Manchester City (Man City) is now one of the biggest soccer clubs in the world. It is arguable that they are in the same class as a Barcelona, Real Madrid or Bayern Munich. However, that has not always been the case. I remember when their star player was Stephan Ireland and they were a team either fighting off relegation or somewhere in the bottom to middle of the Premier League. However, in 2008, the Man City fans received an early Christmas present. UK Sports Investments Limited sold Man City to Abu Dhabi United Group Investment and Development Limited, a company owned by Mansour bin Zayed Al Nahyan (a member of the royal family of Abu Dhabi). The new owner then injected hundreds of millions of dollars into the team (for example, providing funds to purchase one player known as Rodri for 70 million Euros). As higher skilled players were brought to the first team, the team became the juggernaut it is today.
However, Man City’s use of money has gotten them into trouble the past few years. In 2009, the Financial Fair Play Rules were introduced by UEFA. The basic notion of the FFP is to prevent teams from spending more than they earn. The teams can only spend up to 5 million Euros more than they earn for the assessment period (3 year period), but total losses of up to 45 million euros are permitted as long as the team’s owners could cover those losses. This is known as break even calculations. The UEFA website states,
“If a club’s owner injects money into the club through a sponsorship deal with a company to which he is related, then UEFA’s competent bodies will investigate and, if necessary, adapt the calculations of the break-even result for the sponsorship revenues to the level which is appropriate (‘fair value’) according to market prices.”
Therefore, incorrect inflation of sponsorship revenue will skew the break even calculations. In assessing whether there is a violation of FFP, the UEFA created an “independent” Club Financial Control Body (CFCB), which analyzes teams financials for the assessment period. It consists of, among others, the Investigatory Body (IB) and the Adjudicatory Body (AB).
In 2014, Man City was found in violation of the financial fair play rules (FFP). Before the Adjudicatory Chamber came to a decision, Man City and UEFA settled the matter. The terms of the settlement rendered a light punishment compared to the punishment handed down after their second violation. Man City had to to report a maximum break-even deficit of 20 million Euros for the financial year ending in 2014 and a maximum break-even deficit of 10 million Euros for the financial year ending in 2015. Employee benefit expenses cannot be increased during the next two financial periods, so Man City could only register 21 players for Champions League rather then the full 25. Therefore, they had to limit their spending, and paid a conditional fine of 60 million Euros.
In 2019, following an investigation by the IB, the AB found and UEFA announced that Man City violated the Financial Fair Play regulations – again. UEFA said City “overstated its sponsorship revenue in its accounts and in the break-even information submitted to UEFA between 2012 and 2016” and were cited for “failing to cooperate in the investigation by the CFCB”. Leaked documents through Football Leaks, ( Man City’s emails were hacked then the damning emails and documents were leaked) stated that $8 million of the $67.5 million Etihad sponsorship was being paid for by the airline itself, with the rest being funded by the Abu Dhabi United Group. This is a major violation of the FFP as it skews break even calculations. As a result, the AB administered a detrimental punishment to Man City. They handed Man City a 2 year Champions League ban (ie. the 2020/21 and 2021/22 seasons) and Man City must pay a thirty million euro fine.
If held out of the Champions League, it is estimated the team will lose two-hundred million Euros in Champions League prize over the two years. This is definitely a brutal punishment that could possibly send the team into turmoil the next two years. Will Pep Guardiola stay with the team? Will many first team players demand a transfer since they will not be able to participate in the coveted Champions League? The answers to those questions are unclear. What is clear is that Man City will appeal this result with the Court of Arbitration for Sport. Man City stated they were “disappointed but not surprised” by the decision and that the process was “prejudicial”.
However, the legal road leading to the the appeal will be quite interesting. As mentioned before, the CFCB is considered an independent body from UEFA. However, technically it is still part of and affiliated with UEFA (which may be the reason why Man City believes this decision is biased). The investigation is run by “independent” “lawyers, judges and politicians who make up UEFA’s financial control body”. However, on appeal with the CAS, UEFA will for the first time have to defend their decision via the adversarial process in front of a convened panel. In the past, UEFA has not been successful in defending their decisions and the likes of PSG, AC Milan, Galatasaray all have had their punishments reduced or overturned. However, this may be due to the fact that those teams brought in some of the best sports lawyers in the world, while UEFA just handed in written submissions and did not send any legal representatives. If UEFA does send legal representatives to this appeal, Man City may not be as lucky.
What about the leaked documents? They were obtained illegally and therefore should be inadmissible. Not necessarily. The CFCB has broad rights to consider evidence. Article 13(2) of CFCB’s Rules and Procedures states: “All means of evidence may be considered by the CFCB chief investigator. This includes, but is not limited to, the defendant’s testimony, witness testimonies, documents and records, recordings (audio or video), on-site inspections and expert reports.” Therefore, it seems that CFCB had sufficient powers to procure the evidence and did not violate their own procedural rules. Even if the CFCB did not violate their own rules, how will the procured evidence be viewed by the CAS? The nonbinding precedent is not favorable to Man City.
As states in the tweet, CAS courts are allowed to take into account evidence that in state courts would undoubtedly be inadmissible. There is case law where the CAS relied on evidence derived from questionable sources (CAS 2011/A/2426 Amos Adamu v/ FIFA, Sivasspor Kulubu v. UEFA and CAS 2014/A/3628 Eskişehirspor Kulübü v UEFA). However, Man City does not have to go the CAS route, but could be heard in the forum of the Swiss Federal Tribunal. Other routes, the governing law as to the admissibility of the Football Leaks information may vary.
Whether or not Man City will argue that the evidence was obtained illegally and should not be relied on by the CAS is just the tip of the iceberg when it comes to legal issues regarding FFP. They can take other legal angles such as whether or not FFP is even compliant with European Law (European Law has a similar statute to the Sherman Anti-Trust Act). These lines of argument will be an up hill battle, but whatever legal path Man City decides to take, will certainly bring an unprecedented legal battle.