In the last weeks, UEFA published its updated 2014 Club Financial Control Body (CFCB) procedural rules. These rules have been amended with a number of significant additions. Of particular importance are Articles 15 and 16 regarding settlement which were not included in the original regulations. As a result, only months before the first break-even sanctioning decisions are announced a new procedure has been put in place for defaulting clubs. This blog looks at the key features of the new provisions and the potential issues.
For an understanding of the UEFA Licensing and Financial Fair Play regulations, click here. Come the Spring, the CFCB will be taking decisions based on financial submissions provided by clubs to ensure they have ‘broken-even’ which effectively allows for a €45m acceptable loss. Previously, the CFCB published regulations setting out, among other things, its powers, remit and sanctioning capabilities. This document has now been updated and amended and now includes the ability for the CFCB to ‘settle’ with clubs who are in breach.
There are settlement procedures in a number of regulatory frameworks. For example, the European Commission has a settlement framework in place to incentivise companies who have breached the competition rules in cartel matters to admit to the breach. This translates into a quicker administrative process whilst also allowing the company in breach to receive a lesser sanction (usually a fine reduction). This (more lengthy) settlement procedure is set out here. In contrast, UEFA’s settlement procedure is set out in the two provisions below.
The New Procedural Regulations
It is useful to set out the relevant text in order to consider a number of issues arising from this new procedure.
Article 15 – Settlement agreement
1. Settlement agreements pursuant to Article 14(1)(b) shall take into account, in particular, the factors referred to in Annex XI of the UEFA Club Licensing and Financial Fair Play Regulations. Such agreements may be deemed appropriate in circumstances which justify the conclusion of an effective, equitable and dissuasive settlement without referring the case to the adjudicatory chamber.
2. Settlement agreements may set out the obligation(s) to be fulfilled by the defendant, including the possible application of disciplinary measures and, where necessary, a specific timeframe.
3. The CFCB chief investigator monitors the proper and timely implementation of the settlement agreement.
4. If a defendant fails to comply with the terms of a settlement agreement, the CFCB chief investigator shall refer the case to the adjudicatory chamber.
Article 16 – Review of decisions of the CFCB chief investigator
1. Any decision of the CFCB chief investigator to dismiss a case or to conclude a settlement agreement or to apply disciplinary measures within the meaning of Article 14(1)(c) may be reviewed by the adjudicatory chamber on the initiative of the CFCB chairman within ten days from the date of communication of the decision to the CFCB chairman.
2. Any decision of the CFCB chief investigator to conclude a settlement agreement or to apply disciplinary measures within the meaning of Article 14(1)(c) may be reviewed by the adjudicatory chamber at the request of a directly affected party within ten days from the date of publication of the decision.
3. The adjudicatory chamber only reviews decisions of the CFCB chief investigator with regard to the existence of a manifest error of assessment.
4. The adjudicatory chamber may uphold, reject, or modify the decision or refer the case back to the CFCB chief investigator.
Initial Issues to Consider
In the period before the new Articles 15 and 16 were drafted and implemented, it was assumed that any club who was in breach of the acceptable deviation provisions, would be referred to the CFCB’s adjudicatory chamber for a sanctioning decision. We now know that there are two routes available to the CFCB. The second settlement route gives the CFCB investigatory body the power to settle without the CFCB’s adjudicatory arm becoming involved. The test for settlement appears to be in instances “which justify the conclusion of an effective, equitable and dissuasive settlement.”
Many clubs will see this as a somewhat controversial regulatory inclusion. This is because, in my experience of settlement procedures from a competition law perspective, companies will only admit to a breach if they are rewarded for such an admission. As such, the CFCB will have to offer sanctions which make it attractive not to take the matter to the adjudicatory chamber or to CAS. As a result, sanctions are likely to be weaker to incentivise the club to settle. However weaker sanctions may still include large fines, points deductions or player de-registration.
A number of clubs have made public statements about the need to punish clubs who breach the break-even provisions. If the CFCB is settling with clubs in breach rather than letting the adjudicatory chamber handle the breach, a number of compliant clubs may well be annoyed that such a route has been made available. Some owners may believe UEFA should not be providing this new avenue for clubs at this late stage.
Other issues that will need to be decided upon (perhaps by CAS) during the first set of sanctioning and settlement decisions will include:
1. Who will be an affected party? If the season has yet to finish and the league placements yet to be decided, a number of clubs may take precautionary measures to protect their position in the event of settlement affecting them if they finish, for example, one place below a team who is in breach but is not expelled due to a settlement decision. It is worthy to note that the test to appeal against a settlement decision by an affected party (“a manifest error”) appears to be quite a high test to satisfy.
2. At present, Article 15 makes reference to Annex XI of the FFP regulations (which references the size of the breach, projected results, currency fluctuations and debt position) as the instances where the settlement procedure may be used. Presumably the greater the loss or projected loss and the larger the debt, the less likelihood there is of a club ‘qualifying’ for settlement.
While settlement may allow FFP defaulters to escape a full Champions League ban by effectively being put on probation to get their finances in order, it also opens up a new legal process by which a team’s rivals could challenge their Champions League/Europa League place.
With the sanctioning decisions now just a few months away, many stakeholders will await the CFCB decisions with interest. The new settlement procedure is in force and may cause controversy in instances where a club is in breach but is not sanctioned to the same extent had it gone through the ‘normal’ CFCB procedure.