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The legal framework for football's independent regulator: a closer look

Posted on 6 March 2024

The forthcoming introduction of an Independent Regulator for football in England represents a significant moment for the sport's governance. This analysis delves into some of the remaining legal complexities and considerations that must still be addressed as this new body is established, using insights provided by Simon Leaf, who spoke at the Westminster Forum's Next Steps for Football Governance in England on Thursday 22 March 2024.

Legislative preparation and regulator's remit

The draft legislation for the new regulator is still in the works, with its precise remit yet to be determined. The regulator is anticipated to have the authority to grant licences to clubs, prevent participation in breakaway leagues and manage financial redistribution between clubs. The lack of clarity on these powers is a concern, especially considering the potential for a shadow regulator to be introduced soon and the limited parliamentary time before the next general election.

Financial Fair Play (FFP)

The regulator's role in enforcing Financial Fair Play (FFP) regulations is also yet to be fully articulated. Without a clear mandate to monitor and sanction clubs for FFP breaches, the regulator's impact on financial stability is questionable. The regulator must be equipped with the necessary authority to enforce financial compliance and adopt best practices from other sports and jurisdictions, such as the economic control measures seen in Spanish football, which impose real-time spending limits based on a club's financial health.

Stakeholder relationships and FIFA's statutes

The new regulator must carefully manage its relationships with stakeholders, including FIFA, which mandates that member associations manage their affairs independently. A potential legal conflict could arise if the regulator's decisions were to contradict FIFA's governance rules. For instance, where FIFA decides to sanction a tournament that the regulator fails to give approval to.

The White Paper's suggestion that the regulator's decisions be subject to judicial review is a departure from FIFA's preference for arbitration over ordinary court proceedings. Article 58 of the FIFA statutes makes it clear that there is a general prohibition on "recourse to ordinary courts of law" to settle football-related disputes. Instead, FIFA require member associations to insert mandatory arbitration clauses into domestic rules. However, the Government's White Paper made it clear that the "majority of the decisions of the Regulator would be appealable on Judicial Review principles…before an independent court or tribunal". This is unprecedented and essentially means that football-related disputes would be heard in public rather than in private, as is generally the case now.

On a related note, the regulator will be taking up its role at one of the most tumultuous times that the domestic game has seen in recent years. The scope for intra-stakeholder legal dispute has never been greater. In particular, we have seen the very public disagreements between the English Football League (EFL) and Premier League when it comes to agreeing future funding but also, perhaps more worryingly from a Premier League perspective, despite years of relative harmony between its member clubs (particularly in comparison to the often public fall outs we have witnessed between Championship clubs), we now see the potential for widespread claims being made on the back of the recent charges that have been brought against the likes of Manchester City, Everton and Nottingham Forest. It is imperative for the good of the game that any new regulator is able to help the relevant clubs resolve these issues as quickly as possible to avoid further damage to football's reputation.

The licensing regime and Owners' and Directors' Test

The proposed licensing regime will include a more rigorous Owners' and Directors' Test (OADT), designed to ensure the integrity of club owners and directors, scrutinise the source of their wealth, and evaluate their financial plans for the club. The Premier League's recent rule changes, which address human rights abuses and prevent fully leveraged buy-outs, reflect an alignment with these new governance standards. The regulator's role in monitoring these aspects and ensuring ongoing compliance will be crucial, particularly in light of the controversial sale of Newcastle United, which has brought the adequacy of current ownership tests into sharp focus. However, the precise detail of the new OADT is still to be confirmed and, if not correctly managed, has the potential to make English clubs less attractive to investors in comparison with other clubs that may be on the market.

UK insolvency law and the football creditors rule                                    

The regulator's potential power to intervene in the management of financially troubled clubs intersects with UK insolvency law. The relationship between the regulator's powers and the existing insolvency framework, including the football creditors rule, will require careful legal examination. This rule, which has been contentious due to its prioritisation of football-related debts over other creditors in insolvency situations, may be re-evaluated under the new regulatory regime. The Government's consideration of empowering the regulator to appoint a third party to manage clubs in financial difficulty but falling short of insolvency introduces a new dynamic to the insolvency process, potentially altering the landscape for creditors and the administration process.

Promoting women's football and inclusion initiatives

The absence of detailed plans for promoting women's football and broader equity, diversity, and inclusion initiatives within the regulatory regime is a significant concern. These areas are crucial for the sport's development but do not appear to be integral to the regulator's objectives. Assuming women's football is not directly addressed now within the regulator's remit, it is imperative that the new regulatory framework includes provisions that would allow the regulator in the future to support the growth and visibility of women's football and fosters an inclusive environment for all participants.

Ensuring a sustainable and prosperous future for football

In conclusion, the legal framework for establishing the Independent Regulator for football must be comprehensive, clear, and adaptable. The regulator's remit, stakeholder relationships, and licensing regime require meticulous legal consideration to ensure effective governance. As the sport awaits the finalisation of the legislation, it is important clubs and their legal teams prepare for the changes ahead. The legal challenges are significant, but with a collaborative approach, a regulatory environment that upholds the integrity and future of football can be established. The stakes are high, and the legal implications far-reaching, but with thoughtful preparation and collaboration, we can ensure a sustainable and prosperous future for the sport.

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