European soccer’s governing body is preparing to punish teams for breaking new finance rules, and offenders may include some of the region’s biggest clubs including Paris Saint-Germain, Juventus (JUVE) and Manchester City.
UEFA says it expects to announce the first sanctions for breaching “financial fair play” rules as early as this week. The regulations prohibit clubs in the Champions League and Europa League racking up an accumulated loss of more than 45 million euros ($62.3 million) over the previous two seasons.
UEFA aims to reverse a decades-old trend of clubs spending above their means on player transfers and salaries to chase trophies and prize money. It may start out with an adaptable approach to offenders that falls short of expelling them from next season’s tournaments, according to Ken Daly, a partner at law firm Sidley Austin LLP in Brussels.
“It makes sense to allow for a period of flexible enforcement,” said Daly, who focuses on competition in Europe and worked on budget caps in Formula One. “Regulators, like referees, need to be able to use their judgment.”
Nyon, Switzerland-based UEFA is taking up a cost-control challenge other European sports authorities have backed down from. The Paris-based Federation Internationale de l’Automobile has twice dropped plans for a cap on Formula One spending since 2009 amid team opposition.
UEFA’s rules prohibit clubs from making a loss of more than 5 million euros a season unless shareholders cover the amount. The maximum covered loss over the last two seasons was 45 million euros.
In February, UEFA asked 76 of the 237 teams it regulates that might have breached rules to provide more information. It didn’t identify them.
In the English Premier League, Sheikh Mansour bin Zayed Al Nahyan’s Manchester City had an accumulated loss of 174.7 million pounds ($294 million) the last two seasons, according to a filing at Companies House in London. The Agnelli family’s Juventus in Italy had a deficit of 64.6 million euros for the same period, its accounts show.
Under UEFA’s rules, clubs are allowed to deduct player wages signed before June 2010 as well as items such as training and stadium investment costs. Juventus is paying off the costs of financing a new arena that opened in 2011.
In France’s Ligue 1, Qatar-owned Paris Saint-Germain may have offset its losses with a sponsorship deal from the state tourism authority, which according to Le Parisien is worth about 200 million euros a year.
“Put simply, the economic model of PSG is particularly unusual,” UEFA President Michel Platini told the newspaper last week. “Does PSG respect financial fair play rules? It’s not clear, it’s not clear at all.”
‘Blood and Tears’
Still, Platini played down the likelihood of extreme penalties.
“People who expected blood and tears will be disappointed,” Platini said. “There will be some tough sanctions but I don’t believe there will be exclusions from European competitions.”
The comments were confirmed by a UEFA official. PSG spokesman Yann Guerin and Manchester City spokeswoman Vicky Kloss didn’t return e-mails seeking comment. Juventus spokeswoman Gabriella Ravizzotti said the club had no comment.
In February, UEFA announced it would allow a procedure for teams to settle cases outside the disciplinary process.
“The obligation is to bring clubs on the right way rather than to punish them,” UEFA General Secretary Gianni Infantino told reporters at the time.
The rules are having a positive effect because teams are paying salaries and taxes on a more regular basis, according to Infantino. Combined club debt fell by 35 percent to 1.1 billion euros in 2012, from 1.7 billion euros a year earlier, according to UEFA data released last year.
It’s difficult to predict the severity of the sanctions handed down to teams, according to Daniel Geey, a lawyer at Field Fisher Waterhouse LLP in London who advises Premier League clubs on the regulations.
“I will be extremely surprised if there’s a club which is 100 million euros outside the range which isn’t severely sanctioned,” Geey said. “Will Manchester City and Paris Saint-Germain be banned from the Champions League? Only the clubs and UEFA will know at this point.”
Possible lighter sanctions include teams having to drop players from their Champions League squad to fit a wage bill ceiling or a point deduction, Geey said.
An investigatory chamber led by former Belgian Prime Minister Jean-Luc Dehaene will hand down any sanctions and clubs can appeal to another independent panel in June. A further appeal is possible to the Court of Arbitration for Sport in Lausanne, Switzerland in July and August.
That could mean a frenetic offseason for the governing body’s staff, Alasdair Bell, UEFA’s legal affairs director, told reporters. It has about a dozen staff working on the project and hired auditors Deloitte and PricewaterhouseCoopers as consultants.
“We may be dealing with a number of clubs,” Bell said. “And, speaking as somebody who likes to have a summer holiday, July and August may be a busy time.”
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