Football Leaks and Financial Fair Play

Recently, Football Leaks revealed that Gianni Infantino, currently president of the Federation Internationale de Football Association (FIFA), during negotiations with Manchester City and Paris St. Germain, in his capacity as general secretary of European football's governing body UEFA in 2014 agreed on reduced punishments: Manchester City and PSG overvalued sponsorship deals to help meet UEFA's Financial Fair Play (FFP) rules. The latest documents provide insight into the activities of wealthy Gulf individuals and organisations, who have become increasingly influential in soccer and other businesses in Europe and beyond; the nature of the huge sums flowing through some leading clubs; and the uneven way soccer authorities have dealt with application of the sport’s rules.

Financial doping

In 2013, UEFA’s investigatory arm, part of its Club Financial Control Body, began to question elements of accounts submitted by Manchester City and Paris St. Germain.

Manchester City

For many years, Manchester City played in the shadow of its more successful local rival, Manchester United, and struggled to stay in Britain’s top soccer league. Then, in 2008, Sheikh Mansour of the United Arab Emirates took control of Man City and began to transform it. With expensive new star players, the club went on to top the Premier League three times over the past decade.

According to the final preliminary view report by the investigatory chamber of UEFA’s Club Financial Control Body, Sheikh Mansour had “significant influence” over two of Man City’s Abu Dhabi sponsors. The report found that the amount being paid for those sponsorships was three times their market value. Infantino was involved in brokering a settlement. He arranged to meet the club’s CEO, Ferran Soriano, on May 8, 2014, for what Soriano described in an email as “a ‘secret’ meeting in London to try to agree the final deal.” Soriano did not respond to requests for comment. It’s not clear exactly what ensued. But subsequently, UEFA’s Club Financial Control Body rejected a proposed deal for being too generous to Manchester City.

“Unfortunately I’ve been informed that the investigatory chamber has come to the conclusion that the positions are still too distant for them to agree on a settlement agreement. I regret this a lot,” Infantino wrote to Man City chairman Khaldoon Al Mubarak on May 12, 2014. Nevertheless, four days later a deal was agreed. According to the final settlement agreement, UEFA’s Club Financial Control Body accepted that for 2014 and the following two years Manchester City could have sponsorship contracts with two Emirati sponsors at values totalling 26 million euros per year more than the “fair value” determined by the experts advising UEFA.

Paris St. Germain (PSG)

With Paris St. Germain, the key issue was its relationship with the Qatar Tourism Authority, a state agency. According to the sponsorship contract between the authority and the club, the authority agreed to pay Paris St. Germain between 700 million euros and 1.125 billion euros over five years, depending on tournament performance.

Under Financial Fair Play rules, what mattered was whether the QTA was a “related party” to the club owner. If it was, then UEFA’s rules meant that the club could recognise only a market value for the contract in its assessment under the Financial Fair Play rules. UEFA's Club Financial Control Body draft report said the sponsorship rights received were worth “a tiny fraction” of the 200 million euros the QTA spent on Paris St. Germain in the year to mid-2013. External experts who valued the sponsorship deal at that time as worth 3 million euros or less per year.

By early 2014, Infantino had become involved, acting as an intermediary between the club and UEFA’s Club Financial Control Body. Asked in September whether he might have taken a tougher line on clubs such as Paris St. Germain over Financial Fair Play, Infantino said he helped to introduce the rules but did not implement them. UEFA’s generous position towards Paris St. Germain has continued in recent years. In 2015, UEFA re-affirmed to the club that it could record 100 million euros a year in revenue from the Qatar Tourism Authority, according to the documents.

Super League

The year 2016 marked something of a turning point in the realm of top-level, international football. FIFA seemed leaderless and aimless after a wave of raids and arrests. The European umbrella association UEFA also saw its president Michel Platini ousted from office because of a multimillion-euro payment by former FIFA boss Joseph Blatter. Football in 2016 faced the challenge of having to completely reposition itself. National -- and, more recently, international -- competitions have become so predictable; leagues from the Champions League, to the Bundesliga on down to Italy's Serie A are monotonously won by the same teams over and over again. Some clubs have apparently even been willing to betray the traditional cooperation between the clubs and the national leagues, one which has provided the framework for European football for decades.

The idea was the creation of a Super League, an elite league of top-level competition reserved exclusively for the top names in European club football: Arsenal, Manchester United, Juventus, AC Milan, Real Madrid, FC Barcelona and Bayern München. In the autumn of 2018, the Football Leaks revealed the idea had developed into a "binding term sheet". If everything proceeds in accordance with the "binding term sheet," the Champions League will cease to exist as of 2021. Instead, the continent's 11 most important clubs will break away from UEFA and found a new elite class called the "European Super League."  The 11 clubs listed as "founders" of the European Super League -- the ones that would apparently not face relegation -- are Real Madrid, FC Barcelona, Manchester United, Juventus Turin, FC Chelsea, FC Arsenal, Paris Saint-Germain, Manchester City, FC Liverpool, AC Milan -- and Bayern Munich. All seven clubs in the secret society are represented. The five "initial guests," according to the document, would be Atlético Madrid, Borussia Dortmund, Olympique Marseille, Inter Milan and AS Roma.

In FIFA's duty to "protect football", players involved in any European Super League would be banned from playing international football, including the World Cup, says FIFA president Gianni Infantino.

UEFA Financial Fair Play

To achieve financial fair play in UEFA club competitions, three paragraphs are highly relevant in article 2 sub 2 UEFA Club Licensing and Financial Fair Play regulations

b) to improve the economic and financial capability of the clubs, increasing their transparency and credibility

e) to encourage responsible spending for the long-term benefit of football;

f) to protect the long-term viability and sustainability of European club football.

UEFA said that it was “very satisfied” with how the rules have been applied and the results they have achieved (so far). It noted that since the Financial Fair Play rules had been introduced there had been an improvement in the finances of European soccer clubs – which have gone from recording record losses of 1.7 billion euros in fiscal year 2011 to profits of 600 million euros in 2017. “No system is perfect but on the whole FFP has increasingly protected European football from financial difficulty since its introduction in 2010,” UEFA said.

In the cases of Manchester City and Paris St. Germain, UEFA’s Club Financial Control Body (CFCB), which oversees Financial Fair Play rules, accepted that the clubs could receive income from Emirati and Qatari sponsors that was far in excess of the market value estimated by independent experts hired by UEFA to assess the deals, according to investigatory reports, settlement agreements and other documents. Meanwhile, Paris St. Germain and Manchester City went on to acquire top talent at high prices, spending more than 1 billion euros in total on signing players since their settlements with UEFA’s control body. In 2017, Paris St. Germain payed FC Barcelona a transfer-sum of a record-breaking 222 million euros ($256 million) to sign Brazilian striker Neymar.

In my opinion, although the finances of some European soccer clubs have shown a significant improvement, the 'beautiful game of football' in Europe has been under threat, especially as far as the competitiveness is concerned. Where some soccer clubs are able to buy top talent football players because of mild sanctions regarding excesses in fund raising and other clubs are banned out of the Champions League for same or even minor infractions (Dinamo Moskou, Galatasaray) and other clubs, including AS Roma and Inter Milan, have said in statements and media interviews that to comply with Financial Fair Play rules they took various measures, including selling players, the end result will be an irreparable distortion of European football competitions. I am not confident the set-up of a European Super League or a case like CAS 2016/A/4492 UEFA v Galatasaray about yes or no compliance to article 101/102 Lisbon treaty (state aid, competition law) will be of any help here.

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Source: Football Leaks = a trove of contracts, presentations, emails and other material relating to leading soccer clubs that was obtained by the German news magazine Der Spiegel. The magazine shared access to the documents with Reuters and more than a dozen other media outlets in cooperation with European Investigative Collaborations (EIC). The material came from a source Der Spiegel identifies only as John, a Portuguese soccer fan. John was the source for the first so-called “Football Leaks” EIC reporting project, which began publishing in December 2016.