COVID-19 has significantly disrupted Europe's football calendar and as a result has raised a number of questions in relation to club's contractual obligations and financial arrangements.
This article focuses on the measures UEFA have undertaken to ease the financial and regulatory burden on clubs.
COVID-19: The financial impact
The suspension and possible cancellation of the remaining football league fixtures will cause substantial revenue losses for clubs as sponsorship income, ticket sales and broadcasting rights fall away. Clubs usually utilise these revenue streams to ensure compliance with their ongoing financial obligations.
This reduced income coupled with the substantial player wages and transfer fees may leave clubs at risk of failing to meet their scheduled payment obligations and as a result breach UEFA's Club Licensing and Financial Fair Play Regulations ('FFP Regulations').
The FFP Regulations were originally created to regulate the spending of clubs with large reserves of capital and to ensure better financial stability.
In a resolution issued by UEFA on 17 March 2020, it announced that a working group (consisting of representatives from UEFA, leagues, clubs and players) would be set up to assess the financial and regulatory impact of COVID-19.
The working group highlighted the increasing probable risk that clubs may fail to meet their financial obligations under the FFP Regulations. As a result, UEFA has decided to relax the FFP Regulations by extending the deadline under Articles 49,50 and 50bis from 31 March to 30 April, for clubs to evidence that they do not have any "overdue payables".
Under Articles 49, 50 and 50bis "overdue payables" include monies due:
- to other clubs as a result of player transfers (transfer fees, training compensation, solidarity payments etc.);
- in respect of its employees (including players) i.e. image rights payments, salaries, bonuses etc.; and/or
- toward social/tax authorities in respect of its employees.
The impact of UEFA's proposal:
UEFA's extension will provide clubs with more time to:
- complete the administrative task of evidencing compliance with its FFP Regulation obligations;
- consider the overall financial impacts of COVID-19 on the club; and
- become compliant with the FFP Regulations as income (if any) is received within the extension period.
It is evident that UEFA's FFP Regulation relaxation aims to ensure the survival of all clubs under its auspices. However, the relaxation does not present a 'green light' for clubs with significant capital to inject large sums into the club.
UEFA have, however, suggested that COVID-19 is a force majeure event and would be taken into consideration when assessing a club's FFP Regulation compliance. This in-turn provides further flexibility for clubs attempting to secure their short and medium-term futures and creates an opportunity to:
- establish new short or medium-term debt finance arrangements; and/or
- enter into new investment relationships.
These opportunities would normally present non-compliance with FFP Regulations. However, in these unprecedented circumstances, a degree of non-compliance in order to secure survival would seem to justify UEFA's 'force majeure' leniency under the FFP Regulations.
The assessment of a club's FFP Regulation compliance remains subjective. Any non-compliance will need to be assessed on case-by-case basis taking into consideration the club's specific circumstances. Clubs need to be mindful that any non-COVID-19 FFP Regulation breaches would unlikely receive the same level of leniency.
An example of this would be Olympique Marseille's ongoing case relating to the potential breach of the club's settlement agreement with UEFA following UEFA's decision that Marseille had breached FFP Regulations.
UEFA's move to relax its FFP Regulations is a welcomed measured to support clubs during this uncertain period. Many clubs do not have the depth of resources of top flight teams to navigate their way though this period of financial and regulatory turbulence.
However, the extended deadline of 30 April is unlikely to be sufficient should COVID-19 continue to reek havoc to the footballing calendar. Upon that basis, it is foreseeable that UEFA may introduce further measures to combat COVID-19's impact. It is likely that one of these additional measures may be extensions in relation to the 30 June and 30 September deadlines for "enhanced" matters pertaining to "overdue payables" under Articles 65, 66 and 66bis of the FFP Regulations.
Overdue payables could therefore, remain unreported for an undisclosed period, prolonging the time until a club is deemed to be non-compliant and appropriate penalties are enforced. In addition, UEFA's measures are unlikely to provide solace to clubs subject to additional tiers of governance for example, the Premier League's Profit and Sustainability rules which are considered to be stricter in terms of compliance than UEFA's FFP Regulations. Therefore, without similar measures being adopted by the Premier League, UEFA's measures may have a limited impact.
With financial pressures mounting it remains to be seen how governing bodies and leagues will manage the impacts of COVID-19 to support (and potentially save) its clubs.