HM Insights

How UEFA’s financial fair play regulations impose more scrutiny on football club finances

While the regulatory landscape of Scottish football has changed markedly following the decision to merge the Scottish Football League with the Scottish Premier League, creating the four-division Scottish Professional Football League, the wider football landscape is continuing to develop and change, partly in response to financial scrutiny by football’s regulatory bodies.

At a time when broadcast deals entered into by UEFA (the European governing body) for its key European competitions are generating significantly more financial return for UEFA and the participating clubs, UEFA is also increasing its scrutiny of the financial health of European competition participants, as the UEFA Club Licensing and Financial Fair Play Regulations take hold.

The UEFA Regulations were introduced in 2010 and have been designed to increase in scope and application over four years, to gradually impose more regulatory scrutiny and less scope for debt accumulation in pursuit of sporting glory, pressing clubs to adopt a breakeven position.

While their overall impact continues to be debated, with speculation as to how the leading English and continental sides with exorbitant debt will meet their requirements in order to continue to participate in cross-border competitions, UEFA has claimed the new regime to be a success, pointing to the dramatic fall in clubs’ “overdue payables towards clubs, employees and social/tax authorities… from €57 million in June 2011 to €9 million in June 2013”. A similar trend was observed in September 2013.

For the first time since records began in 2006, revenue growth (6.9%) has outpaced wage growth (6.5%) in the top flight of each country in Europe, with losses down from €1.7 billion in the previous year to €1.066 billion this year.

Sanction regime

Underpinning the regulatory regime is the UEFA Club Financial Control Body (CFCB) adjudicatory chamber, established to impose disciplinary measures in the case of non-fulfilment of financial requirements and to decide on cases relating to clubs’ eligibility for UEFA club competitions. High-profile licensing disciplinary issues have occurred recently in Europe, as UEFA continues to monitor and press for the correct application of the regulations.

The sanctioning exercises undertaken by the CFCB have shown a tough stance on financial failings, and a detailed approach to sanctioning. Suspensions handed down have included exclusion from the first European competition for which the club is otherwise eligible over a specified period, fines, deduction of prize money, and suspended sanctions pending resolution of debts. The power to impose bans on player transfers was widely anticipated, but not forthcoming, following legal advice and concern about the anti-competitive nature of such a measure.

The UEFA Regulations are acknowledged to be complex, and there is concern over continued speculation that loopholes abound for the largest clubs. Nevertheless, UEFA’s Michel Platini considers it inevitable that the governing body will eventually need to defend and protect the decisions of the CFCB, with court action thought to be inevitable, again on the basis of anti-competitive principles.

At the start of this season, 31 clubs were investigated by UEFA with 25 having their cases closed; six from Portugal, Ukraine, Latvia, Poland and Romania had their participation monies withheld and have now had their cases referred to the CFCB for consideration.

Scottish response

The impact of the rules will take a number of years to be realised in Europe, but in Scotland, as elsewhere, domestic regulation is ongoing as the regulatory requirements imposed by virtue of UEFA membership cascade down to national associations and leagues.

Clubs within the SPFL Premiership have to meet the requirements set by UEFA, partly in order that they are licensed to qualify and play in European competition. Clubs in the lower divisions have to meet licensing demands set by the SFA, to be licensed to play. Additionally, clubs who may qualify to play in European competition through domestic success in cup competitions would have to meet tests and receive an exceptional licence to play in Europe.

Recent studies suggest Scottish clubs are responding well to the regime, with 60% of top flight clubs reported as saying that they would make a profit after player trading and depreciation, whereas in England’s top league it was 42%. With the centrality of finance in football evident from recent events in Scotland, the work of the SFA’s licensing committee and the licence regime will continue in importance.

This article originally appeared in The Journal of the Law Society of Scotland.