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Football Gate

Regulatory goals: Government hopes to score a winner with the public with new Independent Regulator for Football

Posted on 20 March 2024

Simon Leaf, 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, comments on today's developments:

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 beautiful game since the laws were codified in 1863.

Whilst there are certainly some eye-catching provisions – not least the fact that the IREF will be given powers to fine clubs up to 10% of turnover for non-compliance and the ability to impose a "new deal" on financial distributions between the Premier League (PL) and below, many will see this as a missed opportunity – particularly 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 IREF full powers (including the ability to impose points reductions) in relation to the financial regulation of clubs on a day-to-day basis – nor fully taken on board the feedback from the Premier League who have 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 PL and EFL will retain control over FFP-related regulations despite the IREF being given the objective to "improve financial sustainability of clubs".  As a result, we are likely to see continued controversy from the PL's and EFL's decisions with respect to enforcement as we have seen in recent months and it remains unclear how the IREF will actually be able to achieve its objectives beyond the annual licensing tests that will be applied given that the IREF 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 that get into financial difficulty and directors that 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 IREF's decision could be challenged by way of Judicial Review in open court rather than FIFA's statues that prohibits "recourse to ordinary courts of law" and requires 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 IREF not to sanction certain pre-season tournaments that clubs may wish to participate in, all the way through to the potential ability for the IREF to "disqualify owners/officers".

On that particular point, whilst there is no suggestion that the IREF would take such a decision lightly and further detail is still needed, but on paper this could potentially amount to the nationalisation of a club by the IREF where it considers there has been "persistent and wilful non-compliance". This may put many new owners off acquiring English clubs.

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 following the new FFARs and NFARs, FFP 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, whilst today's announcement will be welcomed in many quarters – particularly amongst 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 PL. 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 whilst the IREF 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.

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