Manchester City v UEFA: Arbitration’s Inherent Risks Exposed

Football Arbitration Blog Image

Resorting to Alternative Dispute Resolution instead of state court litigation is often motivated by time efficiency. In fact, it is not unheard of (to put it lightly!) for national courts to take years to produce a final verdict. In football, arbitration has inevitably become the primary vehicle for dispute resolution. It is necessary for final decisions to be taken quickly, considering that only one year of inactivity may change a team’s or a player’s destiny. 

This article argues that the time efficiency arbitration offers comes at a great cost, namely the quality of the judgment. The case involving Manchester City F.C. and UEFA illustrates this quite frighteningly.

Essentially, UEFA believed MC to have included false sponsorship deals in its financial statement, so as to increase their spending limit. MC appealed this decision to the Court of Arbitration for Sports (CAS). UEFA’s original decision was overturned, and ultimately the appeal was allowed.

This article covers:

  1. The Factual Chronology of the Case
  2. Reasons for the Appellant’s Victory and the Strength of their Case
  3. Conclusion
  4. Bibliography

Factual Chronology of the Case:

  1. 2012-2013: Abu Dhabi United Group (ADUG), MC’s parent company, funded payments to the club by falsely registering them as independent sponsorships from Etisalat (telecom company).
  2. May 2014: year of breach. MC agrees on an FFP settlement agreement where the club’s financial record was supplied. This included the fake Etisalat sponsorship.
  3. 2018: exposure. Der Spiegel (a German magazine) leaks internal emails within ADUG. The artificial nature of Elistat’s sponsorships were revealed, ultimately attracting UEFA’s attention.
  4. 2018: UEFA requested MC to collaborate in order to inspect a potential breach of the FFP settlement agreement. Evidence of the “Der Spiegel” leaked emails were requested. MC did not respond.
  5. February 2020: CFCB, UEFA’s financial control body, bans MC from the Champions League for a total of two seasons. In addition, the club was fined £30m.
  6. July 2020: MC appeals this decision to CAS. The appeal was upheld.

Reasons for MC’s Victory and the Strength of their Case:

Looking at the facts of the case, I would argue that CAS’ decision seems particularly illogical. The legitimacy of the “Der Spiegel” leaked emails was never put into question. CAS admitted the club “was well aware” that the payments were not funded by a “genuine sponsorship.” MC’s breach is undeniable. So why was UEFA’s original decision overturned?

CAS’ decision making panel

CAS’ decision making panel for the case was made up of three men. According to CAS rules, each party should appoint one “independent” arbitrator, who has no particular connection with any of the parties. Additionally, the chairman of the panel must be selected by CAS’ appeals arbitration division. After analysing the procedures and how the panel was selected, it is safe to say that these rules were not adhered to in our case.

What attracts particular attention, here, are the appointed member and the chairman of the panel.

→ Rui Botica Santos (chairman of the panel)

Mr. Santos, a Portuguese lawyer, was directly recommended by MC, and was not, as the rules state, independently appointed by the CAS appeals arbitration division. It is likely UEFA did not object to this fundamental aspect of the case, in an attempt to maximise the time efficiency.

Here, it is already evident how the speedy nature of CAS decisions and the general will to resolve the dispute quickly have eventually come at a great cost for UEFA. In fact, their decision to overlook this cardinal element of the case ultimately contributed to a partially independent decision-making body.

→ Andrew McDougall QC (member of the panel appointed by MC)

Here, too, MC appears not to have acted within the boundaries of CAS’ regulations. As previously mentioned, the appointed arbitrator must have “no particular connection with any of the parties.” McDougall QC is a lawyer at White & Case, Chair of the Operations Council for Europe, the Middle East and Africa. Nonetheless, Etisalat, the telecom company under whose name the false sponsorships were made, is a White & Case client. Therefore, it is difficult to persuasively argue that McDougall QC had acted impartially and independently in a case involving a firm’s client. MC’s fairly unconvincing argument was that although his firm had relations with Etisalat, the appointee himself had no connection with the telecom company. This argument appears even less persuasive when one remembers that McDougall QC is also Chair of the Operations Council for the Middle East where Etisalat has its headquarters and mainly operates.

The presence of this inevitably partial member of the panel offers an insight into the loose enforcement of CAS regulations. What is the point of requesting an “independent” appointed member if the rule is not strictly enforced? I submit that state court litigation would very unlikely have accepted a breach of this nature. Thus, this case is the epitome of CAS’ fragility.

UEFA’s delay

Although there are some clear procedural faults to be taken into account, the substantive portion of the case seems (at the very least) debatable. However, it is very likely that the unbalanced nature of the panel has contributed to the conclusion that MC was not in breach. The arguments can be found below.

MC’s breach was not taken into consideration because the time limits for UEFA’s punishment have elapsed. Rules state that “prosecution is barred after five years” of an FFP agreement breach. Therefore, the panel reasoned that UEFA’s punishment of a two season ban (given in 2020) surpassed the limit of five years, considering that the original breach was made in 2014. However, I would like to argue that this reasoning is not well-founded on the facts. 

It is very frequent within the law for time limits to be imposed upon parties. However, most of the time, it operates on the basis that the clock starts ticking once the prosecuting party is aware they conceded a tort/harm/injustice. In this case, however, MC’s fraudulent intentions coincidentally (or not, perhaps) have been overlooked by UEFA, which altogether allowed exactly five years to pass. Therefore, the time limit of five years should not have started in 2014, the date of the breach, but in 2018 when UEFA was made aware of a possible breach of FFP through the “Der Spiegel” leaked emails. In my opinion, it is not fair for CAS to assume that UEFA could have punished MC between 2014 to 2019, when four out of the five years UEFA was not aware of the fraud in the first place.

It can also be inferred that this element of the case would not have been overlooked by a state court. At the very least, a state court would unlikely dismiss such a crucial issue without close analysis and consideration, as opposed to CAS. Thus, CAS’ limitations are interconnected with the procedural issues that arose. Probably (due to the points mentioned above) the partially independent panel had a stronger tendency to overlook this issue, compared to a valid decision- making team.

Conclusion:

Considering the above, alternative dispute resolution, under the form of CAS, is not an adequate tool for disputes arising in the football arena. Although it is time efficient and other advantages may attract clubs to resort to this solution, some great limitations arise at the cost of these benefits.

Not taking into account substantive law and loosely enforcing procedural rules seem the most prominent issues with CAS in the Manchester City case. These elements both contribute to the greatest issue, namely that justice seems not to have been achieved in this case. All the parties involved were aware that MC acted unlawfully to circumvent the regulations set out by Financial Fair Play. Nonetheless, the case saw MC emerge victorious without being held liable for their  fraudulent acts. This results now in the club being unjustly advantaged and not operating on a level playing field with other teams. On a wider scale, the negative consequences of such decisions are particularly apparent when MC’s unfair advantage is compared to the position of middle sized teams. Because these aim to become a top team, they are forced to sell their most important players in order to avoid a breach of FFP. For example, AS Roma sold Mohamed Salah to Liverpool, one of today’s top scoring and top performing players in the world, for a mere sum of £40 million.

Financial Fair Play was enacted to avoid polarisation between football clubs, attempting to limit excessive spending by the top teams. However, it can be said that its lack of enforcement, partly due to CAS’ unreliability, has resulted in a greater gap than before between European teams.

Bibliography:

https://www.tas-cas.org/fileadmin/user_upload/CAS_Award_6785___internet__.pdf

https://www.theguardian.com/football/2020/jul/28/uefa-claim-against-manchester-city-over-sponsor-money-time-barred-cas-rules#:~:text=The%20findings%20that%20led%20to,sport%2C%20which%20overturned%20the%20CFCB’s

https://www.independent.co.uk/sport/football/european/man-city-uefa-ban-appeal-cas-verdict-reasons-a9643511.html

https://www.tas-cas.org/en/arbitration/code-procedural-rules.html

https://www.fifa.com/who-we-are/legal/court-of-arbitration-for-sport/

https://www.forbes.com/sites/zakgarnerpurkis/2020/07/29/manchester-city-vs-uefa-judgement-reveals-new-depths-of-paranoia/

Leave a Comment

Your email address will not be published. Required fields are marked *