Financial fair play and third party ownership: updated UEFA licensing regulations
Published 03 August 2012 By: Daniel Geey
By way of update, UEFA has modified a number of its licensing criteria in relation to third party ownership (TPO) issues. The new regulations were published recently and are available to read here. By way of a quick recap, the Financial Fair Play Rules (FFPRs) form part of the wider UEFA licensing regime.
It should be borne in mind that the new FFPRs relate only to participation in the Champions League and Europa League, and not to domestic leagues. Each club that believes it can qualify for that season's European competitions must, prior to the beginning of that season, apply for a UEFA club licence. From the 2013-14 season, the licence stipulations will include adherence to the FFPRs. Until the 2013-14 season there are no sanctions for breaching the FFPRs. The FFPRs will therefore start to bite from the 2013-14 season. The rules need to be borne in mind, however, from the 2011-12 season onwards because the 2011-12 and 2012-13 accounts will be used to determine a club's license application in the 2013-14 season.
The UEFA Licensing Criteria Changes
There are two specific changes to the 2012 UEFA licensing requirements.
- Annex VI(E)(m)(ii)now includes a disclosure requirement in respect of TPO; and
- Annex VII (C)(5)(b) now includes a minimum accounting requirement in respect of a disposal of rights to a TPO.
"Players' economic rights (or similar)
For any player for whom the economic rights or similar are not fully owned by the licence applicant, the name of the player and the percentage of economic rights or similar held by the licence applicant at the beginning of the period (or on acquisition of the registration) and at the end of the period must be disclosed."
Annex VII (C)(5)(b)
"Any profit in respect of a player for whom the licence applicant retains the registration must not be recognised in the profit and loss account. For the avoidance of doubt, any profit arising from the disposal of economic rights or similar of a player to any other party must be deferred, and a profit can only be recognised in the profit and loss account following the permanent transfer of a player's registration to another club."
Previously, myself and Argentinian lawyer Ariel Reck had assessed that PL (and Ligue 1) clubs wanting to participate in UEFA competitions were at a real disadvantage, because clubs who do not play in the PL and Ligue 1 were able to take advantage of alternative third party finance arrangements to purchase players. This may have the effect of reducing transfer costs for non-PL/Ligue 1 clubs, thus making it easier for them to break-even under FFPR.
Interestingly Annex VII, (C)(5)(b) appears to rule out a club selling part of a current players' economic rights for a fee and using that as additional revenue to break-even. Such revenues can only be accounted for once the full and perminent transfer of the player has occured. It appears that the only TPO avenue available is when buying a player. That is because there is nothing in the latest set of licensing provisions which states a third party owner cannot purchase, for example, 99% of the economic rights of a player with the club contributing 1%. This would lead to that club only having to account for the 1% worth of expenditure in their FFPR submission.
Whether certain clubs have previously relied upon the regulations, as drafted in 2010, as the basis for breaking even remains an interesting scenario. As the first accounting period (2011-12) that will be taken into account for FFPR compliance for the 2014-14 season has just finished, a club who has heavily relied upon TPO to help fund player transfers may argue that for the 2011-12 season, any revenue posted that falls within the Annex VII, (C)(5)(b) prohibition should not be discounted.
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- Tags: Commercial Law | Europe | Financial Fair Play | Football | Governance | Licensing | Regulation | Third Party Ownership | UEFA | United Kingdom (UK)
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Daniel is a Partner in the Sport Group.
Daniel’s practice focuses on helping clients in the sports sector, including rights holders, leagues, governing bodies, clubs, agencies, athletes, sports technology companies, broadcasters and financial institutions.