Leicester City and the EFL: a sports lawyer’s perspective
Samuel Cuthbert is a sports law barrister at Outer Temple Chambers.
He has featured in several major cases, and more recently has provided comment to CNN, The Guardian, and The Athletic discussing the latest charges against Everton for PSR breaches.
He's also from Leicester. He is now on hand to try to help us all make sense of the recent news.
JT: What does the statement from the EFL actually mean in layman's terms?
SC: In short, Leicester were on course to breach the EFL Profitability and Sustainability Rules by the end of the season.
The EFL, by way of the Club Financial Reporting Unit (CFRU), issued a determination that Leicester submit a business plan which would be ratified and enforced by the EFL, to realign the club with its duties regarding financial compliance.
Leicester took issue with that because they were in the Premier League (PL) for the lion’s share of the period in question and argued the PL rules rather than the EFL rules applied.
Leicester took the matter to the Club Financial Reporting Panel (CFRP) which agreed with Leicester that the CFRU had acted beyond its powers or ultra vires.
Probably more concerning for Leicester is that the CFRU issued a second determination that Leicester submit a business plan based on financial information received after November 23, 2023 as well as a Future Financial Information forecast provided to the CFRU.
This didn’t form a part of the matter before the CFRP. Leicester haven’t contested the suggestion that they could be in breach of the PSR rules for that period.
Regardless of whether Leicester are promoted, sanction will nonetheless follow if they are found in breach for this season.
I would think there’s a good chance that will be a fine, given the difficulties of enforcing a points deduction on a team in a different league.
JT: It is obviously not good news, but many reactions on social media have been somewhat extreme, just how damaging is this news potentially for Leicester City?
SC: This is clearly an issue which is affecting football all the way to the top flight. No club wants to be sanctioned, but in order to protect the integrity of sporting competition the EFL need to enforce their PSR so as to minimise any sporting advantage that may be gained from overspending.
That said, I think a fine is likely given the difficulties I outlined earlier and that may be less damaging than a points deduction.
JT: Do the timescales involved in this kind of regulation enforcement make a mockery of sporting competition, when points deductions are arbitrarily handed out at random times across multiple seasons?
SC: I think the approach taken by the Everton Appeal Board is very sensible on this point. It emphasised the point that any breach of rule E.51 (i.e., any PSR Calculation showing losses of over £105m over the relevant period) warrants a points deduction, and nothing less than a points deduction.
The reasoning given for that is that only a points deduction, with its immediate and overt effect, has the appropriate power of disincentive for clubs to remain within the upper loss threshold required to maintain the aim of an FFP regime.
JT: In your view, do these rules effectively prevent any club from challenging the so-called big six in the future?
SC: I’m happy to make the case for the PSR.
It’s important to remember that the EFL and the PL have different profitability and sustainability rules governing how much they can lose in a given accounting period. Those rules apply freely and fairly to each club within the respective leagues.
Maintaining financial propriety across those clubs is a central aspect of safeguarding the future of football clubs, and with one eye on the cultural significance of football clubs for funs, it must be right that those protections are in place.
The rules aren’t about inhibiting smaller clubs from being able to challenge the big six, they’re about making sure that clubs are accountable for the financial decisions they take.
JT: How significant is the fact that Leicester have many players out of contract in the summer? Would losing players on free transfers make a difference or is shortfall purely about raising cash by selling assets?
SC: Well, while the club may not receive additional funds for that player asset, the sums a transferred player would have been paid by Leicester won’t remain a liability on Leicester’s balance sheet. That may help get them under the upper threshold limit.
Also, there may be a mitigation argument flowing from free transfers if you can show that any sporting advantage was quelled. As I understand it, Nottingham Forest may be running a similar albeit not identical argument over the sale of Brennan Johnson out of the relevant accounting period.
JT: Finally, one argument being mooted from the Leicester City perspective is that we stopped spending at various points to try to comply with the financial regulations, while other clubs continued to splash out.
Does this carry any weight in legal terms or is it as simple as “you didn’t comply, you face the consequences”?
SC: It’s not a great argument in my view. As I mentioned earlier, the rules apply freely and fairly across the board.
Breaches by multiple clubs don’t cancel each other out and nor would you want it to because the application and enforcement of the rules is centrally important to maintaining sporting integrity.
