Leaks show City were prepared to take down UEFA.

By Colin Savage (@PrestwichBlue)

Imagine this scenario. You’re driving to work on a Monday morning, down the same road you always drive down. It’s a 40mph limit and there’s a speed camera there to remind you.

You observe the limit though, so you’ve got nothing to worry about. Unknown to you, later the same day, the local council decide to change the speed limit to 30mph but it’s still showing as 40mph when you drive home that evening.

They change the signs overnight but a few days later you get an Intended Notice of Prosecution for a speeding offence, in which you’ve been caught doing 40mph in a 30mph limit on that Monday evening.

You’re puzzled as it was a 40mph limit then, so you query it with the police, who tell you that the limit was imposed on Monday lunchtime and that you’d broken it in the evening. You protest that the signs all said 40mph but the police won’t back down.

Would you meekly accept the 3 points and £100 fine or would you seek advice from a lawyer and take the matter to court?

You naturally take the latter course and the lawyer, believing you have a strong case, writes to the police.

They respond by making an offer that if you’ll accept a written warning about your speed then they’ll let the matter drop.

This has virtually no impact on you and there’s no consequences for your insurance policy so while you think it’s  nonsense, you accept it to save the time and expense of a court case.

You may wonder what this has to do with the recent Football Leaks revelations about City, PSG & FFP.

These documents didn’t show anything particularly new but did shine some light onto the background to the sanctions imposed in 2014.

One thing they showed was that City were apparently quite prepared to take the legal route over UEFA’s punishment over failing FFP, spend whatever was needed and tie UEFA up for as long as it took. They clearly thought they had a strong case but why did they think that?

Let’s go back to the genesis of FFP.

It was first mooted in 2009 and introduced in the 2011/2 season, with the first assessment taking place in 2014 following the publication of the first two years’ accounts (for the 2012 and 2013 financial years) that were to be assessed.

But there was some concern among clubs when it was first mooted about player contracts they’d signed before FFP had been discussed.

Clubs sign long-term contracts with new players, typically of 5-years duration. The clubs were worried that these contracts could tip them into failing FFP despite not being aware of the ramifications when they originally signed these contracts.

UEFA accepted these arguments and added an additional provision into the FFP rules, known as Annex XI.

This allowed clubs that had failed FFP to plead mitigation, and in principle avoid punishment, if they’d failed because of wages paid under contracts that had been signed prior to June 2010.

To do that they had to meet 3 tests that were set out in the detailed ‘toolkit’ that clubs received to help them complete their FFP returns. The tests required clubs to show that:

  • The loss in their 2012 accounts was solely due to the wages paid under the Annex XI provision;
  • The overall FFP loss, in the aggregated 2012 & 2013 accounts, was due solely to the 2012 loss;
  • They were improving their financial position (i.e. 2013 financial results were better than 2012’s)

The important point is that the first test only depended on one set of accounts – the 2012 year-end ones – whereas the other two required both sets of accounts.

That meant that if you didn’t meet the first test, you couldn’t use Annex XI as mitigation.

But if you did meet it, then you knew what you had to do to meet the other two tests. To help clubs do the calculation for these tests, UEFA included worked examples in their toolkit.

The one for the first test was quite complex, probably unnecessarily so, but based on those 2012 accounts and some other information I had, it seemed that City would – just – meet that first test.

It also seemed that City had been very careful to stay close to UEFA to ensure they were on the right lines on this.

That meant that if the 2013 accounts showed the right figures then City would fail FFP but be able to claim mitigation under Annex XI and, in principle, avoid any sanctions.

But there was a nasty surprise in store.

After City had finalised and published their 2012 accounts, UEFA released a revised version of Annex XI which incorporated what was admittedly a simpler test for determining the first test of whether 2012 losses were solely due to the wages covered under Annex XI.

The problem was that City, having seemingly met the original test, now didn’t meet the revised one meaning they failed FFP without any hope of mitigation.

That’s where the problems started and perhaps you can now understand the speeding analogy.

To use another one, imagine having to do a two-part exam which is necessary for your job.

The published pass mark for the first part is 70% and you achieve 73%. You start studying for the final part but part-way through your studies you’re told that the examining body have changed their mind and the pass-mark for the first part has been increased to 75% and that you’ve now failed an exam you thought you’d passed.

You might think that scenario’s a bit unlikely but City met the test that was in force at the time their accounts were published whereas a subsequent amendment changed all that.

The question is, why did UEFA change the calculation? Was it part of a carefully-laid trap, having worked with City at every stage of the process and assured them that they were on course to meet the key test (which I believe they did) or was it just the result of feedback that the original calculation was flawed (which I think it was) and the desire to introduce a simpler one?

Either way it shouldn’t have mattered. City had met the criteria for establishing compliance at the time the test was applied to their published 2012 accounts and that should have been enough.

I had assured people, based on the information I had, that we wouldn’t be facing any sanctions.

But I was unaware of the change to the Annex XI calculation.

It was only when I saw our chairman’s statement, which mentioned a “fundamental disagreement” about how wages paid under contracts signed prior to June 2010 should be calculated that I checked again and saw that the revised toolkit had been issued in April 2013.

The process of dealing with FFP failure, as set out in the regulations, was that UEFA could do one of four things: nothing, impose a limited punishment, agree a voluntary settlement or, in the worst case, refer the case up to the Adjudicatory Chamber for a more serious punishment if a voluntary settlement couldn’t be reached or wasn’t deemed appropriate.

In City’s case they wanted a negotiated settlement. If that wasn’t possible then it would be one imposed by UEFA.

City were in no mood to talk however.

They felt UEFA had pulled a fast one and were threatening to get lawyers involved and tackle UEFA head-on rather than agree or accept a punishment.

Whether they were threatening to challenge the whole basis of FFP, just take the narrow view on the legality of the Annex XI change, or attack on both fronts isn’t clear but UEFA were clearly very nervous.

This was the first assessment under FFP and they needed to show that the rules had teeth. On the other hand, imposing a punishment on City (who were then well on the way to achieving break-even) would risk legal action for years to come that could paralyse or even see the end of UEFA.

It was therefore crucial that they achieved a negotiated outcome whereby they were seen to punish us but not to such a degree that we went to court.

This scenario is commonly found in commercial, political or legal circles, where compromises are often reached before the courts get involved.

After some threats and counter threats, UEFA seemed to have told us to name our price and we agreed a set of sanctions that met the required objectives.

City still weren’t happy but Khaldoon told us we would “take the pinch”. We did, went on to break even and FFP hasn’t been a problem since.

There’s nothing new in these leaked “revelations”. What they do, is highlight City’s anger and how serious their threats of legal action were.

They also show that UEFA were desperate to negotiate a deal. Anyone looking for some sort of smoking gun is looking in the wrong place.

This Article was written by Colin Savage (@prestwichblue) for The BoltFromTheBlue website. All credit and rights go to Colin Savage for his analysis & opinions in this piece.