The Premier League and the Football Association are currently investigating Chelsea for potential violations of football regulations, specifically regarding financial fair play (FFP). Experts caution that the London team may receive a point deduction if they are found to be at fault.
The authorities are investigating undisclosed financial transactions made by businesses owned by the previous proprietor of Chelsea, Roman Abramovich.
The payments, details of which were revealed by the Guardian and international partners this week, appear to have benefited the club without being declared in annual accounts. With the number of wealthy owners pouring cash into the English game rising over time, other clubs including Everton and Manchester City are also under scrutiny.
What regulations may have been violated, what will the investigation process entail, and will any major soccer team ever face consequences for disregarding FFP?
What does financial fair play entail?
The term FFP has been adopted to refer to multiple regulations, but it originated from a 2009 evaluation by the governing body of European football. Uefa had worries about clubs overspending in their pursuit of success, accumulating debts that were not sustainable and jeopardizing their survival.
In 2011-12, a set of regulations were implemented for the start of the season. After two years, the Premier League also adopted their own version of FFP, called the profitability and sustainability rules. These rules have not only been viewed as a means of ensuring financial stability for football clubs, but also as a way to combat what former Arsenal manager Arsène Wenger referred to as “financial doping”. This refers to the practice of wealthy individuals, such as billionaire oligarchs or Gulf states, using their own funds to gain an unfair advantage and achieve success in the league.
What are the regulations?
Each year, the Premier League examines the financial records of clubs and imposes a restriction on the amount they are allowed to sustain in losses. In summary, clubs are not permitted to exceed a total of £105m in losses over a span of three years. However, certain types of expenditures are not factored into this calculation, such as investments in infrastructure (such as stadium and training ground improvements), community initiatives, women’s football, and youth development. These are referred to as “add backs”.
Due to the pandemic, the regulations were relaxed to accommodate the increased expenses for health and safety measures and the loss of significant revenue due to the absence of fans at stadiums.
The limitations set by Uefa have undergone changes over time. In the current system, clubs are allowed to have a deficit of up to €60m, which is twice the previous amount permitted under FFP. Additionally, there is a regulation on squad expenses, where clubs are not allowed to exceed 70% of their revenue on wages, transfers, and agent fees.
How does this relate to Chelsea?
In 2022, a group led by American investor Todd Boehly acquired Chelsea, following pressure from the UK government for owner Abramovich to sell due to his connections to the Kremlin. Upon taking ownership, Boehly and his partners allocated £100m as a precaution for potential financial inquiries. As part of the acquisition process, it was revealed that inaccurate financial data had been provided to football governing bodies from 2012 to 2019. The club self-reported the issue to the Premier League, Uefa, and FA.
In July, Chelsea agreed to pay £8.7m to Uefa as a settlement for this issue. However, this is not the final resolution. Uefa’s regulations only allow them to go back to the 2018-19 season. On the other hand, the Premier League has no time limit and can penalize Chelsea by deducting points or even disqualifying them from competitions.
What is the process for investigating breaches?
If the Premier League identifies a violation in a club’s yearly financial statements, or receives evidence indicating that those statements were incorrect, its board has the authority to levy charges against the club for violating the regulations outlined in the Premier League handbook.
After the charges have been filed, the case is reviewed by a judicial panel led by Murray Rosen KC, a seasoned sports barrister and deputy judge. Rosen has the authority to choose three individuals from a pool of 15 to serve on the panel and make a decision on the case. These individuals are selected based on their expertise in areas such as accounting or experience with arbitration.
Similar to a legal trial, attorneys representing both the club and the Premier League must present their arguments. Due to the high financial and reputational stakes, this is usually a lengthy and confidential process. Once completed, a decision will be made by the judicial panel. Unlike in a criminal trial, the ruling is based on the likelihood of evidence rather than proof beyond a reasonable doubt.
If the club is deemed to be at fault, they have the option to appeal to a designated panel. Nevertheless, this is the final opportunity for resolution. The matter cannot progress to the legal system or the international tribunal for sports arbitration.
What is the status of Manchester City and Everton?
Both teams have been accused of violating financial regulations, and both teams have denied the allegations. Manchester City was charged by the Premier League for 115 violations in February of 2023. Some soccer supporters seem to think that no further measures are being taken, but the case is still ongoing, although it is being kept confidential.
With the support of Abu Dhabi’s financial strength, City has enlisted the expertise of prominent lawyer Lord Pannick KC to lead their defense. According to reports, this has involved submitting a complaint about Rosen, who is said to be an Arsenal supporter. Despite not being traditional rivals, Arsenal and City competed for the Premier League championship last season and may do so again this year. It is expected that a decision on the case will take a significant amount of time.
The team Everton has been accused of violating FFP regulations and may face a quicker decision that could result in a 12-point deduction, causing them to fall to the last place in the standings. The club maintains its belief that it did not break any FFP guidelines.
What other relevant rules apply?
Manchester City faced multiple charges due to the possibility of breaking one rule being indicative of breaking others. For example, a violation of financial fair play regulations could also mean the submission of false accounts and a lack of good faith, both of which are prohibited.
Furthermore, the Football Association (FA) holds the authority to conduct investigations. This includes ensuring that agents involved in transfers report accurate information about their fees. This week, it was announced that the FA is currently conducting an investigation into Chelsea.