Table of Contents
Accusations by UEFA
So, let’s start with the offences which Manchester City in UEFA’s view had committed, namely violating the financial fair play rules. These rules are laid down in the UEFA Club Licensing and Financial Fair Play Regulations (CLFFPR). In general, the UEFA accused Manchester City of:
- Receiving equity contributions in an amount of GBP 204,000 by its ultimate owner, which are disguised as sponsorship income from Etisalat and Etihad.
- Refusing the cooperate with the investigation by the UEFA.
In a decision dated 14 February 2020 the UEFA Adjudicatory Chamber has found Manchester City guilty of these accusations and decided to ban Manchester City for 2 years from UEFA club competitions. Furthermore, Manchester City had to pay a 30-million euro fine to the UEFA.
Manchester City lodged an appeal against this decision at the CAS, which lead to the CAS-award of 13 July 2020
Before we go into the details of the financial fair play rules and the alleged breaches, this case is also characterized by origin of the UEFA’s evidence. The case of the UEFA is based on several e-mail which were obtained through an illegal hack of Manchester City’s systems by a Portuguese hacker, running the Football Leaks website. These e-mails were then later published by several news media.
Therefore, one of the first things that needed to be resolved in the CAS arbitration, was the admissibility of the evidence in the form of the leaked e-mails. (or as Manchester calls it, “the criminally obtained documents”).
The tribunal fell back on Swiss law and determined that the interest in discerning the truth was more important than the personality rights of Manchester City and that therefore the e-mails are admissible. In its decision the Tribunal took into consideration that the UEFA had no involvement in the hack and that the e-mails were already available in the public domain.
Financial fair play rules
Back to the accusations by the UEFA, the alleged breaches of the financial fair play rules. In short, these rules set obligations for clubs with an UEFA license to balance their books. Briefly summarize, this comes down to the football related outgoings being not more than the club’s football related income. A small deficit is allowed. It is therefore not allowed to have huge losses covered by wealthy contributors.
In order to monitor if clubs commit to the break-even requirements, clubs need to provide the UEFA with relevant financial information, such as financial statements. Clubs also need to provide financial information to obtain a license. The alleged violation of the financial fair play rules is that the financial information of Manchester City contained false information.
In this case the UEFA blamed Manchester City that it had received equity funding from its ultimate owner, which was disguised as sponsor income. Therefore, Manchester City did not meet the break-even requirement for several seasons. The break-even information for these seasons was alleged to be false.
Disguised equity contributions
According to the UEFA Manchester City’s owner, His Highness Sheikh Mansour bin Zayed bin Sultan bin Zayed Al Nahyan (“HHSM”) paid sponsorship amounts to Manchester City through his personal investment vehicle ADUG in the seasons 2011/12 through 2015/16. The relevant payments are made in June 2012 and January 2013 with regard to the sponsorship of Etisalat. According to the UEFA the equity funding also took place through a sponsorship agreement with Etihad in the seasons 2012/2013, 2013/2014 and 2015/2016.
Consequently, the UEFA argues that Manchester City overstated its sponsorship revenues in the relevant years and provided incorrect break-even information, therefore reporting incorrect information. In the view of the UEFA Manchester City has thus breached articles 13, 43, 47, 51, and 62 of the CLFFPR.
Before entering into the merits of the case, and the assessment whether Manchester City had actually received disguised equity funding by ADUG/HHSM, the tribunal first had to determine which breaches had to be assessed. The reason for this is the time passed since the payments were made and since the submission of the financial information allegedly to be false. The procedural rules of the UEFA Club Financial Control Body (CFCB, art. 37) prescribe a time bar:
Prosecution is barred after five years for all breaches of the UEFA Club Licensing and Financial Fair Play Regulations.
The tribunal – or at the least the majority – determined that the prosecution as meant in article 37 of the CFCB procedural rules, commences with the filing of charges. It considered that the be the moment that the suspect is formally informed of the case he needs to answer (para. 170). In this case the tribunal determined that to be the moment the Investigatory Chamber of the UEFA referred the case to the Adjudicatory Chamber on 15 May 2019. That means that all (alleged) breaches of the financial fair play rules, which happened before 15 May 2014 are time-barred. These breaches can no longer be prosecuted.
The consequence of this time bar is that the alleged breaches related to the Etisalat sponsorship are time-barred. The payments took place in June 2012 and January 2013 and were thus reported in the financial statements for the financial year ending May 2013. These financial statements were filed to the UEFA before 15 May 2014.
With regard to the Etihad-sponsorship, the alleged breaches regard the seasons ending in 2013, 2014 and 2016. The breaches with regard to the season 2013 are considered time-barred, since the financial statements with regard to this season were filed before 15 May 2014. The breaches with regard to the seasons ending 2014 and 2016 are not considered time-barred and can be prosecuted.
Merits (burden of proof)
The UEFA’s case is based on six e-mails from which the UEFA concludes that Manchester City and its ultimate owner disguised equity funding as sponsorship payments. From the e-mails it should follow that the sponsor – Etihad – was or was to be reimbursed by ADUG/HHSM, the ultimate owner of Manchester City.
It was undisputed that the payments to Manchester City were in fact paid by the sponsor Etihad itself. Therefore, the Tribunal judged that it was up to the UEFA to prove that the reimbursements actually had taken place. The UEFA failed to do so. Manchester City also brought forward several witnesses testifying that there was no disguised equity funding.
Although the tribunal considered it possible that the relevant payments were reimbursed and therefore could be disguised equity funding, the tribunal also considered that there are other hypotheses which could likely be possible. Hence the standard of proof – comfortable satisfaction – was not met. The tribunal held that the UEFA had not proved that Manchester City disguised equity contributions as sponsorship income.
Cooperation with the Investigatory Chamber of the CFCB
The second accusation by the UEFA is that Manchester City did not cooperate with the Investigatory Chamber of the CFCB. Manchester City inter alia did not submit requested e-mails and withheld requested witnesses from the CFCB. The tribunal judged that Manchester City herewith violated article 56 of the CLFFPR.
With regard to this violation, it is interesting that the tribunal gave weight to the dependency of the UEFA by the cooperation by clubs with investigations as the financial fair play system can only work when clubs truthfully disclose information (para 327).
Considering the failure to cooperate and considering the seriousness of the infringement, Manchester City is fined EUR 10 million.
The CAS decision is frequently criticized, such as by top premier league managers Jürgen Klopp and Jose Mourinho. However, legally speaking a few very important safeguards have played their part: the time bar and the burden of proof. Both safeguards are in place to make sure you cannot be confronted with offences from way past (making it hard to defend yourself since evidence and recollections may have faded) or accusations which are not well founded. So, where the feeling may be that this award is unjust, the justice system did however actually prevail. Although, the conclusion cannot be drawn that Manchester City did not violate the financial fair play rules.