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High-Spending Clubs Must Still Be Careful How They Use Their Money


July 6, 2015

This blog was first published on the excellent Secret Footballer website here.

Introduction

It had been reported for some time that Uefa was intending to relax its Financial Fair Play (FFP) regulations to allow clubs in certain instances to spend more than was preciously permitted. On 1 July, Uefa’s new regulations were published. The basic Uefa FFP premise is that clubs participating in its competitions cannot make large losses or if they do, they will be sanctioned accordingly. A summary of the regulations is set out here .

In previous seasons, clubs like Manchester City and Paris Saint-Germain have been sanctioned by Uefa with squad size reductions as well as transfer and wage restrictions. Indeed, only in the last few days has it been announced that City and PSG have been released from some of their most stringent ongoing monitoring requirements. However, this does not necessarily mean that they can spend large sums again.

The Detail

The new Uefa FFP regulations do contain particular provisions that allow clubs in certain instances to spend over the previously stipulated Uefa loss amounts. This is probably the most significant change to the regulations and comes in the form of a voluntary agreement (VA) that can be submitted by a club to Uefa. This will allow certain clubs, if qualification criteria is met and the VA is agreed by Uefa, to spend significant amounts on transfers and wages in the short term as long as a detailed business plan is in place to demonstrate to Uefa how the club will break even over a maximum four-year period.

Interestingly, there are VA eligibility criteria. Clubs that have already been subject to an FFP disciplinary decision or have entered into settlement with Uefa – like Manchester City, PSG and AS Monaco – within the past three years cannot qualify. Therefore, clubs settling with Uefa last summer, for example, are unlikely to be able to spend significant sums above the current permitted Uefa loss levels – ie. no losses of 30 million-plus euros over three previous seasons.

Some clubs may have potentially opted against previous settlement decisions if they knew it would disqualify them from the benefits of VAs. VAs are open to all clubs and not just those subject to a change of ownership. Current owners can decide on a potential short-term spending spree as long as they can demonstrate how they will break even within a maximum of four years. There will always be a risk that the VA business plan is not adhered to and monitoring by Uefa could still lead to disciplinary sanctions imposed on the club.

Most importantly, a club owner who wishes to spend significant sums must guarantee such losses and commit funds as part of the VA. This is similar to the Premier League regulations where secured funding is required. This, in practice, may be quite an onerous obligation on an owner as a bank guarantee or money in an escrow account will likely be required. This is to ensure that the short-term spending, should an owner decide to stop funding a club, will be covered by the guarantees already in place.

Conclusion

All of this means that the amount that clubs can spend, if a VA is agreed by Uefa, could rise significantly in the short term and that a relaxation of the rules is, indeed, taking place.

However, such relaxation is subject to some quite stringent conditions. Should clubs not comply, they could still find themselves in trouble with Uefa.

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