City were appealing against a ruling that found them guilty of breaching Financial Fair Play (FFP) regulations by “disguising” cash injections from the ownership as sponsorship payments, specifically from Etisalat and Etihad.
The case brought by European football’s governing body was ultimately thwarted by the time-barring of two key payments, and the lack of evidence to show the collaboration of sponsors in plans to disguise funding.
Cas released the bare verdict on Monday 14 July, revealing that City’s two-year ban from Uefa competitions had been overturned in its entirety. A fine of approximately £9m for lack of cooperation, however, was upheld, having been reduced from €30m.
This instantly triggered a deluge of opinions and reactions, but in truth we learned very little from the initial press release. The only point of clarity was on the fine, where even the short-form verdict offered a certain amount of explanation. Cas clarified that this element of the initial sanction was partially maintained in recognition of the importance of members cooperating with Uefa, due to its limited investigatory powers.
The meat of the judgment was the rejection of the European ban Uefa had tried to impose. The initial release revealed the conclusions of the court, but no more: Manchester City could not be banned from the Champions League, as most of the alleged breaches of Financial Fair Play regulations were “either not established or time-barred”.
In simple terms, this meant that the majority of the charges against City could either not be satisfactorily proven or else occurred outside of Uefa’s own five-year window for bringing prosecutions. This was a huge financial victory for Sheikh Mansour’s club, who would have faced an array of colossal challenges had the two-year European exile been upheld, but the details and wider implications remained unclear.
The eventual release of the reasoning has shed much more light on the case. Significantly, the two payments on which Uefa focused most of its case were ruled to fall outside of the five-year limit on bringing charges. These occurred in June 2012 and January 2013 respectively – and while Manchester City and Uefa disagreed over exactly when a ‘prosecution’ began - these dates fell outside the five-year window on either calculation.
Cas rejected Uefa’s argument that these payments could nonetheless be prosecuted on the basis that they were reported again in later years that did fall within the five-year time period. The court held that this would artificially extend the limit to one of “five + two” years, negating the legal certainty for which a statute of limitations clause was created in the first place.
This defeated much of Uefa’s case before it reached a review of the substantive merits, leaving only two disputed Etihad payments from 2013/14 and 2015/16 respectively to be considered. Nonetheless, the review of these payments produced some very interesting insights.
Cas accepted that City undoubtedly had a case to answer, holding that the leaked emails provided prima facie (face value) evidence of disguised equity funding. They added that Uefa had no real choice but to open a new investigation to assess the revelations contained in the emails. They also accepted that the plans discussed in the emails, if executed, would have amounted to a breach of the FFP regulations.
Uefa’s issue was establishing that the plans were ever executed. The leaks were admissible, and indeed City implicitly conceded their veracity by providing the original versions in most cases, but none of them were capable of showing actual false accounting. The communications were nearly all internal, and as such failed to show the collaboration of the sponsors that would have been necessary to make disguised payments.
The fact that Manchester City received one particular sponsorship fee in two payments, one of £59.5m and one of just £8m, proved nothing on its own. Uefa alleged that the only plausible explanation was that the larger payment came from City’s ownership group. Cas held that there was no evidence to contradict the alternative account put forward, namely that the larger payment was made from Etihad central funds with the £8m coming from the marketing budget. Without this evidence, and given that Cas ruled that “particularly cogent” proof would be needed given the gravity of the accusations, Uefa’s sanctions had to be quashed.
A further point of interest is that these conclusions were attributed to a “majority” of the panel. As Cas uses three-man panels, it seems that there was a 2-1 split on this element of the verdict. Point 272 offers a useful summary: “…it boils down to the burden of proof. Given that Uefa carries the burden of proof and because the majority of the Panel finds that it did not succeed in satisfying such burden, Uefa’s allegations must be dismissed.”
It was ultimately this evidential shortfall that thwarted Uefa’s case. City’s submission that Uefa breached due process, an accusation repeated from their first appearance before Cas last year, was dismissed. So too was the argument that the previous Settlement Agreement between the two parties prevented fresh charges from being brought. It was simply the case that there was not enough evidence to show that the rules had actually been breached.
It is worth remembering that the rules themselves, ostensibly at least, were not under challenge here. The City against FFP narrative is a tempting one, but does not reflect the case brought before Cas. The arbitration body has upheld the rules before, dismissing Galatasaray’s appeal against a one-year ban in 2016. The Turkish club brought a much more direct challenge to the legality of FFP, which was rejected. Provided Uefa have “properly applied” their own rules, it can theoretically rely on support in the court.
For now, at least, it is duly too early to sound the death knell for FFP – the Cas reasoning was specific and focused, revolving around the time-bar and the lack of evidence showing collusion of the sponsors in plans to disguise funding. If Uefa is prepared to chance its arm again the next time it suspects a super-club of financial doping then it remains possible that we could see a different outcome.
Even so, with this latest verdict joining the pile alongside the planned review of PSG’s spending – thrown out last year after Uefa failed to act within its own ten-day time limit – questions are mounting over the governing body’s capabilities to effectively enforce their own rules.
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