Beyond CAS: Manchester City could fight FFP’s legality in court

The entrance of the Court of Arbitration for Sport (CAS) is seen on November 15, 2017 in Lausanne. / AFP PHOTO / Fabrice COFFRINI (Photo credit should read FABRICE COFFRINI/AFP via Getty Images)
The entrance of the Court of Arbitration for Sport (CAS) is seen on November 15, 2017 in Lausanne. / AFP PHOTO / Fabrice COFFRINI (Photo credit should read FABRICE COFFRINI/AFP via Getty Images) /

According to reports, Manchester City are gearing up for an all-out legal battle in the Court of Arbitration for Sport against their two-year Champions League ban from UEFA. Should it fail, however, City could litigate further to have FFP, whose legal status is dubious, ruled in violation of EU anti-trust law.

By handing Manchester City the harshest possible punishment for breach of FFP rules, UEFA have upped the stakes in one of the biggest off-the-field battles football has ever seen.

I am not defending the actions of the club or its ownership. While the club is highly confident they will be proven correct in their pending CAS appeal, if it is true, they are clearly in violation of UEFA’s FFP rules as currently constructed. City are accused of essentially accounting fraud, or misrepresenting sponsorship revenue in order to allow the club’s Abu Dhabi owners to put more money into the project, and also potentially face sanctions from the Premier League.

However, FFP itself is a highly controversial policy and one that stands on very shaky legal ground. Its theoretical purpose, to promote responsible management of football clubs and avoid debt, has failed to help clubs such as Bolton Wanderers from avoiding liquidation, and protects the interests of Europe’s historically elite clubs with massive built-in revenue streams.

The main controversy surrounding the legality of FFP stems from the concept that UEFA is restricting competition between businesses by capping the amount of money an owner can put into a club. To be specific, Article 101 of the Treaty on the Functioning of the European Union reads in part:

"“The following shall be seen as incompatible with the internal market: all agreements between undertakings…which have as their object or effect the prevention, restriction or distortion of competition within the internal market.”"

More specifically within Article 101, agreements that “limit investment” Paragraph 1(B) and those that place companies at a “competitive disadvantage” through “dissimilar conditions” Paragraph 1(D), are prohibited. FFP’s requirements undeniably distort competition and limit investment, while the argument can be made that the policy puts newly-challenging teams such as City and PSG at a competitive disadvantage by capping their investment at lower levels than historic giants such as Real Madrid and Manchester United.

In addition, UEFA’s actions could constitute an abuse of a dominant position under Article 102, as a governing organization cannot impose “unfair trading conditions” (A).

City have multiple routes by which they can challenge that FFP violates EU competition law, but the most likely will be through the Swiss national court system. The issue has been notably unsuccessfully challenged twice, however, there are several caveats to the precedent set in each of those cases. First, it has only been argued at CAS and the European Commission, never a national court, the avenue that City will likely pursue should CAS uphold UEFA’s decision. In addition, the full expanse of the legal challenge City will present has yet to be argued, making any further litigation unprecedented.

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Agent Daniel Striani’s case was dismissed by the European Commission because FFP was aimed at clubs and only tangentially affected him, but importantly, this decision held that clubs could have a claim heard in a national court because of the policy’s direct impact.

The more relevant precedent stems from Galatasaray’s challenge on Article 101 and 102 before CAS. UEFA successfully argued, as it in all likelihood would against City, that its restrictions “pursue a legitimate governance objective”. CAS accepted this argument, and ruled in favor of UEFA.

City have made it clear that they will not let UEFA’s power move go lightly, and that they will exhaust every legal avenue possible to win their case. FFP stands on grounds of murky legality at best, and the outcome of any potential litigation from the club would be a landmark decision that would either strike down the application of FFP’s investment caps which City fraudulently circumvented, or set FFP in stone in the years to come.