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(Bloomberg) -- The credibility of UEFA’s financial fair play rules has been questioned after Europe’s top soccer regulatory body lost in its attempt to ban Manchester City for two years from the Champions League.
Soccer governing body UEFA had barred the English Premier League team from Europe’s most prestigious competition for two seasons and fined it 30 million euros ($34 million) for overstating sponsorship revenue between 2012 and 2016.
In an almost complete reversal, the Independent Court of Arbitration for Sport in Switzerland said Monday that Manchester City did not hide equity funding as sponsorship contributions, although it failed to cooperate with UEFA authorities. The fine was also reduced to 10 million euros.
The ruling is a setback for UEFA and its efforts to prevent teams from spending without limits in order to win trophies.
“It’s obviously a blow to UEFA,” said John Shea, senior associate at law firm Lewis Silkin. “I would expect UEFA to implement some changes in light of the decision in order to strengthen the regulations and ensure that clubs won’t have this route of appeal in the future.”
At stake was a potential 100 million euros a season in revenue, the ability to hang onto top players who want to compete at the highest level and pride in one of the world’s most famous soccer clubs. No team from any of the big five leagues in Europe has ever been banned from the Champions League for breaching its financial fair play rules.
Since being acquired by Abu Dhabi in 2008, Manchester City has grown to become the world’s sixth-biggest soccer club with annual revenue of more than 600 million pounds, according to Deloitte’s Money League. Last year it won the Premier League, the world’s richest soccer competition. Silver Lake owns around 10% of Manchester City, valuing it at about 5 billion pounds.
Under the financial fair play rules introduced in 2011, teams have to balance their spending within revenues and are prevented from accumulating debt. Rivals say that breaches of the regulations allow the offending teams to spend more on top players, distorting competition.
“We have to reassess whether the CAS is the appropriate body to which to appeal institutional decisions in football,” said Javier Tebas, president of La Liga. “Switzerland is a country with a great history of arbitration, the CAS is not up to standard.”
The CAS decision has implications for this season’s race to qualify for next season’s Champions League tournament. Chelsea, Leicester City, Manchester United, and Wolverhampton Wanderers are all competing to join Liverpool, but now only two of them will qualify, instead of three had City been banned.
The threat of being banned from the Champions League for overspending has been widely acknowledged as having helped to improve the profitability of Europe’s soccer clubs. In 2011, according to UEFA, the region’s 900 or so teams in top divisions went from a combined 1.7 billion euro-loss in 2011, to a 140-million-euro profit in 2018, according to UEFA
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