A leading sports lawyer explains what the football regulator will and won’t do
The government has finally introduced the long awaited and highly anticipated Football Governance Bill, which will see the establishment of an Independent Regulator for Football (IREF) to oversee the men’s game in England.
This is a bold move and arguably the most controversial and significant legal and regulatory intervention into the game since the laws were codified in 1863.
While there are certainly some eye-catching provisions – not least the fact that the regulator will be given powers to fine clubs up to 10 per cent of turnover for non-compliance, and the ability to impose a “new deal” on financial distributions between the Premier League and below – many will see this as a missed opportunity.
This is particularly true when it comes to ensuring that the fast-growing women’s game, which is not included within the regulator’s remit, does not suffer the same pitfalls faced by the men’s game and is given the opportunity to thrive on the back of the recent success of the Lionesses.
The government does not appear to have fully embraced all the proposals from the Tracey Crouch fan-led review, especially with respect to giving the regulator full powers, including the ability to impose points reductions, in relation to the financial regulation of clubs on a day-to-day basis.
Nor has it fully taken on board the feedback from the Premier League, which has pointed out the risks of over-regulating a clear UK global success story.
It could be said that we might end up with something of a halfway house, with a regulator that in theory has lots of power but in practice is unlikely to wield those powers because it hasn’t been given the appropriate tools to do so.
For instance, we know that the Premier League and EFL will retain control over financial fair play regulations despite the regulator being given the objective to “improve financial sustainability of clubs”.
As a result, we are likely to see continued controversy from the Premier League and EFL’s decisions with respect to enforcement, as we have seen in recent months.
‘Uncertainties and ambiguities’ in regulator plans
It also remains unclear how the regulator will actually be able to achieve its objectives beyond the annual licensing tests that will be applied, given that it will not be undertaking constant supervision (or even setting budgets, as the regulator in Spain does for its leading clubs).
There are uncertainties and ambiguities in lots of other areas too – including the approach to the renewed Owners’ and Directors’ test (OADT).
In essence, it appears that any existing club owners and directors will effectively be given a free pass when it comes to the OADT, with the stricter, revamped OADT only applying to new investments and appointments rather than existing owners and directors having to subject themselves to the higher thresholds.
Owners who get into financial difficulty and directors who commit misdemeanours part-way through a season may also slip under the radar.
It also remains to be seen how Fifa will react to the new legislation – particularly in light of the fact that ultimately the regulator’s decision could be challenged by way of Judicial Review in open court rather than Fifa’s statutes, which prohibit “recourse to ordinary courts of law” and require member associations to insert mandatory arbitration clauses in domestic rules.
This is truly unprecedented and means that football-related disputes would for the first time be heard in public rather than in private, as is generally the case now.
Typical disputes that could arise include claims following a decision by the regulator not to sanction certain pre-season tournaments that clubs may wish to participate in, all the way through to the potential ability for the regulator to disqualify owners.
On that particular point, while there is no suggestion that the regulator would take such a decision lightly and further detail is still needed, on paper this could potentially amount to the nationalisation of a club by the regulator where it considers there has been “persistent and wilful non-compliance”. This may put many new owners off acquiring English clubs.
Headaches in Premier League boardrooms
The additional regulations also come at a time when clubs have experienced significant changes to other day-to-day regulations that they must comply with – including with respect to football agents, financial fair play modifications and other general legislative developments on the back of Brexit.
Already stretched legal teams will now have to prepare themselves for applications for a provisional and full licence that will follow shortly.
In summary, while today’s announcement will be welcomed in many quarters – particularly among fan groups and the EFL, who will no doubt be excited about the prospect of an imposed and improved financial deal – it will only add to the pressures and costs that in-house legal teams within clubs face and ultimately may cause additional headaches in the boardroom, particularly with respect to owners in the Premier League.
Such clubs may not only be compelled to share more of the spoils but will also want assurances that adequate regulations will be brought in to ensure that any future amounts received are used for the benefit of all fans and are not squandered.
Ironically, at the moment while the regulator may have the power to redistribute it remains to be seen whether it will also be able to truly regulate to avoid such an outcome.
Simon Leaf is a Partner and Head of Sport at Mishcon de Reya and author of the chapter Financial Regulation of Football in the leading textbook Football and the Law.