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Financial fair play: all you need to know

Published: Friday 28 February 2014, 12.12CET
What is financial fair play? How does it work? What is it trying to achieve and why does UEFA believe it will improve the overall financial health of European club football? Find out here.
Financial fair play: all you need to know
Financial fair play is aimed at benefiting the long-term financial health of European football ©UEFA
 
Published: Friday 28 February 2014, 12.12CET

Financial fair play: all you need to know

What is financial fair play? How does it work? What is it trying to achieve and why does UEFA believe it will improve the overall financial health of European club football? Find out here.

Q&A: Financial fair play explained

In other words, they have to prove they have paid their bills
Financial fair play explained

1) How do you explain financial fair play in one sentence?

Financial fair play is about improving the overall financial health of European club football.

2) When does financial fair play start?

Financial fair play has already started, in 2011. Since then clubs that have qualified for UEFA competitions have to prove they do not have overdue payables towards other clubs, their players and social/tax authorities throughout the season. In other words, they have to prove they have paid their bills.

From this current season (2013/14), clubs also have to make sure they comply with break-even requirements, which in principle means not to spend more than they earn. UEFA has installed the Club Financial Control Body (CFCB) to verify every year each club's figures of the past two years put together, and as of 2014/15, they will look at the figures of the previous three years put together.

The first sanctions for clubs not fulfilling the break-even requirement will be taken following this first assessment in May 2014. The first possible sanctions relating to non-compliance with break-even requirements would be effective for the 2014/15 campaign.

3) Are clubs no longer allowed to have losses?

To be exact, clubs can spend up to €5million more than they earn per assessment period (three years). However it can exceed this level to a certain limit, if it is entirely covered by a direct contribution/payment from the club owner(s) or a related party.

The limits are:
• €45m for seasons 2013/14 and 2014/15
• €30m for seasons 2015/16, 2016/17 and 2017/18

In the following years the limit will be lower, with the exact amount still to be decided.

In order to promote investment in stadiums, training facilities and youth development, all such costs are excluded from the break-even calculation.

4) Are clubs automatically excluded if they are not in line with FFP?

If a club is not in line with the regulations, it will be UEFA's Club Financial Control Body that decides on measures and sanctions.

Non-compliance with the regulations does not mean that a club will be excluded automatically, but there will be no exceptions. Depending on various factors (e.g. the trend of the break-even result) different disciplinary measures may be imposed against a club. There is a catalogue of measures:
a) warning
b) reprimand
c) fine
d) deduction of points
e) withholding of revenues from a UEFA competition
f) prohibition on registering new players in UEFA competitions
g) restriction on the number of players that a club may register for participation in UEFA competitions, including a financial limit on the overall aggregate cost of the employee benefits expenses of players registered on the A-list for the purposes of UEFA club competitions
h) disqualification from competitions in progress and/or exclusion from future competitions
i) withdrawal of a title or award

5) Are owners allowed to inject money into their club as they like or through sponsorship?

If a club's owner injects money into the club through a sponsorship deal with a company to which he is related, then UEFA's competent bodies will investigate and, if necessary, adapt the calculations of the break-even result for the sponsorship revenues to the level which is appropriate ('fair value') according to market prices.

6) Who grants a licence to clubs to compete in a UEFA competition?

Every club that has qualified for the UEFA Champions League or UEFA Europa League needs a licence, which is granted to a club by the national associations (or sometimes leagues). This is based on the UEFA Club Licensing and Financial Fair Play Regulations. UEFA then verifies documents and figures from all clubs which have been registered for one of the UEFA competitions.

7) Some clubs have enormous debts or do not pay their debts. Can those clubs still comply with financial fair play?

Clubs need to pay invoices and debts in a timely manner. This means that clubs have to pay their players or transfer fees as agreed in contracts, otherwise they may be sanctioned by UEFA's competent bodies.

8) Has it happened that a club has been denied access to UEFA competitions because of FFP?

The UEFA club licensing system was introduced in the 2003/04 season. Since then 44 clubs which have directly sportingly qualified for either the UEFA Champions League or UEFA Europa League were not admitted because they did not fulfil the licensing criteria. Financial fair play has been introduced and added to the licensing criteria in 2011. Since then several clubs have been denied access to the UEFA competitions because they have not paid wages to players or fees to other clubs for transfers.

9) Is FFP in line with European law?

UEFA has been in permanent dialogue with the European Commission about financial fair play and has received continued support for this initiative. There is also a joint statement from the UEFA President and the EU commissioner for competition, emphasising the consistency between the rules and objectives of financial fair play and the policy aims of the EU commission in the field of state aid.

10) Will financial fair play make it impossible for smaller clubs to overcome bigger clubs in financial terms?

There are large differences between the wealth of different clubs and countries, which predate and are irrespective of financial fair play. The aim of financial fair play is not to make all clubs equal in size and wealth, but to encourage clubs to build for success rather than continually seeking a 'quick fix'. Football clubs need an improved environment where investing in the future is better rewarded so that more clubs can be credible long-term investment prospects.

By favouring investments in youth and stadium infrastructure and by setting the acceptable deficits in absolute million € terms and not relative percentage terms, the break-even assessment has been structured to be less restrictive to smaller and medium-sized clubs. In time, more smaller and medium-sized clubs will have potential to grow.

11) Some players do not belong to the clubs they play for, but to other investors or agents. Is this allowed with financial fair play?

This is called third-party ownership and is currently allowed according to FIFA regulations. However, within UEFA's financial fair play regulations clubs are required to disclose information on third-party ownership arrangements and, in addition, any income arising from these arrangements is delayed until the player is sold.

UEFA has asked FIFA to prohibit this worldwide. Should FIFA not take the appropriate steps, UEFA would be ready to implement its own regulations to ban third-party ownership arrangements at least for UEFA competitions.

12) Why have no clubs been banned from UEFA competitions?

Exclusion from competition is of course a possible sanction if appropriate. However financial fair play is designed to create a fair and properly regulated system of financial management and sanctions are based on that aim. UEFA believes the sanctions and agreed settlements are appropriate.

13) Why has the UEFA Club Financial Control Body reached settlement agreements with clubs?

The CFCB's investigatory chamber can offer clubs settlement agreements, a common instrument for financial regulators to help facilitate compliance. Article 15 of the Procedural rules governing the UEFA Club Financial Control Body states that "settlement agreements may set out the obligation(s) to be fulfilled by the defendant, including the possible application of disciplinary measures and, where necessary, a specific timeframe. The CFCB chief investigator monitors the proper and timely implementation of the settlement agreement. If a defendant fails to comply with the terms of a settlement agreement, the CFCB chief investigator shall refer the case to the adjudicatory chamber."

14) Can you explain the financial measures handed out and how the figures were determined?

Financial measures are linked to each club's earnings from their participation in European competition during the assessment period.

15) What are the player registration restrictions and how they are determined?

The Club Financial Control Body felt that it was imperative that clubs face sporting restrictions as well as financial measures as a result of non-compliance with the break-even requirement. The restriction on the number of players to be registered on the A list serves the dual purpose of limiting the on-field benefits arising from non-compliance while also assisting in achieving the overall objectives of the break-even requirement. The A list restriction is further supported by the restriction on the number of new registrations that clubs can add to the A list and on limits on their net transfer spend.

16) What is the appeal process for other clubs?

Any decision of the CFCB chief investigator to conclude a settlement agreement or to apply disciplinary measures may be reviewed by the adjudicatory chamber at the request of a directly affected party within ten days from the date of publication of the decision.

17) How are clubs that have contravened financial fair play being incentivised to become break-even compliant?

Settlements require the clubs to become compliant with financial fair play within a short period of time. Failure to meet settlement terms will lead to the club being automatically referred to the adjudicatory chamber.

Conversely if a club fulfils each individual requirement of the settlement, it may be released from the limitation on the number of players for UEFA competitions for the following season. If a club becomes break-even compliant during the course of the settlement, all sanctions shall cease to apply for the following season, with the exception of the non-conditional element of the financial measure.

18) Where does the money from the financial measures go?

UEFA will not keep any of the money. UEFA will distribute money from financial contributions by making solidarity payments to other European clubs according to an agreed formula. The exact details for redistribution of funds will be decided by UEFA and its Executive Committee in due course.

19) How does financial fair play deal with debt?

Manageable debt geared towards the long-term development (stadium, academy, infrastructure etc) of the club is efficient for financial planning and is standard practice in most industries. Debt taken on board, including the monetisation of future income, to fund day-to-day operating activity such as wages and transfer fees or to fund short-term cash flow shortfalls can create problems and must be managed effectively.

Financial fair play through the requirement of clubs to meet their financial obligations and to break even prevents the accumulation of losses leading to unmanageable debt.

Last updated: 17.45CET, 20/05/2014

Last updated: 04/10/14 15.23CET

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