Perhaps it is not surprising that reporting so far has focused on the, admittedly severe, sanction meted out on City by UEFA’s, “semi-independent” (in the words of David Conn) Adjudicatory Chamber. The myopic coverage is largely City’s own fault. Belligerent press statements focusing on “agendas” rather than briefing tangible arguments as to the merits are unlikely to generate the right sort of coverage especially where the club is unwilling or unable to articulate its own defence. Mix that with sports journalists trying to grapple with complex legal processes across multiple jurisdictions, quasi-legal sporting rules, selected (sometimes gratuitous) leaked documents, specialist accounting issues, sponsorship considerations and related party relationships (or not) and we have a fog of sanctimonious noise.

City’s style of communication is not purely a front for the public – the extracts in CAS’s judgment of City’s failed attempt to get the matter thrown out or postponed shows the vitriolic tone of the private exchanges between the parties in correspondence. On 20 May 2019, the CFCB Chief Investigator wrote to City: “I must vehemently reject your allegations of unlawful activities, either by myself or by any of the members of the UEFA CFCB, in particular of its Investigatory Chamber (IC). Your allegations are groundless in the merits and unacceptable in tone. Please be advised that I will not continue such an exchange of correspondence and that I will not respond further to groundless accusations directed against me personally and/or against my fellow members of the IC.”

City’s tone was also evident in submissions to CAS, with the club stating: “[UEFA’s alleged] breaches have been timed such that MCFC suffers serious prejudice in those proceedings, […]. These ongoing and egregious breaches undermine the very integrity of UEFA’s adjudicatory process, which is a consensual dispute resolution mechanism with confidentiality at its core. They also fundamentally undermine UEFA’s “good faith” participation in the process, in breach of article 2(1) of the Swiss Civil Code [the “SCC”] and article 52 of the Swiss Code of Civil Procedure [the “SCCP”]”.

This type of language is not unusual in bad tempered civil disputes going through courts particularly where the parties have no ongoing relationship. It is a little more surprising where that is the language that is being used between what is effectively a regulator and organiser of competitions (UEFA) and a (mere) participant and where the parties will have to find a way to work together after this.

I think that points to City feeling a combination of genuine outrage, defensiveness, disappointment and, most probably, fear. Clearly, there is lots of animosity and distrust in the relationship between, at least divisions of, UEFA and City and the club now appear to recognise that following the instigation of the investigation, the outcome from the Adjudicatory Chamber was inevitably going to include a ban. I doubt the club foresaw a two year ban, the impact of which is far more than double one season’s “rest” from Europe. Financially, it’s a disaster in the short-term and one that jeopardises meeting future FFP review periods. For top players like Sterling and De Bruyne, if upheld, it would be surprising if it did not impact their plans. From a reputation perspective, the damage is not easily wiped away especially where the club’s stance publicly has been as aggressive and dismissive as City’s has been so far and where the underlying documents were so ill advised in the first place.

Tone

It is possible that the tone of City’s communications with UEFA and the media reflects the fact that those responsible for the most optically damaging leaked emails, remain in very senior posts at the club and are likely to be drafting and commenting on the actual letters and press statements the club is sending/making today. Not only do the owners and the football club itself have a lot to play for but a large proportion of its most senior business, PR and accounting personnel have much riding on the outcome. And where will it end beyond those elements? What actions will the Premier League take? Would it cast doubt on the accuracy of the historic audited accounts – a major and significant topical issue in the business pages and in wider industry. Would the auditors be investigated for failing to show what’s known as sufficient “professional scepticism” in the information being presented to them? Or worse. Are directors liable for misstatements in letters assuring the auditors of the accuracy of the accounts? Will other clubs line up to argue in British courts that but for City’s “cheating”, they would have qualified for profit generating Champions League appearances. An appearance in front of a parliamentary select committee is also possible – best keep Simon Pearce away from that, eh? It is not hard to construct some worst case scenarios. In short, and stating the obvious, City have to overturn the ban. So, for all the noise and grandstanding, what are the likely defences City will run, how are they likely to argue their case at CAS and what do we know right now?

The Documents

I’ve pulled together all of the public documents and related content out there to draw some, initial but highly provisional thoughts and pointers. I’ve read the recent CAS cases with AC Milan, Galatasaray and City themselves. They point clearly to the type of arguments that will be run and the sort of approach CAS take as a quasi-judicial body.

So, what are the key dates and documents that the outside world has access to today?:

On 16 May 2014, MCFC entered into a Settlement Agreement with UEFA in respect of a FFP investigation in the reporting periods and covering the three sporting seasons 2013/14, 2014/15 and 2015/16. (“the 2014 Settlement Agreement”).

For the duration of the 2014 Settlement Agreement, City were subject to on-going restrictions which were agreed by the club. UEFA stated[1]: “The compliance with the Settlement Agreement will be subject to on-going and in depth monitoring, in accordance with the applicable rules. In this connection, Manchester City also undertakes to provide the CFCB with a Progress Report evidencing its compliance with all relevant conditions agreed on a six monthly basis. In case Manchester City fails to comply with any of the terms of this Agreement, the UEFA CFCB Chief Investigator shall refer the case to the Adjudicatory Chamber, as foreseen in Art. 15 (4) of the Procedural Rules.”

The 2014 Settlement Agreement itself is not publicly available but a number are (albeit in redacted form) including the Dinamo Zagreb[2] Inter[3], Porto, Maccabi Tel Aviv and Marseille[4] Neither PSG’s nor City’s 2014 Settlement Agreement was ever made public even in redacted form. All the agreements available include the following clauses:

a) “Compliance with the Settlement Agreement will be subject to on-going and in-depth monitoring, in accordance with the applicable rules. In this regard, the Club also undertakes to provide the CFCB with progress reports evidencing its compliance with all relevant conditions agreed”

b)“Consequence of Coming into Compliance with the Break-even Requirement – If the Club fulfils the primary purpose of the Settlement Agreement and becomes break-even compliant, then the Club shall exit the Settlement Regime and all of the operational, financial and sporting measures shall cease to apply as from the start of the following sporting season.”

c)“The Settlement Agreement shall expire at the end of the Settlement Regime, unless the Club has reached full compliance with the Break-even requirement at an earlier stage or UEFA has taken new measures because of a breach by the Club of the Settlement Agreement.

It is notable that the redacted settlement agreements are not conventional in the sense of civil litigation in the English courts. They do not appear to include clauses broadly closing off any future claims between the parties. Given the common clauses across those agreements that are public, it is reasonable to infer that those entered into after City and PSG’s settlement agreements (and probably also City and PSG’s) were standardised agreements with little scope for the clubs to negotiate additional clauses. In other words, it points to the clubs being told that the form of settlement agreement was “take it or leave it” and largely non-negotiable. This recognises the relative power of the parties to the negotiation – UEFA on one side and individual clubs accused of breaching FFP on the other.

On 21 April 2017[5], UEFA announced: “The CFCB Investigatory Chamber confirmed that … Manchester City FC …. whose settlement agreements were signed back in May 2014, have fully complied with all the requirements and overall objective of their agreements. Consequently, they have all exited the settlement regime.” MCFC also confirm a letter of release was issued on or around that date (see CAS’s City judgment p12) (“Letter of Release”).

On 7 March 2019, UEFA announced[6]: “The Investigatory Chamber of the independent UEFA Club Financial Control Body (“IC”) has today opened a formal investigation into Manchester City FC for potential breaches of Financial Fair Play (FFP) regulations. The investigation will focus on several alleged violations of FFP that were recently made public in various media outlets.”

Also on 7 March 2019, following the exchange of various correspondences between the Investigatory Chamber and City, the Investigatory Chamber notified City that “further to our letters for your attention dated 14 and 19 February 2019, your club’s response dated 1st March 2019 and subsequent information and documents recently made public in various media outlets, an investigation is hereby formally opened in accordance with Article 12 (2) of the Procedural rules governing the UEFA Club Financial Control Body – Edition 2015 [the “CFCB Procedural Rules”]” (the “Investigation”).

On 14 May 2019, City stated: “Manchester City’s published accounts are full and complete and a matter of legal and regulatory record. The accusations of financial irregularities are entirely false, and comprehensive proof of this fact has been provided to the [IC].”

On 15 May 2019, the Investigatory Chamber issued the Referral Decision (“Referral Decision”). This was the eve of the 5 year anniversary of the 2014 Settlement Agreement. It is unlikely, in my view, this was co-incidental (cf Article 37[7] of UEFA’s Procedural Rules governing the UEFA CFCB).

On 16 May 2019, UEFA announced the Referral Decision[8] stating: “the Club Financial Control Body (CFCB) chief investigator, after having consulted with the other members of the independent investigatory chamber of the CFCB, has decided to refer Manchester City FC to the CFCB adjudicatory chamber following the conclusion of his investigation.”

On 14 February 2020[9], UEFA announced: “The Adjudicatory Chamber, having considered all the evidence, has found that Manchester City Football Club committed serious breaches of the UEFA Club Licensing and Financial Fair Play Regulations by overstating its sponsorship revenue in its accounts and in the break-even information submitted to UEFA between 2012 and 2016.”

City’s defence as extracted from the summary in the CAS judgment[10] includes:

a) The case referred to the Adjudicatory Chamber (according to City): “makes no allegations concerning the reporting periods 2016-17 and 2017-18.”

b) The Investigatory Chamber only had jurisdiction to review 2016-17 and 2017-18. City also state that this is what the Investigatory Chamber said its investigation was focused (although this does not seem to be stated publicly anywhere).

c) In any event, the Investigatory Chamber has no jurisdiction to make determinations on matters relating to any earlier point in time because:

i) breaches before the 2016-2017 reporting period are covered by the 2014 Settlement Agreement;

ii) the Investigatory Chamber does not have jurisdiction in respect of the subject matter of the 2014 Settlement Agreement because: (i) the Settlement Agreement created a bespoke “Settlement Regime” covering the entirety of the periods referred to in the Referral Decision, including to the end of the reporting period 2015-2016; (ii) in any event, the Investigatory Chamber has issued a decision through which City has been formally released from the Settlement Agreement and the Settlement Regime in the Letter of Release (as announced on 21 April 2017);

iii) UEFA is time-barred from reopening the proceedings that were concluded by the 2014 Settlement Agreement and the Letter of Release;

iv) all breaches alleged against MCFC more than five years prior to the communication on 15 May 2019 are time barred by virtue of Article 37 of the Procedural Rules (see below), which expressly prohibits prosecution of any breach that took place more than five years prior. Article 37 of UEFA’s Procedural rules governing the UEFA Club Financial Control Body are state expressly that there is a statute of limitations such that: “Prosecution is barred after five years for all breaches of the UEFA Club Licensing and Financial Fair Play Regulations.”

d) in any event, “the temporal jurisdiction of the IC is limited to the current “monitoring period” and, specifically, the “reporting periods” 2016-2017 and 2017-2018.

e) the Investigatory Chamber breached its obligation to act in good faith pursuant to Article 2(1) of the [SCC] and Article 52 of the [SCCP], as well as Article 29 of the Swiss Federal Constitution inter alia by failing to present City with the full case against it, and in failing to allow City adequately to respond to that case.

Analysis

It is notable (and surprising) that UEFA has never publicly set out what they have been investigating. The closest UEFA got to articulating it was in its 7 March 2019 announcement which referred to “several alleged violations of FFP that were recently made public in various media outlets.” This was an extraordinarily vague statement especially given that the historic investigations clearly overlapped with this latest one. Remarkably, even the CAS judgment did not spell out the allegations under investigation, instead grouping them together as the “Football Leaks”.

Therefore, we can only rely on the briefest of details in UEFA’s announcement of 14 February 2020 which stated the alleged breaches were the “overstating [of] sponsorship revenue in [City’s] accounts and in the break-even information submitted to UEFA between 2012 and 2016.” We also know from CAS and other public documents that UEFA were pursuing the whole investigation pursuant to UEFA’s Procedural Rules governing the UEFA CFCB (and not some other UEFA rule book). That means that, as City argued at CAS, Article 37 of those rules must apply and a 5 year limitation period applies. Therefore, UEFA’s own rules state that, in effect, only breaches that occurred after 15 May 2014 (at the latest) are liable for “prosecution” by UEFA. Any acts, and therefore breaches, before that date are expressly time barred. It is therefore odd and surprising that UEFA refer to 2012 in their announcement at all.

This appears to be City’s strongest and cleanest point. It is very hard to see how UEFA could overcome this limitation on any basis. It does not seem to me that UEFA can suspend or extend the limitation period simply by the issuing the Referral Decision within 5 years of the 2014 Settlement Agreement. Assuming that City were successful in knocking out any breaches before May 2014, this would leave only breaches that took place in the reporting periods covered by the 2014 Settlement Agreement and seemingly covered by the Settlement Regime (ie 2014/2015 and 2015/2016 reporting periods).

City’s argument that the Settlement Regime was closed, final and binding upon the issue of the Letter of Release in April 2017 (see above) looks like a strong argument too and CAS has been happy to enforce historic, final and binding decisions of UEFA as incapable of reversal – for example in the PSG case [11]. The PSG case was far simpler than City’s and although no formal judgment has been published by CAS the summary makes it clear that “The CAS Panel concurred that the 10-day time limit …, did indeed mean that the review conducted by the Adjudicatory Chamber should have taken place within ten days and that since the Challenged Decision was issued beyond the 10-day time limit, the Challenged Decision was untimely and must be annulled.”

As detailed above, it is highly likely that the 2014 Settlement Agreement included the clause: “Consequence of Coming into Compliance with the Break-even Requirement – If the Club fulfils the primary purpose of the Settlement Agreement and becomes break-even compliant, then the Club shall exit the Settlement Regime and all of the operational, financial and sporting measures shall cease to apply as from the start of the following sporting season.” This appears unequivocal in that once a club exits the Settlement Regime (as City undoubtedly did in April 2017), the Settlement Regime is done and dusted. It would be nonsensical and unfair for UEFA to be able to change its mind at some future date and re-instate the Settlement Regime relating to that period. In City’s case now, the Adjudicatory Chamber appears to be saying “yes we accept you paid a settlement, went through a settlement regime, passed a number of tests/checks that UEFA itself devised, officially and definitively came out of that regime but 3 years on, we are going back and convicting you again relating to exactly the same (significantly historic) period.” That is double jeopardy and it seems very unlikely to me to be the way those rules are designed to operate.

So, on a simple reading of the chronology and City’s submission, it is difficult to see UEFA prevailing on this point either although my view on that is qualified by the fact that we should expect that the Adjudicatory Chamber did fully consider such seemingly obvious and clear hurdles for UEFA. It is probable that City will also have further arguments in respect of the factual evidence as opposed to these procedural and legal points. In particular, City have been at pains to point to the integrity and primacy of their audited accounts. This appears to be putting the burden of proof on UEFA to show that the audited accounts are, in effect, false. How they got round this in the Adjudicatory Chamber in the timescales is difficult to understand – it’s a serious allegation that requires a serious burden of proof.

In reality, there is no possibility that the Adjudicatory Chamber was able to (or capable of) assess(ing) the accuracy of City’s 2014, 2015 and 2016 accounts or making a fair value assessment excluding those sponsorship contracts it believed to be disallowed. An assessment of the facts would take months of evidence, cross examination, submission and legal argument in a formal trial. By way of example, the recent civil trial at the High Court regarding former Spurs sponsor, Autonomy and HP required forensic evaluation of historic accounts and contracts (including the Spurs sponsorship contract itself which HP claimed was faulty in itself [12]) and lasted from March 2019 to January 2020 – ten months. The judgment, which is likely to run to three to five hundred pages will not be available for months.

City’s repeated reference to the Swiss Civil Code and Swiss Code of Civil Procedure in terms of its rights to a fair and impartial judicial process is a warning shot that it will fight on beyond CAS if it has to – not to fight FFP as has been trailed but specifically relating to these sanctions.

For completeness, it seems to me that City are on less firm ground on the sort of well-trodden arguments UEFA rolled out in CAS 2018/A/5808 AC Milan v. UEFA. UEFA has successfully argued that clubs voluntarily submit to the rules and regulations of UEFA in order to participate in the European club championships. In particular it appears that UEFA will continue to argue that FFP does not breach competition law, EU competition law is not directly applicable to FFP generally and CAS jurisprudence has confirmed that the CL & FFP Regulations are compatible with EU competition law. This is likely to be relatively safe ground for UEFA at CAS – areas that have been tested before and more difficult for CAS to overturn in any meaningful way.

It appears to be generally accepted that the matter will need to be resolved at CAS before the start of the next campaign. The Premier League seems to accept that 5th place is now a pending Champions League spot opening the door to Sheffield United, Burnley and even, Manchester United and Arsenal. It is likely that CAS, UEFA and City will also want the matter to go before CAS before any other club is able to claim to be an “interested party” to the matter. In the AC Milan case, Fiorentina and Atalanta were those interested parties and it is bound to complicate matters where other clubs are involved.



Conclusions

CAS can annul the Adjudicatory Chamber’s findings; dismiss the appeal and uphold the Adjudicatory Chamber’s findings; uphold part of the Adjudicatory Chamber’s findings awarding a reduced penalty; or, as it did with AC Milan, CAS can refer the case back to the Adjudicatory Chamber to take “a proportionate decision based on CAS’s findings and a proper assessment of the facts at the relevant reference date.” On the face of the facts as known, in particular that City entered into a settlement agreement relating to this period already, City appear to have good reason to feel confident of prevailing at CAS. However, most of these arguments appear to be both relatively obvious and known to the Adjudicatory Chamber at the time of its “deliberations.” It will also be interesting to see what counter arguments UEFA presented to the Adjudicatory Chamber on these points (if any) that haven’t been made public at this stage.

An inherent contradiction exists between the ultimate findings of Adjudicatory Chamber and the stories (no doubt well sourced) that City were set not to be banned in December 2019 and that UEFA were keen to offer a financial settlement for a “technical breach” around the same time. It is hard to square all of this making the drawing of any conclusions uncertain. If CAS upholds UEFA’s verdict, given the scale of the damage to the club (especially financially) and given the identity of the owners (not just Abu Dhabi but also Chinese and American venture funds), it is probable that City will find themselves in the Swiss courts. It will be no accident that City’s CAS submission specifically referred to breaches the Swiss Civil Code and the Swiss Code of Civil Procedure. If it gets to that stage, we should assume the prospects of overturning the ban are slim and the damage exponentially grave.

Stefan went on to write a Part 2 of the blog. You can find it here.

There was also an accompanying two-part podcast special.

Part 1 can be found here.

Part 2 is here.

The author is a more than 20 year English qualified lawyer, current public company Chief Executive Officer, former General Counsel, former financial adviser to the Board of Manchester City and an experienced litigator including in matters of complex accounting. He knows little or nothing about CAS jurisprudence or the Swiss Civil Code and freely admits he could be completely wrong on all of the above given the scarcity of public documents relating to these matters.

Footnotes

[1] https://www.ecestaticos.com/file/dceba6c9d17b4d3f5cfdc88f04f92aa0/1408641174.pdf

[2] https://www.uefa.com/MultimediaFiles/Download/OfficialDocument/uefaorg/ClubFinancialControl/02/36/74/93/2367493_DOWNLOAD.pdf

[3] https://www.uefa.com/MultimediaFiles/Download/OfficialDocument/uefaorg/ClubFinancialControl/02/24/67/80/2246780_DOWNLOAD.pdf

4] https://www.uefa.com/MultimediaFiles/Download/OfficialDocument/uefaorg/ClubFinancialControl/02/61/59/14/2615914_DOWNLOAD.pdf

[5]

https://www.uefa.com/insideuefa/news/newsid=2460156.html?referrer=%2Finsideuefa%2Fdisciplinary%2Fnews%2Fnewsid%3D2460156

[6]

https://www.uefa.com/insideuefa/protecting-the-game/club-licensing-and-financial-fair-play/news/newsid=2594640.html

[7] https://www.uefa.com/MultimediaFiles/Download/Tech/uefaorg/General/01/85/85/25/1858525_DOWNLOAD.pdf

[8]

https://www.uefa.com/insideuefa/about-uefa/news/newsid=2605229.html

[9]

https://www.uefa.com/insideuefa/news/newsid=2638659.html

[10]

p11 of https://www.tas-cas.org/fileadmin/user_upload/Award_CAS_6298_internet.pdf

[11]

https://www.tas-cas.org/fileadmin/user_upload/CAS_Media_Release_5937_decision.pdf

[12] https://www.theguardian.com/business/2019/mar/26/autonomy-executives-mischaracterised-revenues-from-clients-court-told