Matt Scott: Why FFP is right and proper, whatever City fans might say

“No man can judge what is good evidence on any particular subject, unless he knows that subject well. A lawyer is no better than an old woman at a post-mortem examination.” George Eliot, Middlemarch

For hundreds of years the legal profession has been among society’s least popular functions. It’s pretty clear that not everyone likes the way lawyers practise their business but the fact is the modern world could not carry on without them. They are here to stay.

Even so, those who have the opportunity to regulate their own affairs can to a degree limit the influence of the courts. And so it has been with football, which has always adopted George Eliot’s practical 19th Century view of the legal profession. Football prefers to keep disputes among those who know the subject of our game well.

Article 68.2 of the FIFA statutes reads: “Recourse to ordinary courts of law is prohibited unless specifically provided for in the FIFA regulations. Recourse to ordinary courts of law for all types of provisional measures is also prohibited.”

The decision by a Brussels court to refer to the European Court of Justice a complaint against the break-even requirement in UEFA’s Financial Fair Play regulations reflects how FIFA measures to forbid external legal challenge are not watertight. The complaint was first lodged in May 2013 by the player agent Daniel Striani, initially to the European Commission, which declined to pursue it given that the first-instance court in Belgium was sufficiently competent to do so.

Jean-Louis Dupont, the lawyer who made his name with a successful challenge to the old player-contract regulations that brought about the so-called Bosman ruling, has presented the Striani case to that Belgian court. The matters that required specific European-law consideration, the court ruled last week, related to internal-market competition, free movement of labour and allegations of an abuse of a dominant market position.

Fundamentally, what Dupont is driving at is that football is a purely economic activity that must be governed by the same strictures as other commercial sectors, like logistics or construction. He is asking the traditional courts to apply laws in exactly the same way.

There is more of a football flavour to the argument in the fact that he and Striani have the support of Manchester City and Paris Saint-Germain fans’ groups. In a statement, Manchester City FC Supporters Club said: “Our members are consumers of the football product and it is as such that they denounce the EU competition law infringements caused by the UEFA break-even requirement.

“The UEFA rule may be bad news for MCFC supporters, but it is even worse news for supporters of all clubs that do not today belong to the established European elite.”

The rationale is that “ambitious owners” are restricted in what they may invest in clubs and it entrenches the so-called elite. But in whose interest is it really that unlimited investment should be permitted in football? City and PSG fans certainly are consumers – a teensy-weensy, tiny part of the consumer element of the football economy – but do they speak for supporters of other clubs? Would all clubs’ supporters testify that their experience leads them to believe unbridled owner investment is an unalloyed good thing?

What of the fans of Leeds United? Their club bankrupted itself “living the dream” of investment it could not afford and tumbled down the divisions in a purgatory that now extends to 12 years. What of Portsmouth fans? Their club had an “ambitious owner”, the son of a fugitive international arms dealer, who pumped millions in until his father went to ground in Russia and the investment abruptly stopped. They won an FA Cup and soon afterwards were insolvent, spiralling to the fourth tier of English football, where they remain.

What of Parma fans? Even Liverpool fans? Do they look back on the Hicks-Gillett era at all fondly? The list of clubs that subsisted on debt that caught up with them is very long indeed. But fans of other clubs might also object. It is fine if your “ambitious owner” is a petrodollar-soaked sovereign-wealth fund, but those who must survive on self-generated resources do so only through the well of supporter sustenance. For them, a club that pays ever more to keep up would not be ideal for its fans because they as consumers would be hit in the pocket. It is perhaps instructive that the core plaintiff in the case is an agent, in whose interest inflationary practices of player wages and transfer fees most undoubtedly are, regardless of the interests of the bulk of fans.

It is also untrue that the investment of ambitious owners is banished by FFP. Patient capital can be injected at unlimited levels in areas of youth development and stadium or training-ground infrastructure, guaranteeing the systems and facilities that give the biggest clubs an edge are not the preserve of an elite. This Manchester City has done with impunity. Indeed, the elite is made neither permanent nor sacrosanct by FFP: the eight-times European champions Milan’s 10th-place finish in Serie A last season proves as much.

Moreover, there is no barrier to good management. Southampton, one of those whose unsustainable past caught up with them with the foreclosure of Barclays Bank, were bought by Markus Liebherr from insolvency proceedings in England’s third tier. Six seasons later (with Liebherr now regrettably having passed away and the FFP-compliant club in his daughter’s hands) they are about to embark on a Europa League campaign.

And finally, refinements to the rules were agreed this week at UEFA’s executive-committee meeting in Prague. This will permit, inter alia, more flexibility of investment for clubs facing “sudden economic shocks or severe [regional] market structural deficiencies,” UEFA said in a statement. The new version of the regulations will now: “… Address situations where clubs have undergone a recent business restructuring or takeover and occasions where clubs wish to invest sustainably within the spirit and essence of FFP. Under these circumstances club monitoring will increase and broaden in scope through the application of rigorous conditions.”

The rules continue to enjoy the support of the 214-member European Clubs Association that was heavily consulted on the FFP rules, the ECA said on Tuesday in a statement. Even if the intended tightening of the break-even restriction from a three-year permitted cumulative loss of €45 million to €30 million is scrapped per the instruction of the Belgian first-instance court’s ruling, UEFA is keen to show the world that FFP is here to stay, Striani notwithstanding.

The European Commission has already given a nod towards the objectives of Financial Fair Play, through a joint statement issued by UEFA and the then EC vice-president, Joaquín Almunia, in 2012. That read: “Both UEFA and the European Commission are concerned that clubs in the short term pay inflated wages for players, even when their true financial position should not allow them to do so.

“Such a policy seems particularly unjustified in the context of the current economic downturn where austerity measures are being introduced in all Member States. The central objective of FFP (namely to ‘live within your means’ or ‘break even’) ensures prudent economic management that will serve to protect both the interests of individual clubs and players as well as the football sector in Europe as a whole.”

Dupont rejects this, and points out that the European courts have disagreed with the Commission before. In an article in the Wall Street Journal in March 2013, Dupont accused football-industry participants of “collusion”. He claims: “FFP is a joint agreement between clubs to limit their freedom to hire players by restraining their ability to spend on wages and transfers.”

Yet that is simply not the practical effect of FFP. Clubs still have freedom to invest in players because there are no artificial obstacles like salary caps or player-recruitment limits, which would prima facie offend European law. Indeed, FIFA Transfer Matching System data showed that during the 2014-15 season, with FFP well under way, 990 cross-border transfers were conducted in the “Big Five” Leagues of England, France, Germany, Italy and Spain – 16.3% more than in 2013-14. The $2.762 billion spent was 25.5% more than the previous season.

Another key element of the case relates to Article 101(3) of the Treaty on the Functioning of the European Union. Here it would seem that UEFA as defendant has a fair amount of protection. Guidance notes for the Article outline four areas for consideration for all agreements between undertakings as follows: “efficiency gains; fair share for consumers; indispensability of the restrictions; no elimination of competition.”

So, taking each point in order, it is very clear that there have been efficiency gains. Clubs across the board are making lower losses in the FFP era. Heck, there are even profits in the perennially loss-making Premier League.

Is there a fair share for consumers? This is harder to demonstrate. But it is clear that being a lifelong fan makes football consumers vulnerable to abuses of a dominant market position. If they become unhappy with pricing they are unlikely to choose another supplier by switching their custom from Real Madrid to Barcelona, Milan to Internazionale or Liverpool to Manchester United, as logistics or construction firms could. FFP rules that slow cost excesses might simultaneously put the brakes on match-day revenue increases, which would be to the benefit of fans, meeting the fair share for consumers test. And as such, perhaps fan groups of clubs with different investment models than Manchester City and PSG’s might be well advised to offer to support the UEFA case in pushing back against the arguments of these clubs’ fans. In any case, it is absolutely certain City and PSG fans do not speak for all football consumers.

Point three asks: are the restrictions indispensable? Well, during the decades of ever-spiralling wages and transfer fees, the recent arrest of the corollary trend for losses and for clubs suffering default has been remarkable. In a briefing paper first published in 2011, Supporters Direct, a community-club-ownership group, found that 52 clubs had suffered insolvency events since 1992, all of them at the time in or entering the Football League. That competition now has its own set of Financial Fair Play rules (which are not at issue in Striani) and in the past two seasons, following their implementation, not a single club among the Football League 72 has filed for administration.

That there has been no elimination of competition, point for of the Article 101(3) test, must also seem clear to close football observers. Football has not stopped being played, cross-border transfers continue (increasingly) to take place, the product is unequivocally good (as almost universally rising values in broadcasting rights demonstrate) and clubs like Manchester United and Milan, historically two of Europe’s most successful, have stumbled in this age of FFP. Football has an exceptionally fluid internal market.

Finally, there is English case law from 2012 to support UEFA’s framework. In HM Revenue & Customs vs the Football League [FL], the UK taxman took football clubs to task over their Football Creditors Rule, which stipulates all clubs and players owed money by insolvent clubs must be paid in full before any other unsecured creditors can be weighed out.

Mr Justice Richards ruled: “The FL is composed of the member clubs. The articles are the collective expression of the member clubs. The articles were adopted by the member clubs and they can be amended by the member clubs. The obligations of member clubs to play all other member clubs in the league exist alongside the provisions in the articles applicable to insolvent clubs.

“The latter are the terms on which member clubs commit themselves to play the other member clubs. As HMRC put it in their particulars of claim, the articles, regulations and Insolvency Policy ‘are the terms upon which clubs contract with the Football League and with each other’.”

In essence, no one is forcing any club to play in the Champions League or any other UEFA competition. But those clubs wishing to do so currently abide by articles collectively adopted by those clubs, including FFP. After all, no club – not even PSG or Manchester City – has ever formally challenged the rules.

And that, really, is the nub of it. Individual clubs might have grievances about some areas of regulation but they must respect each other and the rules for a properly functioning football economy at large. If peripheral interests like agents and the supporters of two clubs among the hundreds affected by FFP prevail, then is that for the game’s wider weal?

Eliot would hope that the esteemed judges of the European courts take time to get to know our subject well before pronouncing on the legitimacy of FFP. For if not, it will be a difficult post-mortem for football.

Journalist and broadcaster Matt Scott wrote the Digger column for The Guardian newspaper for five years and is now a columnist for Insideworldfootball. Contact him at oc.ll1553117231abtoo1553117231fdlro1553117231wedis1553117231ni@tt1553117231ocs.t1553117231tam1553117231m.