Changing formation - UEFA re-writes the Rulebook for the Club Financial Control Body

Introduction

With many European football clubs’ transfer business in full swing, fans will be dreaming of the big money purchase that can drive their team on to success in the upcoming season. Away from the media spotlight, however, observant club lawyers will have noticed UEFA changing its procedural rules which support the UEFA Club Licensing and Financial Fair Play Regulations (FFP Regulations). The FFP Regulations govern the finances of clubs participating in UEFA club competitions.

As we previously noted on the SportingLinks podcast and blog, recent decisions and the COVID-19 pandemic have raised questions about the effectiveness of the existing FFP Regulations. We highlighted the potential weaknesses in the FFP Regulations and in the structure and procedures of the Club Financial Control Body (CFCB), an independent UEFA body that enforces the FFP Regulations.

In the 2021 version of the Procedural Rules governing the CFCB (2021 Rules), UEFA has sought to address these issues. In particular:

• the CFCB has been reorganised to provide an internal appellate mechanism; and
• the Procedural Rules have been amended to enhance and clarify the CFCB’s enforcement capabilities.

This article considers these changes and their likely impact on the financial regulation of club football and its enforcement in Europe.

A game of two chambers – the reorganisation of the CFCB

The CFCB is tasked with determining if any club is operating in breach of the FFP Regulations. In July 2021, UEFA announced that the CFCB’s composition had changed – new members were appointed and, crucially, new procedural rules were introduced.

Under the now discontinued 2019 version of the Procedural Rules (2019 Rules), the CFCB was divided between an Investigatory Chamber and an Adjudicatory Chamber. The Investigatory Chamber determined if there was a case to be heard by monitoring data and collecting evidence. Following its investigation, among other options, it could refer the case to the Adjudicatory Chamber. The Adjudicatory Chamber ruled on referrals and reviewed decisions of the Investigatory Chamber for manifest error. It could impose disciplinary measures and uphold, reject or modify decisions of the Investigatory Chamber.

The 2021 Rules refresh the CFCB structure. While two chambers remain, they are now rebranded the “First Chamber” (FC) and the “Appeals Chamber” (AC), each with new powers and functions.

The First Chamber

The FC, as the first instance decision-maker, is responsible for the opening of proceedings and collection of evidence. It has a reporting member in each case who establishes the facts and presents conclusions and recommended decision(s) to the entire FC. Where appropriate, the defendant is invited to rebut the case of the reporting member through written and oral submissions, and evidence. The FC (excluding the reporting member) then reaches a first instance decision. This improved ability for a defendant to present its case at first instance is a welcome change as it ensures a consultative process.

Another significant change is the power of the FC to impose broader sanctions. In addition to dismissing the case and concluding a settlement agreement with the club, the FC is now empowered (amongst other capabilities) to:

• conclude voluntary agreements (i.e. with the aim of complying with the breakeven requirement); and
• impose a full suite of disciplinary measures, including a points deduction, disqualification from UEFA competitions and even a withdrawal of a title or award.

The FC is also vested with a new power to take final decisions in particularly urgent cases, such as where the case concerns entry into a UEFA competition, giving the CFCB the ability to potentially accelerate enforcement.

The Appeals Chamber

The AC is strictly an appellate body. It hears appeals from FC decisions except for minor sanctions, small fines, exemptions and urgent cases. Interestingly, the AC may exclude substantial new facts or evidence submitted by a club if they could have been, but were not, adduced before the FC. This provision is likely to ensure that the FC can make an informed decision at first instance and that a club cannot overturn decisions with evidence that should have been raised earlier. The AC can dismiss the case, uphold, amend or overturn the FC decision, accept or reject the club’s admission to the UEFA competition and/or impose disciplinary measures.

As before, all CFCB decisions are final, except for the possibility of an appeal to the Court of Arbitration for Sport (CAS) in Lausanne, Switzerland. In exceptional cases, a further appeal might lie before the Swiss Courts.

In effect, the new CFCB structure combines the former Investigatory and Adjudicatory Chambers into a single FC and introduces an additional appellate mechanism in the form of the AC. This new construction creates an additional layer of adjudication before the CFCB decision becomes final, which may enhance the quality of decision-making and will arguably reduce the possibility of appeals before the CAS. In introducing this additional appellate mechanism, UEFA’s disciplinary procedure becomes more akin to that of other international bodies, such as FIFA’s Disciplinary Code, which provides for a similar two-tier adjudicatory mechanism.

Summer reinforcements – enhancement of CFCB enforcement capabilities

An efficient and clear procedural and enforcement framework is key to the success of any regulatory mechanism. The FFP Regulations and the Procedural Rules have previously attracted calls for change due to several legal challenges which have arguably exposed weaknesses in the regulations. The 2021 Rules bring in several important changes to address these weaknesses. These updates have the potential to enhance the enforcement powers of the CFCB:

• First, the rules on limitation periods have been changed. The 2019 Rules provided that prosecution is barred after five years following the breach of the FFP Regulations. CAS jurisprudence interpreted this to mean that the operation of the five-year limitation period occurred from when the breach first took place and “prosecution” meant the referral of the case to the Adjudicatory Chamber. This created enforcement issues, particularly if the CFCB was not aware of a breach or the investigation process took some time. The 2021 Rules change the limitation period to allow five years for the opening of proceedings from the breach. This could provide greater room for the FC to investigate, collect evidence and take decisions without the pressure of the clock running out.
• Second, Article 56 of the FFP Regulations places a duty on clubs to cooperate with the CFCB in respect of its requests and enquiries. However, the 2019 Rules did not expand on this duty which meant that UEFA could do little if the clubs did not proactively disclose material in their possession. Article 22 of the 2021 Rules seeks to fill this gap by introducing an obligation of full cooperation, much like the obligation on financial services firms in the UK per the Financial Conduct Authority’s Principle 11. It provides that a failure to cooperate (notably, such as a failure to provide documents) would allow the CFCB to draw adverse inferences. This change could go a long way in ensuring that the CFCB has all the material it needs to reach an informed decision and creates an additional enforcement route against non-compliant clubs.
• Third, in previous enforcement cases clubs were able to introduce additional evidence in proceedings before the CAS and the 2019 Rules were silent on the introduction of new material. However, the 2021 Rules include an explicit bar prohibiting CAS from taking into consideration “any substantial new facts or evidence that were available to or could reasonably have been discovered by the appellant and were not adduced by the latter before the CFCB”. Coupled with the AC’s power to disregard substantially new evidence not put before the FC (as discussed above), this rule may enhance the possibility of final resolution of proceedings at the CFCB without the need to go to CAS. It is also likely to ensure that UEFA is not blindsided during the CAS appeal process.
• Fourth, Article 26 of the 2021 Rules introduces the principle of recidivism; meaning it will be considered an “aggravating circumstance” if a club has committed another offence of a similar nature within a period of three years of a previous offence. This may act as a deterrent for repeat offenders as they will be subject to stricter sanctions. By targeting strategic violations of the 2021 Rules, it might ensure a more level playing field in the future.

Comment

These changes to the structure of the CFCB and the Procedural Rules suggest that UEFA is responding to the difficulties faced in enforcement in the past as it looks ahead to the future. The success of this strengthening of UEFA’s enforcement powers and capabilities will be determined in the coming years, especially as clubs seek to ‘return to normal’ following the belt-tightening made necessary by the financial impact of COVID-19.

However, the procedure is only one piece of the puzzle for UEFA. The remainder of the jigsaw lies in the FFP Regulations themselves. Public statements by UEFA suggest that the FFP Regulations are also due a significant revamp. UEFA’s 2021 European Club Footballing Landscape Report indicates that the intended overhaul would look to do away with the backward-looking breakeven requirements and push towards a more forward-looking focus on club wage levels and the scale of fees in the transfer market. While the reduction in expenses to sustainable levels might be acceptable to the clubs in principle, the actual form it will take will be the key for UEFA. A suggestion that some form of cap may be introduced is unlikely to be popular with the clubs and a “hard” cap (i.e. a cap with a fixed amount that applies to all clubs) seems prima facie unworkable given the divergence in the resources of clubs in UEFA competitions.

And the procedural changes may not yet blow the final whistle on legal issues surrounding FFP. While UEFA has successfully resisted competition law challenges to the breakeven requirements in the past, it may find itself playing a different ball game altogether if it imposes limits on transfer fees and salaries.