Winning the Premier League, Champions League and FA Cup in one season is an impressive feat. From the inception of the Premier League in 1992 to 2002, Manchester City had been in and out of the top division of the Premier League. In 2008, it was bought by the Abu Dhabi United Group (ADUG). Their ownership by ADUG is one of the reasons for their success. Availing the club with vast amounts of money in investment has been an important reason for Manchester City’s success. But City’s winning streak has not been without controversy. The most recent charges brought by the Premier League against Manchester City, if successful, could jeopardise all the accolades it has racked up over the past decade and a half. Not only could City face serious consequences, but also this is a test of the strength of the Financial Fair Play rules (FFP) of the Premier League, and the Gulf Nations’ influence on world sport.
The purpose of the Financial Fair Play rules is to ensure clubs do not spend more than they make in revenues. Both UEFA and the Premier League have their own rules, the major difference between them being a time bar on when claims can be brought in UEFA’s FFP whereas the Premier League does not have any. In doing so, regulators like the Premier League and UEFA aim to prevent clubs from incurring losses that would compromise their existence. Most sectors have regulators and regulations meant to prevent overspending that could affect the competitiveness of the market. An example being the CMA that recently blocked Microsoft’s acquisition of Activision Blizzard (I wrote an article on the implications of this recently here ). The strict enforcement of these rules by the Premier League demonstrates what makes football as a business unique. In an episode of The Sports Law Podcast, Dan Jones, Football Finance & Governance specialist remarked that football is unique in that it is the only industry where the companies and consumers get frustrated by attempts made by a regulator to help them lose less money.
There has also been criticism of the rules as in fact preserving the dominance of the clubs at the top, infringing certain EU law-guaranteed freedoms of clubs such as free movement of capital and workers as well as reducing competition and hindering competitiveness by limiting the salaries of players. However, reduced competition is a risk that comes with an unregulated market. The absence of FFP rules as well would enable clubs at the top to secure investment and preserve their positions with their financial muscle. Indeed this can be seen by the dominance of Manchester City of English and European football for the past five years despite FFP rules being in place. This leads to some arguing that the FFP rules simply do not work. In an article for Linklaters’ Sporting Link, Kalin Ivanov contended that the FFP rules enable richer clubs to profit from their established brand and rely on their current revenues whereas the less well off clubs are restricted due to their revenues. In addition, he adds that these smaller clubs cannot rely on investment to hire better players from the transfer market because this could affect the calculation of the club’s break-even point, which is at the heart of the FFP rules – a club cannot spend more than it makes.
The enforcement of the Financial Fair Play rules in the past has resulted in Manchester City’s name frequently featuring in charges and allegations made by regulators. In 2014, following allegations that it inaccurately represented its financial position in breach of UEFA’s FFP, it reached a £49 million settlement with European football’s governing body. Most recently, CAS overturned a 2 year ban from the Champions League issued by UEFA, after UEFA found that City was in breach of UEFA’s FFP rules. The decision of the independent commission regarding the charges brought by the Premier League will no doubt be another test of the efficacy of the Financial Fair Play rules and City’s reputation.
The charges brought by the Premier League against Manchester City in February 2023 are not too dissimilar to those brought by UEFA in February 2020. UEFA alleged that City improperly represented its sponsorship revenue, concealing money received from ADUG as that received from sponsors Etisalat and Etihad. This was in breach of UEFA’s own Financial Fair Play rules. UEFA then dealt City a two-year ban from the Champions League. A ban that it overturned, on a procedural point albeit, at the Court of Arbitration for Sport. The difference between UEFAs FFP and the Premier League’s FFP is that the Premier League does not have a time limit within which the breach must have happened for a penalty to be imposed. The decision of the independent commission investigating the charges brought by the Premier League could amount to, de facto, a review of a Court of Arbitration for Sport (CAS) decision.
It is no secret that the Gulf states have incredible financial power. And with financial power comes soft power for the state. The Saudi Public Investment Fund (PIF) owns the once notorious, now somewhat prodigal son appearing, LIV Golf tournament. It also recently sold £400m worth of preference shares in F1 team McLaren to the Bahrain Sovereign Fund. Sheikh Mansour, a member of the ruling family of the United Arab Emirates and deputy prime minister of the nation, owns Manchester City. Saudi Arabia’s PIF as well owns the majority of shares in Newcastle. Certainly, the Gulf states are not all the same, their ownership of significant elements of elite sport is the latest part of their drive to diversify their economies away from dependence on oil. The ruling of the committee will not necessarily affect Sheikh Mansour’s stake in City, however, it will certainly be a test of the limits on the way investors from these nations, all super rich investors for that matter, can operate in the sports industry.
The verdict of the independent commission will have ramifications for far more players than City. It may lend a bit more credibility to the much- criticised Financial Fair Play rules. Or add to calls for them to be scrapped or modified. It will certainly have an impact on the dynamics between clubs and regulators – affecting how each perceives the legitimacy or fairness of the other’s actions. By testing these rules, it will certainly have an impact on how investment into football is to be done. However, this certainly will not be the final whistle for investment into sports by the Gulf Nations and in turn their increasing influence in the sector.