Spanish giants Barcelona and Real Madrid face state aid charge

The Spanish giants' advantages amount to several billion euros, according to the European ombudsman

Real Madrid and Barcelona are among the seven Spanish clubs the European Commission will charge with alleged state aid today, after a damning indictment of the EC's handling of the case by its independent regulator.

The EC's decision finally to push ahead with the investigation, first revealed in April by The Independent, came less than a day after the European ombudsman, an independent adjudicator with some power over European institutions, gave notice that it would go public on its frustration at the snail's-pace inquiry.

The ombudsman day made the announcement nonetheless, attacking the EC for having "failed to act" for more than four years of "bad administration" over the complaint of alleged illegal state aid to Spanish clubs. The Independent revealed in April that Real Madrid was under investigation for alleged state aid over a land deal with Madrid city council.

In August, this newspaper also revealed that the EC was looking at the tax status of Real Madrid, Barcelona, Athletic Bilbao and Osasuna, who were exempted in 1990 from Spanish government legislation that required not-for-profit sports clubs to become public limited companies.

Emily O'Reilly, the ombudsman, launched a veiled attack on the European competitions commissioner, Joaquin Almunia, an avowed Bilbao fan. In a statement, the office of the ombudsman, based in Strasbourg, said that "to the European public it can look like a conflict of interest given the commissioner's strong links to one of the football clubs in question".

She added: "According to the complainant, these advantages [gained through illegal state aid] amount to several billion euros. He also noted that Spain is granting these tax advantages even as it requests hundreds of billions of euros from Eurozone taxpayers."

Almunia is expected to outline today the three cases against the seven clubs, who also include Valencia and Elche, in Spain's top division, and Hercules, in the second division, at a press conference in Brussels. There is also an investigation into the financing of Bilbao's San Mames Barria Stadium. The clubs will have three months to respond before the EC will be expected to uphold a decision.

The prospect of being found guilty would have far-reaching implications. Under the terms of the land deal with Madrid city council, Real Madrid could well be forced to pay back money on a land deal related to their efforts to redevelop the area around the Bernabeu Stadium into a shopping mall and hotel complex.

Should the four clubs favoured with not-for-profit, non-plc status be found to have contravened state aid rules, they, including Real Madrid and Barcelona, will be forced to give up their status as member-owned clubs. While that is celebrated around Europe as a utopian model, the fact it is conferred on just four clubs in Spain is a gross inequality.

During the three-month response period, the EC will accept observations on the issue from other interested parties, including English and German football clubs who have often found their best players poached by the two biggest clubs in Spain.

It did not go unnoticed by key figures around the issue that the day the EC was finally pricked into action to investigate alleged advantages conferred on Real Madrid and Barcelona by the national and regional government in Spain coincided with Tottenham's sacking of Andre Villas-Boas. The former manager lost his best player, Gareth Bale, to Madrid for a world-record fee of £85m this summer.

From the Spanish government there was no prospect of backing down in the dispute. The foreign minister, Jose Manuel Garcia-Margallo, said his government was "going to battle until the end to defend Spanish clubs". It has been noted that the EC competitions' office is heavily populated by Spanish nationals, including Almunia.

The commissioner's term in charge runs out at the end of October next year and it is unlikely he will be returned again. It is expected that the case will go all the way to the European Court of Justice. A spokesman for Barcelona said that the club had "never received any type of public aid".

In the dock: Alleged state aid cases

Real Madrid land deal

Dates back to a 1996 land transfer with Madrid city council in which the council overestimated its debt to the club in order that it could give them, in compensation, prime land near the Bernabeu. Real plan to develop the area into a lucrative shopping mall and hotel complex.

Privileged tax status

Real Madrid, Barcelona, Athletic Bilbao and Osasuna were granted exemption from 1990 legislation that all Spanish football clubs must become public limited companies. This granted them advantages under corporation and property tax as well as preserving their not-for-profit status. EC intervention could mean Real and Barça lose their famous membership-owned status.

Regional government aid

Valencia are effectively owned by the Spanish bank Bankia, which owns the debt of the Valencia foundation which nominally controls the troubled club. But that debt is guaranteed by the regional government. Hercules and Elche both took out sizeable bank loans guaranteed by regional government. As a consequence, regional government now effectively has shareholdings in both clubs.

Have you tried new the Independent Digital Edition apps?
Caption competition
Caption competition
Latest stories from i100

Bleacher Report

Daily Quiz
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent