UEFA’s Malaga ban may not curb reckless spending

Switzerland is a country famed for its neutrality but it was in the Court of Arbitration for Sport (CAS) in Lausanne that the first major battle in the age of UEFA’s financial fair play (FFP) regime was fought. European football’s governing body defeated the challenge of Malaga, who had protested against a ban from European competition for next season, imposed for failing to pay salaries and tax bills on time.

Malaga’s place in the Europa League would have gone to Rayo Vallecano, but they too have been denied a UEFA license to compete in their competitions because of outstanding payments. And so the final Spanish spot in the Europa League goes to Malaga’s Andalucian neighbours Sevilla.

UEFA originally announced their decision to ban Malaga from European competitions on December 21st, a day after they had been drawn to play Porto in the second round of the UEFA Champions League. They were also given a second season’s suspension if they failed to make overdue payments by March of this year, although that deadline was met.

Qatari tap runs dry
Malaga’s story is a strange one – having been bought in 2010 by Sheikh Abdullah Al-Thani, who is related to Qatari royalty, they received hefty investment. Martín Demichelis, Ruud van Nistelrooy, Julio Baptista, Jérémy Toulalan and Santi Cazorla were all signed as the club looked to break into the elite of Spanish football. That they did, finishing fourth in La Liga last season, but the cracks were emerging. Late payments, unpaid wages and the apparent drying up of the money which had flowed so freely beforehand created the chain of events which led to their suspension from European competition.

Malaga’s experience shows that UEFA is serious in its desire to uphold financial fair play, designed to force clubs to break even and stop running up annual losses. It also seemed convenient for UEFA’s first battle to be against the Spanish side. Malaga may be owned by someone related to Qatar’s ruling family, but they are hardly European royalty in sense of football. This is no Real Madrid or Bayern Munich, or even a Chelsea, who whilst heavily bankrolled by an oligarch for a decade, have been consistent features of the knock out stages of the Champions League for years. This was an easy target – as the club themselves claimed, they were “sacrificial lambs”. And unlike Chelsea, who coincidentally have a sponsorship deal with UEFA Champions League sponsors Gazprom, the tangle web of vested interests does not appear spun in Malaga’s favour.

A second challenge for UEFA
If Malaga represented the first battle the second is being fought as this is written in Brussels. Jean-Louis Dupont, the lawyer who famously won Jean Marc Bosman the right to move on a free transfer and thus paved the way for the empowerment of players and agents at the expense of clubs, is challenging UEFA through a Brussels court, requiring the European Court of Justice to form an opinion on FFP.

Dupont believes competition laws and free movement of workers regulations are contravened by UEFA’s new system, and is arguing that there are better alternatives available, such as a ‘luxury tax’. If successful, Dupont could have a major impact on European football for a second time, but for now UEFA maintains the upper hand. That was underlined when, this Thursday, they denied Greek side Panathinaikos a license to play in Europe next season for breaching FFP regulations.

Gill appointment forces Premier League compliance
So what has been the effect of these battles so far? The evidence from the Premier League, which at the time that FFP was revealed was assumed to be the main target, is encouraging. Billionaire backed Chelsea and Manchester City have both been noticeably more restrained this summer. Jose Mourinho at Chelsea is reported to be working within fair play, rather than against it.

Perhaps that is because of the Premier League’s own financial fair play rules, introduced last season to force clubs to break even. Or it could be to do with the fact that UEFA has appointed David Gill as the chairman of the club licensing committee which decides on the teams who are given permission to play in European competitions.

Given his role at Manchester United for most of the last decade, where he served as their chief executive, Gill’s appointment is a clear statement of intent – and a warning to Chelsea and Manchester City. United have been firm advocates of FFP both in Europe and within the Premier League itself, and Gill has said previously that sanctions have to be placed on teams if UEFA’s new system is to work.

Paris St Germain and Monaco pose FFP threat
Ironically it is Platini’s native France which seems to pose the greatest threat to his new regulations. AS Monaco have recently spent over €100 million already and are not finished with their summer spending. The Malaga owner’s cousin, Tamim bin Hamad Al-Thani, who owns Paris St Germain, is yet to open their chequebook but could easily match Monaco’s lavish expenditure. At the same time Monaco, who do not even have Champions League revenue to supplement their revenues, famously entertain crowds of around 5,000 on a regular basis. How could they possibly comply with FFP?

There is a way that, whilst making losses beyond the accepted deviation of €45 million over rolling three year periods, Monaco or any other team can escape censure. UEFA’s regulations do indicate that a club showing a positive trend towards break even should not in principle be sanctioned. But that is only if the difference between the overall loss and acceptable loss for either 2013-14 or 2014-15 is due to wages for players signed prior to 2012. In Monaco’s case, that is unlikely to help them with their expenditure so recent. But for Paris St Germain, they could conceivably discount the wages of players they signed before 2012 when UEFA comes to consider licenses to play in their competitions in 2014-15.

Monaco’s plans are harder to decipher – perhaps they are undeterred by FFP perhaps because they see exclusion from European competition as a means to an ends. They may find themselves banned for 2014-15 if they qualify, but in future years they can meet the requirements if they reduce expenditure. This shows that in the era of FFP, if you wish to break the monopoly of the leading clubs in a particular league your initial outlay must be greater than it was previously. Sustained investment over five or six years would see a team repeatedly fail FFP year after year – one massive investment can limit the damage and potential penalties to a single season.

The Malaga case may represent a sign of UEFA’s intent – they want clubs to play by their new rules, and live a financially responsible existence, and even the billionaires of the Premier League have sat up and taken notice, but reckless spending remains a feature of the modern game as Monaco show. In spite of the Malaga case, the irony is that Monaco illustrate how UEFA’s FFP initiative may not be enough to curb reckless spending.