Exclusive: Real Madrid under investigation amid allegations of illegal state aid
FFP implications as Real Madrid alleged to have colluded with city council over price of land around Bernabeu
Real Madrid are the subject of a European Commission investigation following allegations they have received illegal state aid, the decision on which is overdue and will be of great interest to the likes of Manchester City and Chelsea, under pressure to conform to Uefa Financial Fair Play regulations.
The Independent has learn that the EC competition office, run by the Spaniard Joaquin Almunia, has delayed its decision on the case. It is alleged that Real and Madrid City Council agreed a favourable deal for land around the Bernabeu stadium which is to be redeveloped into a lucrative new shopping mall and hotel complex.
The club's pre-eminence in the transfer market and their ability to borrow money is partly dependent on the success of the development, as well as the construction of a roof over the stadium, which will then be subject to a naming rights auction. Florentino Perez is expected to be re-elected president in May, with the club targeting more high-profile players this summer, possibly including Gareth Bale.
The allegation against Real is that their transactions with Madrid city council, dating back to a 1996 agreement between the two parties, constitute illegal state aid under article 87 of the Treaty of the European Community. It is alleged that the council hugely overestimated its debt to the football club in order that the former could give Real the prime city-centre land they require for their new development.
As with all leading European clubs, Real are subject to Uefa FFP regulations which forbid any form of state aid. In a joint statement released by Uefa's president, Michel Platini, and Almunia last year, they declared that the "objectives [of FFP] are also consistent with the aims and objectives of European Union policy in the field of state aid".
The investigation into Real's deal with Madrid city council centres upon an area of land in the north of the city, Las Tablas. Having originally been valued at €421,000 when it was part of a payment by the council to the club in 1998; the same land was then valued at €22.7m in 2011, a 5,400 per cent rise, when the council decided they had to take it back. In lieu of a €22.7m payment, the club was given the land they needed to develop their stadium.
Under the competition commission's guideline 7.2 on state aid they have a year to investigate and rule on the complaint, made about the valuation of Las Tablas property, unless they are still awaiting information from respondents. The allegation was raised in December 2011. The investigation into Real has been mentioned publicly just once by Almunia, who has also focused on other clubs alleged to have received state aid.
The Spanish club Valencia were judged to have received illegal state aid by a Spanish regional court because a loan from the state-owned Spanish bank Bankia was underwritten by the regional government. Last month, Almunia issued a statement on an investigation into five Dutch clubs, including PSV Eindhoven, over allegations that they had received state aid from local councils in the Netherlands.
FFP has become an issue key to the future of Europe's elite clubs and those clubs who seek to challenge them. Manchester City, in particular, have come under scrutiny for their 10-year Etihad Airways sponsorship deal they signed in 2011, estimated to be worth between £350m-£400m. West Ham's original deal to take over the Olympic Stadium was scrapped after a complaint to the European Union that funding from Newham Council represented state aid.
In response to The Independent's questions about the process, Real said that they had not received "any special privileges in its real estate activities since it has always been subject to the then current legislation and has received the same treatment as any other entity."
The club claimed that the valuation of Las Tablas in 2011, which found its value to have increased 54-fold, was carried about by Madrid City Council, and was therefore "independent". "Acting like this, MCC, through the agreement with Real Madrid, has protected the municipal interests," Real said, "avoiding judicial proceedings that when executed would have foreseeably resulted in an obligation to provide Real Madrid with a higher amount of compensation."
Real said: "The valuation of all the properties have increased due to the time lapse between the different valuation that in some cases exceeds 10 years, the degree of evolution of the urban development process and the evolution of property prices."
The Independent has seen documentation confirming the existence of an investigation by the competition commission into Real receiving state aid. A spokesman for the EC competition office said that the investigation was at a "preliminary" stage.
Lincoln MP Karl McCartney 'denied all knowledge' of the Twitter activity
Detective novelist who wrote Death comes to Pemberley passed away peacefully at her home, aged 94
Sites using the popular Gigya comment platform were attacked by the Syrian Electronic Army (SEA)
Latest in Sport
Phil Hughes injury: Cricket world reels as Australian opener 'fights for his life'
Arsenal vs Borussia Dortmund player ratings: Who was the star man at the Emirates? Alexis Sanchez? Santi Cazorla? Or Yaya Sanogo?
Phil Hughes: A swashbuckling, raw and talented batsman who had the world at his feet
Phil Hughes dead: List of players who have tragically died on the cricket pitch
Arsenal vs Borussia Dortmund report: Yaya Sanogo and Alexis Sanchez are on target as Gunners secure impressive victory
- 1 Sean Abbott: Messages of support flood in for bowler following death of batsman Phil Hughes
- 2 Exodus Gods and Kings: Ridley Scott never considered casting 'Mohammad so-and-so from such-and-such' in lead role
- 3 This letter from a reader explains why women can’t play football
- 4 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
- 5 Scientists predict green energy revolution after incredible new graphene discoveries
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
'Beast of Bolsover' Dennis Skinner takes Ukip MP Mark Reckless to task moments after he is sworn in
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Rochester aftermath: Sacking of Emily Thornberry will make work of Labour MPs '10 times harder'