.europa.eu/competition/sectors/sports/joint_statement_en.pdf

10 http://europa.eu/rapid/press-release_IP-12-264_en.htm?locale=en

11 http://www.financialfairplay.co.uk/latest-news/legal-challenge-to-uefa-ffp-rules-by-bosman-lawyer

12 Case C-519/04P Meca Medina v Commission [2006] ECR I-6991

13 13 Case T-193/02 Piau v Commission [2005] ECR II-209, §69

14 Commission decision of 23 July 2003, Case 37398 Joint selling of the commercial rights of the UEFA Champions

League, OJ 2003 L 291/25, (“UEFA CL”)

15 Case C-309/99 Wouters [2002] ECR I-1577

16 Case C-67/96 Albany [1999] ECR I-5751 at §59

17 http://bleacherreport.com/articles/1632009-5-reasons-why-the-uefa-financial-fair-play-regulations-are-a-badidea#/

articles/1632009-5-reasons-why-the-uefa-financial-fair-play-regulations-are-a-bad-idea/page/3

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