Does the loan of Frank Lampard to Man City raise Financial Fair Play concerns?
Frank Lampard’s recent loan move from New York City FC to Manchester City has made many commentators raise questions about the English club's compliance with the UEFA's Financial Fair Play Regulations. James Ferrow analyses whether these type of loans may proffer intangible benefits to clubs and whether they will come under closer investigation from UEFA in the future.
The Lampard loan deal
There has been much discussion in recent weeks regarding the loan of ex-Chelsea talisman, Frank Lampard, from New York City FC (New York FC) to Manchester City FC (Man City).
The fact that New York FC’s majority shareholder is City Football Group, a holding company established to hold shares in the growing number of overseas clubs affiliated with Man City, has led a number of figures within the game - most prominently, current Arsenal manager, Arsene Wenger - to question whether the transaction complies with, or is designed to subvert, the UEFA Financial Fair Play Regulations (“FFP Regulations”).1
Earlier this month, Wenger queried whether the move was designed to “get round” the FFP Regulation.2 Since his comments, Man City have been quick to point out that they will be paying Lampard’s wages themselves during his loan spell and there is nothing underhand about the transaction.
Below we will briefly recount the current status of Man City’s compliance with the FFP Regulations before examining whether Wenger is right to draw attention to the Lampard transaction as potentially subverting the Regulations.
It is worth noting at the outset that, as a standalone transaction, the Lampard deal does not breach the FFP Regulations per se. However, potentially there is scope for UEFA to view the deal as a “related party transaction” (explained below). The rules related to related party transactions empower UEFA to adjust the value of the deal when assessing City’s future “break-even” calculations (explained here3).
Man City’s recent problems with the FFP Regulations
Settlement with UEFA
Earlier this year, Man City entered into a settlement agreement with UEFA whereby it was agreed that the reigning Premier League champions would pay a conditional £49m fine and accept the imposition of certain restrictions on their European squad and incoming transfers.
A statement made on the club website referred to a “fundamental disagreement between the club’s and UEFA’s respective interpretations of the FFP Regulations on players purchased before 2010." 4 The club maintained that the regulations had been complied with; UEFA clearly thought differently.5
The settlement agreement stipulates a number of sanctions and restrictions, the key ones being as follows6:
- "Man City will lose €10m of its share of income from UEFA for competing in the Champions League for season 2014-15;
- Rather than having a cumulative allowance of €30m of losses over the next two reporting years (like all other clubs), Man City will have specific stipulated allowances for 2013-14 and 2014-15 of €20m and €10m respectively;
- Man City’s European squad for the 2014-15 competition will be limited to 21 players of which five must be ‘home-grown’ 7;
- The club’s expenditure on new players for the transfer window which has just closed, on top of income from players it sold, was limited to €60m; and
- The wage bill of the whole club (playing and non-playing staff) for the 2014-15 season must not exceed the level of the 2013-14 season (although additional bonuses for performances can be paid outside this number)."
If Man City complies with the restrictions contained in the settlement agreement, the constraints will be lifted at the end of 2015-16 season.
Is Lampard’s loan a “related party transaction” under the FFP Regulations?
Due to the connection between Man City and New York FC, the relevant FFP Regulations to look at when analysing the Lampard loan deal are those regarding related party transactions.
Annex X (E) of the FFP Regulations makes reference to “related party transactions and fair value of related party transactions.” Annex X (E.7) states:
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- Tags: FIFA | Financial Fair Play | Football | Governance | Major League Soccer (MLS) | Premier League | Regulation | UEFA | UEFA Club Licensing and Financial Fair Play Regulations | United Kingdom (UK) | United States of America (USA)
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About the Author
James is an Associate in the Sports Corporate department at Couchmans LLP. James advises clients on all aspects of corporate and commercial law including investments, joint ventures, mergers and acquisitions and corporate finance in the sports business and media sectors. James is also a specialist on financial and regulatory issues in the football industry.