On 28 March 2017, the Court of Arbitration for Sport (“CAS”) confirmed in a media release that it had issued a consent award in the arbitration procedure between the Serbian football club FK Partizan and UEFA.  That procedure related to the finding of the Adjudicatory Chamber of the UEFA Club Financial Control Body (“CFCB”) that FK Partizan had breached the UEFA Club Licensing and Fair Play Regulations (the “FFP Regulations”) in respect of overdue payables.

In particular, the CFCB determined that FK Partizan had failed to satisfy the overdue payable requirements in the FFP Regulations in respect of certain sums owed to the Serbian tax authority.  As a result, the CFCB excluded FK Partizan from participating in the next UEFA club competition for which it qualified in the next three seasons.

FK Partizan then appealed the decision of the CFCB to CAS.  In the proceedings before CAS, new evidence was presented by FK Partizan which clarified its overdue payables position with the Serbian tax authority.  In view of this, UEFA and FK Partizan agreed that the exclusion imposed by the CFCB was deemed to have been made conditional on the club’s timely payment of the overdue payables identified as at 30 September 2016.  As FK Partizan had now satisfied that condition, it was agreed that it would be eligible to compete in future UEFA club competitions.  UEFA and FK Partizan therefore entered into a settlement agreement which was embodied in the consent award, which concluded the CAS arbitration.

This case is an interesting insight into the world of overdue payables and the impact that a dilatory approach to settling debts may have on a club.  The three year suspension from entry into UEFA competition was a serious punishment which would have affected FK Partizan in a number of ways.  Most obviously, it would have had a sporting impact in that it would have prevented the club from pitting its wits against the best clubs across Europe in UEFA competitions.  A subsidiary effect of that ban on participation would have been to prevent the club from earning the lucrative sums that are on offer for playing in those competitions.  It would also have sent out a clear message to other clubs that FK Partizan was a club that reneged on its agreements.  In turn, this may have impacted the club’s ability to effectively work in the player transfer market.

Against this background, the rules regarding overdue payables can be seen to have serious effects on the ways in which a club manages its financial affairs.  In view of the possible sanctions for non-compliance, there is a real incentive for clubs to ensure that any sums due to players, staff, tax authorities and other clubs are settled in good time.

In order to better understand the rules with which clubs must comply, the regulatory framework behind the overdue payables regime is set out below.

The FFP Regulations

The FFP Regulations were implemented by UEFA to support its goal of achieving financial fair play amongst clubs.  This is a concept which is described by UEFA as being about improving the overall financial health of European club football.

In order to participate in a UEFA competition, a club first needs to acquire a licence, which is granted to a club by the relevant national association (or sometimes league).  A licence will only be granted where a club has complied with the FFP Regulations, which set out in detail the financial parameters within which clubs must operate.

Certain levels of debts are accepted under the FFP Regulations, it being acknowledged that debt is part of a normal financing approach for any business.  However, the build-up of net debt is restricted by the break-even rules set out in the FFP Regulations.  These require owners or investors to recapitalise and cover any losses.  As part of this process, certain debts are given particular importance and these are monitored on a regular basis by the CFCB.  These include debts due to players or key staff, social/tax authorities and other clubs.  In short, these are what we understand as overdue payables.

The notion of overdue payables is fleshed out in more detail at Annex VIII to the FIFA Regulations.  There, it is explained that payables are considered as overdue if they are not paid according to the agreed terms.  Payables are not considered overdue if the debtor club is able to prove by the relevant time (as to which, see below) that:

• It has paid the relevant amount in full; or

• It has concluded an agreement which has been accepted in writing by the creditor to extend the deadline for payment beyond the applicable deadline; or

• It has brought a legal claim which has been deemed admissible by the competent authority or decision-making body. If the decision-making body considers that such claim has been brought or such proceedings have been opened for the sole purpose of avoiding the applicable deadlines, the relevant amount will still be considered as an overdue payable; or

• It has contested to the competent authority or arbitration tribunal a claim which has been brought or proceedings which have been opened against it by a creditor in respect of overdue payables and is able to show to the reasonable satisfaction of the relevant decision-making bodies that it has established reasons for contesting the claim or proceedings. However, as above, if the decision-making body considers the reasons for contesting the claim or proceedings to be manifestly unfounded, the amount will still be considered as an overdue payable; or

• It is able to demonstrate to the reasonable satisfaction of the relevant decision making bodies that it has taken all reasonable measures to identify and pay the creditor clubs in respect of training compensation and solidarity contributions that are due under the FIFA Regulations on the Status and Transfer of Players (the “FIFA Regulations”).

Under Articles 49 – 50bis, clubs must be able to show that, as at 31 March preceding the season in relation to which it is seeking a licence, it has no overdue payables towards:

• Other football clubs as a result of transfers undertaken prior to the previous 31 December; or

• Its employees as a result of contractual or legal obligations that arose prior to the previous 31 December; or

• Social/tax authorities as a result of contractual or legal obligations in respect of its employees that arose prior to the previous 31 December.

Those rules set out in detail the information that clubs must provide in respect of each of the above categories and how any liabilities must be accounted for in their balance sheet.  On the basis of the provided information, a decision will be made as to whether a licence will be granted to participate in UEFA competition.

The FFP Regulations also set out “enhanced” rules regarding overdue payables (at Articles 65 – 66bis).  These require that, as at 30 June and 30 September of the year in which the UEFA club competitions commence, the licensee must not have any overdue payables towards:

• Other football clubs as a result of transfers undertaken up to 30 June and up to 30 September respectively; or

• Its employees; or

• Social/tax authorities as a result of contractual or legal obligations in respect of its employees.

Sanctions for non-compliance

The CFCB is competent to determine whether clubs have fulfilled (and continue to comply with) the licensing criteria as set out in the FFP Regulations, including in respect of overdue payables.  Under the Procedural Rules Governing the UEFA Club Financial Control Body, the following disciplinary measures may be imposed against a club for non-compliance:

• Warning;

• Reprimand;

• Fine;

• Deduction of points;

• Withholding of revenues from a UEFA competition;

• Prohibition on registering new players in UEFA competitions;

• Restriction on the number of players that a club may register for participation in UEFA competitions, including a financial limit on the overall aggregate cost of the employee benefits expenses of players registered on the A-list for the purposes of UEFA club competitions;

• Disqualification from competitions in progress and/or exclusion from future competitions;

• Withdrawal of a title or award.

These sanctions may be combined.  There is therefore a strong incentive for clubs to comply with the FFP Regulations regarding overdue payables.  In turn, this helps encourage a healthier trading model within which clubs can feel a sense of protection when buying or selling players.

Article 12bis of the FIFA Regulations

The UEFA regime is necessarily limited to clubs that play under the auspices of UEFA competition.  There is no jurisdiction for the FFP Regulations to bite on clubs in, say, South America.  That void is covered by Article 12bis of the FIFA Regulations.

Under Article 12bis, clubs are required to comply with their financial obligations towards players and other clubs as per the terms stipulated in the contracts signed with their professional players and in respect of their transfer agreements.

In order for a club to be considered to have overdue payables under Article 12bis, the creditor must have put the debtor club in default in writing and have granted a deadline of at least ten days for the debtor club to comply with its financial obligations.

Any club that is found to have delayed a due amount for more than 30 days without a prima facie contractual basis may be sanctioned.  Those sanctions may include:

• A warning;

• A reprimand;

• A fine; or

• A ban from registering any new players, either nationally or internationally, for one or two entire and consecutive registration periods.

These sanctions may be applied cumulatively and repeated offences will be considered as an aggravating circumstance that may lead to a more severe penalty.  The execution of a registration ban may be suspended (though any such suspension would result in the imposition of a probationary period ranging from six months to two years).  If a club benefiting from a suspended registration ban commits another infringement in the probationary period, the suspension is automatically revoked and the registration ban executed.  It will then be added to the sanction pronounced for the new infringement.

Financial fair play among clubs?

The UEFA and FIFA rules certainly encourage clubs to act in a more fiscally responsible manner than might otherwise be the case.  It is difficult to argue against the positive impact of these rules.  According to UEFA, the introduction of the FFP Regulations has resulted in European clubs’ losses falling by two-thirds between 2011 and 2014, from €1.67 billion to €468 million, while overdue payables have reduced from €57 million in 2011 to €5 million in 2015.

The rules against overdue payables must therefore be welcomed as encouraging clubs to pursue a healthier approach to financial management.