To Comply or not to Comply ?

UEFA Club Licensing. – To Comply or not to Comply ?

On 16 April 2018 The UEFA Club Financial Control Body (CFCB) adjudicatory chamber took decisions in the cases of four clubs that had been referred to it by the CFCB chief investigator, concerning the non-fulfilment of the club licensing criteria defined in the UEFA Club Licensing and Financial Fair Play Regulations.

Such criteria must be complied with by the clubs in order to be granted the licence required to enter the UEFA club competitions.

The cases of two clubs::

Olympique des Alpes SA (Sion Switzerland )

and

FC Irtysh  (Kazakhstan) 

are of particular interest to those following the events under which the SFA awarded a UEFA License to Rangers FC in 2011 currently under investigation by the SFA Compliance Officer because

1. The case documentation tell us how UEFA wish national associations to apply UEFA FFP rules
2. The cases  tell us what might have happened to Rangers  FC in 2012 had they not gone into liquidation and as a consequence avoided the same type of sanctions that UEFA applied to Sion and Irtysh.

 

FC Sion  (Olympique des Alpes SA)

Here we are told how the Swiss FL and then the UEFA CFCB acted in respect of FC Sion in 2017 where a misleading statement was made in the Sion UEFA licensing application.

Full details can be read at

http://tiny.cc/y6sxsy

 

but this is a summary.

In April 2017 the Swiss FL (SFL) granted a licence to Sion FC but indicated that a Disciplinary case was pending.

In July 2017 the CFCB, as part of their licence auditing programme,  carried out a compliance audit on 3 clubs to determine if licences had been properly awarded. Sion was one of those clubs.

The subsequent audit by Deloitte LLP discovered Sion had an overdue payable on a player, amounting to €950,000, owed to another football club (FC Sochaux ) at 31st March 2017 as a result of a transfer undertaken by Sion before 31^st December 2016, although the €950,000 was paid in early June 2017.

Deloitte produced a draft report of their findings that was passed to SFL and Sion for comment on factual accuracy and comment on the findings. Sion responded quickly enabling Deloitte to present a final report to the CFCB Investigation Unit. In response to the Deloitte final report Sion stated:

“il apparaît aujourd’hui qu’il existait bel et bien un engagement impayé découlant d’une activité de transfert. Ce point est admis” translated as

“it now appears that there was indeed an outstanding commitment arising from transfer activity. This is admitted”

What emerged as the investigation proceeded was that the Swiss FL Licensing Committee, after granting the license in April and as a result of a Sochaux complaint of non-payment to FIFA, had reason to refer Sion’s application to their Disciplinary Commission in May 2017 with regard to the submission of potentially misleading information by FC Sion to the SFL on 7^th April 2017 as part of its licensing documentation.

Sion had declared

“Written confirmation: no overdue payables arising from transfer activities”, signed by the Club’s president, stating that as at 31 March 2017 there were no overdue payables towards other football clubs. In particular, the Club indicated that the case between FC Sion and FC Sochaux regarding the transfer of the player Ishmael Yartey was still under dispute.

The SFL Disciplinary Commission came to the conclusion that FC Sion had no intention to mislead the SFL, but indeed submitted some incorrect licensing documentation; the SFL Disciplinary Commission further confirmed that the total amount of €950,000 had been paid by the Club to FC Sochaux on 7 June 2017. Because of the inaccurate information submitted, the SFL Disciplinary Commission decided to impose a fine of CHF 8,000 on the Club.

Whilst this satisfied the SFL Disciplinary process the CFCB deemed it not enough to justify the granting of the licence as UEFA intended their FFP rules to be applied.

Sion provided the CFCB with a number of reasons on the basis of which no sanction should be imposed. In particular, the Club admitted that there was an overdue payable as at 31 March 2017, but stated that the mistake in the document dated 7 April 2017 was the result of a misinterpretation by the club’s responsible person for dealing with the licence (the “Club’s licence manager”), who is not a lawyer. The Club affirmed that it never had the intention to conceal the information and had provisioned the amount due for payment and that, in any case, it has already been sanctioned by the SFL for providing the wrong information.

The CFCB Investigation Unit accepted that the Sion application, although inaccurate, was a one off misrepresentation and not a forgery, (as in intended to deceive ) but that nevertheless an overdue payable did exist at 31st March and a licence should not have been granted.

Based on their findings, the CFCB Chief Investigator decided to refer the case to the CFCB Adjudicatory Chamber and suggested a disciplinary measure to be imposed on FC Sion by the CFCB Adjudicatory Chamber, such measure consisting of a fine of €235,000, corresponding to the UEFA Revenues the Club gained by participating in the 2017/2018 UEFA Europa League.

The CFCB Investigatory Chamber submitted that it was  appropriate to impose a fine corresponding to all the UEFA revenues the Club gained by participating in the competition considering the fact that FC Sion should not have been admitted to the competition for failing to meet one of its admission criteria.

 

The Adjudicatory Chambers took all the circumstances (see paras 91 to 120 at http://tiny.cc/i8sxsy ) into consideration and reached the following key decisions.

1. FC Sion failed to satisfy the requirements of Article 49(1) of the CL&FFP Regulations and it obtained the licence issued by the SFL not in accordance with the CL&FFP Regulations.
2. FC Sion breached Articles 13(1) and 43(1)(i) of the CL&FFP Regulations. (Documents complete and correct)
3. To exclude FC Sion from participating in the next UEFA club competition for which it would otherwise qualify in the next two (2) seasons (i.e. the 2018/19 and 2019/20).
4. To impose a fine of two hundred and thirty five thousand Euros (€235,000) on FC Sion.
5. FC Sion is to pay three thousand Euros (€3,000) towards the costs of these proceedings.

Comment in respect of the award of a UEFA Licence in 2011 to Rangers FC.

It is now public knowledge that an actual liability of tax due before 31stDecember 2010 towards HMRC, was admitted by Rangers FC before 31^st March 2011.

This liability was described as “potential” in Rangers Interim accounts audited by Grant Thornton.

“Note 1: The exceptional item reflects a provision for a potential tax liability in relation to a Discounted Option Scheme associated with player contributions between 1999 and 2003. A provision for interest of £0.9m has also been included within the interest charge.”

The English Oxford Dictionary definition of potential is:

Having or showing the capacity to develop into something in the future.

Which was not true as the liability had already been “developed” so could not be potential.

This was repeated by Chairman Alistair Johnson in his covering Interim Accounts statement

“The exceptional item reflects a provision for a potential tax liability in relation to a Discounted Option Scheme associated with player contributions between 1999 and 2003. “  where he also added

“Discussions are continuing with HMRC to establish a resolution to the assessments raised.”

This could be taken as disputing the liability but In fact the resolution to the assessments raised would have been payment of the actual liability, something that never happened.

In the Sion case it was accepted the misleading statement was a one off misrepresentation, but at the monitoring stages at June 2011 in Ranger’s case the status of the liability continued to be misrepresented and in September the continuing discussions reason was repeated, along with a claim of an instalment paid whose veracity is highly questionable.

The Swiss FL Licensing Committee did at least refer the case to their Disciplinary Committee when they realised a misleading statement might have been made. The SFA however in August 2011, when Sherriff Officers called at Ibrox for payment of the overdue tax , did no such thing and pulled up the drawbridge for six years, one that the Compliance Officer is now finally charged with lowering.

 

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The case of FC Irtysh of Kazakhstan is set out in full at http://tiny.cc/y9sxsy  and is a bit more straightforward but is nevertheless useful to compare with events in 2011 in Scotland.

Unlike Rangers FC , FC Irtysh properly disclosed that they had an overdue payable to the Kazakhstan tax authorities at the monitoring point at 30^th June 2017. This caused the CFCB Investigatory Unit to seek further information with regard to the position at 31^st March

It transpired that Irtysh had declared an overdue payable at 31st March but cited their financial position (awaiting sponsor money) as a reason for non payment to the Kazakhstan FA who accepted it and granted the licence. The outstanding tax was paid in September 2107.

The outcome of the CFCB Investigation was a case put to the CFCB Adjudicatory Chamber  who agreed with the CFCB Investigation Unit that a licence should not have been granted and recommended that Irtysh be fined the equivalent of the UEFA prize money, (that had been withheld in any case whilst CFCB investigated.)

The CFCB Adjudicatory Chamber however decided that a fine was not sufficient in sporting deterrent terms and ruled that:

 

1.  FC Irtysh failed to satisfy the requirements of Article 50bis(1) of the CL&FFP Regulations and it obtained the licence issued by the FFK not in accordance with the CL&FFP Regulations.
2. To withhold four hundred and forty thousand Euros (€440,000) corresponding to the UEFA revenues FC Irtysh gained by participating in the 2017/2018 UEFA Europa League.
3. To exclude FC Irtysh from participating in the next UEFA club competition for which it would otherwise qualify in the next three (3) seasons (i.e. the 2018/19, 2019/20 and 2020/21 seasons). This sanction is deferred for a probationary period of (3) three years. This exclusion must be enforced in case the Club participates again in a UEFA club competition having not fulfilled the licence criteria required to obtain the UEFA licence in accordance with the CL&FFP Regulations.
4. FC Irtysh is to pay three thousand Euros (€3,000) towards the costs of these proceedings. “

 

The deferral was because unlike Rangers FC,  FC Irtysh had properly disclosed to the licensor the correct & accurate financial information required, so the exclusion was deferred for a probationary period of (3) years.

 

Comment in respect of the award of a UEFA Licence in 2011 to Rangers FC.

From the foregoing it could be deduced that had Rangers FC qualified for the Champions League (or European League) and not gone bust as a result and so not entered liquidation BUT it became public knowledge by 2012 that a licence had been wrongly and possibly fraudulently granted then

1. Rangers would have been fined the equivalent of their earnings from their participation in the UEFA competitions in 2011
2. At least a two year ban from UEFA Competitions would have been imposed, but more likely three in view of repeated incorrect statements.
3. The consequences of both would have been as damaging for Rangers survival as the real life consequences of losing to Malmo and Maribor in the qualifying rounds of the Champions and European Leagues.

Karma eh!

Interestingly in the UEFA COMPLIANCE AND INVESTIGATION ACTIVITY REPORT 2015 – 2017 , the CFCB investigatory chamber recommended that both the Kazakhstan FA and Swiss FA as licensors

“pay particular attention to the adequate disclosure of the outstanding amounts payable towards other football clubs, in respect of employees and towards social/tax authorities, which must be disclosed separately;

Would the same recommendation apply to the Scottish FA with regard to their performance in 2011 and will the  SFA responses thereafter to shareholders in a member club be examined for compliance with best governance practice by the SFA Compliance Officer investigating the processing of the UEFA Licence in 2011?

This would be a welcome step in fully restoring trust in the SFA.