Editor's note: Rhys was an intern at the T.M.C. Asser Institute. He now advises on investments and Notre acquisitions in sport (mainly football) via Lovelle Street Advisory. Following a career as a professional athlete, Rhys has spent much of his professional life as an international sports agent, predominantly operating in football. Rhys has a Bachelor of Laws (LL.B) and a Bachelor of Philosophy (B.Phil.) from the University of Dame, Sydney, Australia. He is currently completing an LL.M at the University of Zurich in International Business Law / International Sports Law.
Having looked at the different types of
investors in football in part one of this two-part blog series, “A
non-exhaustive Typology”, it is fitting to now consider the regulations
that apply to investors who seek to build a portfolio of football clubs.
One way to measure the momentum of a
particular practice and how serious it ought to be taken, might be when that
practice earns its own initialism. Multi-club ownership or MCO as it is
increasingly known today, is the name given to those entities that have an
ownership stake in multiple clubs. Within the little research and writing that
has been undertaken on the topic, some authors submit that investors with
minority stakes in multiple clubs ought not to be captured by the MCO
definition. This position appears
problematic given some of the regulations draw the line at influence rather
than stake.
There
are now approximately 50 MCO’s across the football world that own approximately
150 clubs.[1]
Given the way MCO is trending, one might consider it important that the
regulations keep up with the developing MCO practice, so as to ensure the
integrity of football competitions, and to regulate any other potentially
questionable benefit an MCO might derive that would be contrary to football’s
best interests.
In this blog, I focus on the variety of
ways (and levels at which) this practice is being regulated. I will move through the football pyramid from
member associations (MA’s) to FIFA, laying the foundations to support a proposition
that FIFA and only FIFA is positioned to regulate MCO.
i)
The Cases that Shaped the MCO
Regulatory Landscape
The ENIC and Red Bull cases essentially
shaped MCO regulations, at least for UEFA.
For a comprehensive analysis of the cases, I would encourage one look at
both “Multi-Club
Ownership in European Football – Part I: General Introduction and the ENIC
Saga” and “Multi-Club
Ownership in European Football – Part II: The Concept of Decisive Influence in
the Red Bull Case” by Tomáš Grell.
ENIC CASE[2]
The ENIC case featuring proceedings before
the Court of Arbitration for Sport and before the European Commission, made its
way to such bodies because London Stock Exchange listed entity, ENIC (English
National Investment Company), owned stakes in both AEK Athens and SK Slavia
Prague, that were set to play in the same UEFA club competition. At that point
in time, UEFA had adopted regulations that made entry to UEFA club competitions
conditional upon a club having not (i) held or been dealing in the securities
or shares; and refrained from (ii) being a member; (iii) being involved in any
capacity whatsoever in the management, administration, and/or sporting
performance; and (iv) having any power whatsoever in the management,
administration and/or sporting performance - of any other club participating in
the same UEFA club competition. Furthermore, an individual or entity was
prohibited from exercising control over more than one club participating in the
same UEFA club competition.
The Committee for the UEFA Club
Competitions had initially ruled that only SK Slavia would take part in the
1998/99 UEFA Cup. Not satisfied with that ruling, on 15 June 1998, AEK Athens
and SK Slavia Prague filed a request for arbitration with CAS and
simultaneously sought interim relief which was given, allowing both clubs to
compete in the 1998/99 UEFA Cup. On 20 August 1999 however, the CAS held
that the Original Rule was valid and that UEFA could apply the rule moving
forward. Given the blow this dealt to ENIC’s football business strategies, on
18 February 2000, ENIC lodged a complaint with the European Commission and argued
anew that the UEFA rules were contrary to EU competition law. The Commission was
satisfied that the Original Rule was valid in that it sought to protect the
integrity of UEFA competitions, rather than to restrict competition, hence
seeing no violation of the relevant EU competition laws.
RED BULL CASE[3]
The current rules encapsulated in Article 5
of the UCL
Regulations are distinct from the Original Rule in that one of the
standards that would render a club unable to participate in a UEFA competition
is if an individual or entity is able to exercise by any means a “decisive
influence” in the decision-making of more than one club in that competition.
In 2017, RB Salzburg and RB Leipzig had
both secured places in the 2017/18 UCL. Not long after, the UEFA General
Secretary expressed concern with the Club Financial Control Body (CFCB), and
the Adjudicatory Chamber of that body agreed that the clubs had failed to
satisfy the criteria set out in the rules. The substantial levels of
sponsorship received by Red Bull and certain individuals linked to the decision
making of both clubs inter alia, were flagged as reasons for breaching
the threshold.
However, and following some quite
deliberate and specific changes, the CFCB Adjudicatory Chamber accepted
compliance reports that RB Salzburg had cut ties with certain individuals,
reduced the amount of sponsorship money paid by Red Bull and were satisfied
that a cooperation agreement between the two clubs had been terminated. The CFCB Chief withdrew his objection and RB
Salzburg and RB Leipzig were admitted to the 2017/18 UCL.
ii)
Member Associations and Motives
Whilst one could simply list the national
association’s MCO regulations, the reality is that for the MA’s that have
express regulations, they are largely of a similar flavour to that of their Confederation.
One might find the varying motivations of MA’s in enacting MCO regulations of
more interest. One key feature is that some of the MA’s regulate based on MCO
within their own nations, and some concern themselves with MCO even outside of
the nation in which the MA governs football. This is where an MA’s motivations
are evident.
Scotland
Scotland for instance, regulates MCO via
Article 13 of the Articles
of Association of the Scottish Football Association and refers to the
section as “Dual Interests in Clubs”.[4] It is understood that Scotland have a high
standard when it comes to MCO, so as to ensure that its competition does not
become the reserve competition to the English Premier League or another larger
league. With that in mind, one can then
understand why Mike
Ashley’s attempt to increase an already 8.92% to 29.9% shareholding of Rangers
FC was rejected. The Newcastle United owner was not given written
permission as is required per Article
13, as he had signed an agreement that he would not own more than 10% of
the club and would not exercise influence on the board.
"The Board, under Article 13
of the Scottish FA Articles of Association, is required to have due regard to
the need to promote and safeguard the interests and public profile of
association football, its players, spectators and others involved with the
game. This test is set out in full in Article 13.6."
Italy
Not too long ago, one was free to own more
than one club in Italy (i.e. Aurelio De Laurentiis’ ownership of S.S.C. Napoli
and S.S.C. Bari), but in recent months MCO in the Italian context has been
headline material, with U.S. Salernitana 1919 promoting to the Serie A, a club
owned by Claudio Lotito who also owns S.S. Lazio. The
newly enacted Article 16 bis of the NOIF FIGC provides that an individual
or entity cannot own two or more clubs in Italy, in the same competition. On Thursday 30 September 2021, the FIGC
announced that ownership of more than one professional club would be
prohibited, “for those companies that should rise to Lega Pro from the Serie D”
(translated), and multi-club owners would need to sell their (other) clubs “by
the beginning of the 2024/2025 season”.
The result of this is retroactive in effect
and one can reasonably suspect that the legal teams for these wealthy multi-club
owners will be instructed to explore all options for a favourable outcome in
courtrooms and other relevant decision-making bodies. One can simultaneously
hold a view that MCO ought to be regulated, and concede that, when these owners
bought these clubs, they did so on the representation that it was legal and
they were free to do so. A forced sale as opposed to a willing sale distorts
the market and what a willing buyer and willing seller would have otherwise
settled on for a purchase price. Flowing
from the above, club owners can expect well below market rate offers, as has
been the case reportedly
with Salernitana, given they must sell.
iii)
The Confederations
Most of the MCO regulations of
Confederations refer to the concern of jeopardisation of the integrity of a
match or competition. The regulations largely capture the substance of Article
20(2) of the FIFA
Statutes which will be expanded upon below. For instance, the OFC
regulation found at Article 15 (3) of the OFC
Statutes, states that ‘Member
Associations shall ensure that no natural or legal person (including holding
companies and subsidiaries) exercise third-party control in any manner
whatsoever (in particular through a majority shareholding, a majority of voting
rights, a majority of seats on the board of directors or any other form of
economic dependence or control etc.) over more than one club or group whenever
the integrity of any match or competition could be jeopardised.’ One will find almost verbatim, the same provision
at Article 12(3) of the CAF
Statutes and at Article 17(3) of the CONCACAF
Statutes.
There is a distinction to be made however
at confederation level, between MCO regulations applying specifically to the
MA’s that fall under the Confederations, or to competitions hosted by the Confederation.
Given the noise both the ENIC and Red Bull cases made, the most renown MCO
regulations are those that apply to UEFA competitions, but consider also how
CONMEBOL prohibits multi-club ownership in its competitions. Article 7(f) of
the CONMEBOL Statutes
provides that natural or legal persons cannot control more than one club.
Perhaps an extension, “CONMEBOL’s
Club Licensing Regulations establish as a requirement that, to participate
in CONMEBOL Libertadores and CONMEBOL Sudamericana tournaments, license
applicant clubs must submit a legally valid declaration if one: Owns or trades
titles or securities of any other club participating in the same competition;
or, b) Owns the majority of the shareholder voting rights of any other club
participating in the same competition; or, c) Has the right to appoint or
dismiss most of board or management or department members of another
participating club in the same competition; or, d) Is a shareholder and
controls most of the shareholder voting rights of shareholders in any other club
participating in the same competition in accordance with an agreement signed
with other shareholders of the relevant club; or, e) Belongs to the leadership
structure of any other club participating in the same competition; or, f) Is
involved in any quality in the management, administration and/or sporting
performance of any other club participating in its competition; or, g) Has any
power in the management, administration and/or sporting performance of any
other club participating in the same competition.”
The AFC regulates at both confederation
club competition level, and via its club licensing regulations. The Entry
Manual of the AFC Club Competitions provides as a condition of entry,
at section 9.12: To ensure the integrity of an AFC Club Competition: no
participating club may, either directly or indirectly, hold or deal in the
securities or shares of any other participating club; be a member of any other
participating club; be involved in any capacity whatsoever in the management,
administration and/or sporting performance.
Article 19 of the AFC’s
Club Licensing Regulations provides that a Licence Applicant must submit a
legally valid declaration outlining the ownership structure and control
mechanism of the club. These regulations prohibit a natural or legal person
involved in the management, administration and/or sporting performance of the
club, either directly or indirectly: a) holds or deals in the securities or
shares that allows such person to exercise Significant Influence in the
activities of any other club participating in the same competition; b) holds a
majority of the shareholders’ voting rights of any other club participating in
the same competition; c) has the right to appoint or remove a majority of the
members of the administrative, management or supervisory body of any other club
participating in the same competition; d) is a shareholder and alone Controls a
majority of the shareholders’ voting rights of any other club participating in
the same competition pursuant to an agreement entered into with other
shareholders of the club in question; e) is a member of any other club
participating in the same competition; f) is involved in any capacity
whatsoever in the management, administration and/or sporting performance of any
other club participating in the same competition; and g) has any power whatsoever
over the management, administration and/or sporting performance of any other
club participating in the same club competition.
When it comes to UEFA, MCO regulation is
found throughout the so-called “UEFA Regulatory Framework”. This includes the UEFA
Statutes (Edition 2020), the UEFA competitions regulations, in particular
the Regulations of the UEFA
Champions League 2018-21 Cycle (2020/21 season) and the Regulations
of the UEFA Europa League 2018-21 Cycle (2020/21 season), and the UEFA Club
Licensing and Financial Fair play Regulations (Edition 2018).
The UEFA Statutes capture both the
objectives of UEFA and the obligations of its MA’s, with a strong emphasis on
the frequently referred to concern with MCO - issues of integrity. Then, within
The Regulations of the UEFA Champions League, sits at Article 5 - Integrity of
the competition / multi-club ownership.
This covers integrity of competition again and sets a criterion in order
for a team to be eligible for UEFA competition, much the same flavour of
regulation seen throughout the rest of the Confederations regarding ownership
and control, but with the all-important test at Art.5 – 5.01(c) (iv) No individual or legal entity may have
control or influence over more than one club participating in a UEFA club
competition, such control or influence being defined in this context as: being
able to exercise by any means a decisive influence in the
decision-making of the club..
FIFA
reported that as of 2018, just 33 % of MA’s had regulatory provisions for
MCO’s. The percentage of MA’s within the Confederations that regulate MCO is as
follows:
- Confederation of North, Central America and
Caribbean Association Football (CONCACAF) – 19%
- Oceania Football Confederation (OFC) – 22%
- Confederation of African Football (CAF) –
22%
- Asian Football Confederation (AFC) – 33%
- South American Football Confederation
(CONMEBOL) – 50%
- Union of European Football Associations
(UEFA) – 50%
What these figures might uncover is a gap
in how serious MCO ought to be taken, between the Confederations and the MA’s,
and that the perceived threat MCO posed to the integrity of competitions at the
time these MA regulations were enacted was minor. Confederations might want to
take a firmer proactive rather than reactive approach with MA’s, given the
speed at which the MCO phenomenon has gained momentum. That is if one concludes
that MCO regulation ought to lie with the Confederations.
Whilst MCO might not give rise to an issue
for many nations (yet), the MCO environment of countries like Mexico, (1/3
of the clubs in the Liga MX are part of a domestic MCO arrangement, to say
nothing of those same owners stake and influence in Mexican media and broadcast)
where there are regulations in place at both MA and Confederation level, flies
in the face of both the Mexican FEMEXFUT regulations and CONCACAF regulations.
Might this highlight that FIFA and only FIFA can regulate this practice?
iv)
FIFA & MCO Regulation
FIFA does not expressly regulate MCO,
assumingly as clubs are not its direct remit. Though through some
interpretative effort, FIFA imposes an obligation on its MA’s to regulate MCO.
In the FIFA
Statutes at Article 20 (2), “Status of clubs, leagues and other groups of
clubs”, it reads:
Every member association shall
ensure that its affiliated clubs can take all decisions on any matters
regarding membership independently of any external body. This obligation
applies regardless of an affiliated club’s corporate structure. In any case, the
member association shall ensure that neither a natural nor a legal person
(including holding companies and subsidiaries) exercises control in any manner
whatsoever (in particular through a majority shareholding, a majority of voting
rights, a majority of seats on the board of directors or any other form of
economic dependence or control, etc.) over more than one club whenever the
integrity of any match or competition could be jeopardised.
Another way of looking at how FIFA may regulate
MCO, is an obligation it places on the confederations at Article 23 (g),
“Confederations’ Statutes”, it reads:
The confederations’ statutes must
comply with the principles of good governance, and shall in particular contain,
at a minimum, provisions relating to the following matters:
(g) regulation of matters relating
to refereeing, the fight against doping, club licensing, the imposition of
disciplinary measures, including for ethical misconduct, and measures required
to protect the integrity of competitions.
As one will notice, the protection of the
integrity of competitions does not quite warrant its own sub-section of Article
23, and instead is heaped in with matters such as refereeing and doping. Article
20 might have more clout, but given the influx of MCO and investment in
football in modernity, one can reasonably wonder if the regulations suffice.
Article 20(2) of the FIFA Statutes
(formerly Article 18(2)) has been considered to a degree at the Court of
Arbitration for Sport. Though where it has, for instance in CAS
2014/A/3523 Club de Fútbol Atlante S.A. de C.V. v. Federación Mexicana de
Fútbol (FMF) & Club Atlas F.C., the findings uncover that Article 20(2)
cannot be relied upon for clarity, in terms of the jeopardisation MCO poses to
the integrity of football matches or competitions.
“The FIFA rule on multiple
ownership is not absolute but is based on a case-by-case assessment of the
jeopardy caused to the integrity of football matches or competitions. Whether
or not the integrity of a match or competition is jeopardised is a very
intricate assessment which necessarily must be based on profound knowledge of
the match or competition in question.”[5]
Whilst the case is not exclusively about
the relevant integrity of competitions article within the FIFA Statutes, the
appellant was unable to successfully argue the point that two clubs in the same
league belonging to the same owner poses a serious threat to the competition (via
the then Article 18(2) of the FIFA Statutes and the identical Article 7(m) of
the CONCACAF Statutes) as it was unable to convince the Panel that the
integrity of the Liga MX was indeed actually jeopardised.
The CAS in this instance was merely making
a decision per its reach, but one struggles to imagine that any football
governing body would want to take the position and to regulate so as to suggest
that MCO within competitions does not “necessarily” raise integrity issues. Perhaps
an extreme analogy, but that would be like concluding that doping is not
“necessarily” performance enhancing and a case-by-case intricate assessment is
needed to determine whether an advantage was actually attained. Some threats to integrity require the
preventative approach be captured in the regulations and the above case
highlights that the articles regarding MCO found in the FIFA Statutes are insufficient
and have probably not kept pace with the MCO phenomenon. A further reasonable
question one might ponder, is what the reaction to the above case might have been
if the clubs were UEFA based?
v)
Concluding remarks and why FIFA must assume
MCO Regulations
MCO is a transnational phenomenon with no
clear integrated or uniform regulatory framework and rather, a fragmented
landscape, as one might reasonably expect when MCO regulation is left to the
many Confederations and MA’s. MCO regulations
as they stand may have sufficed in yesteryear when football was not the target
of such investment for direct financial return, branding in the case of company
investment, or the branding and soft power strategies of nations – evidently the
prime motivations for establishing an MCO.
FIFA regularly offsets the negative news
stories it attracts, with reference to growing the game globally. If FIFA is to
cash in on the growing the game globally narrative, it surely has an obligation
to regulate when that global growth produces integrity issues to football, as
is the case with MCO. If one accepts that MCO is a transnational phenomenon and
in turn a global issue, and that it does raise concerns in regard to the
integrity of football inter alia, then it is difficult to see what body
other than FIFA is best positioned to deal with the MCO phenomenon.
There are other reasons of significance as
to why this should lie with FIFA as well. For instance, the MCO phenomenon also
affects FIFA’s training rewards systems that it has gone to considerable lengths
to attempt to fine tune (i.e. the establishment of the Clearing House). With
players moving between clubs within the same MCO for free, many transfers will
not trigger the trickledown effect they may have otherwise had players
transferred for market rates. Another concern for FIFA might be player trading
within an MCO being used as accounting tactics to avoid triggering Financial
Fair Play issues, rather than a transfer representing the market value of the
player.
Player welfare issues also arise, as do
employment law questions. It is already
the case that there are clauses in player contracts where a player cannot
refuse to be transferred to another club within an MCO if so requested (or
demanded), which is in effect an MCO contract, rather than a club contract.
Even when clauses of this nature are not inserted within an MCO club player’s
contract, there are concerns when players are groomed within an MCO ,given the
clubs have considerable time with players and a unique dynamic exists within
MCO given common ownership, where a club is incentivised to persuade the player
to remain within the group, when the best move, career, financial or otherwise,
may be elsewhere. This is an entirely different dynamic to a player weighing up
his or her transfer options and seeking professional advice from an agent and/or
lawyer. There are also instances where
an MCO has only allowed a move internally and refused a transfer to another
club and potentially better option for the player, raising the ever-recurring freedom of movement
questions. These instances are of course rare (for now), but real implications
that need attention from football’s global governing body.
The increased globalisation of the game
through creations like the UEFA Conference League and FIFA also expanding the
Club World Cup, significantly broadens the number of clubs that may face each
other, which increasing the risks that MCO presents. The obligations FIFA
imposes on its MA’s and Confederations are not observed across the board, and
are consequently not sufficient to keep pace with the burgeoning MCO phenomenon.
FIFA can no longer simultaneously celebrate the globalisation of football, and defer
on definition and regulation downwards in the football pyramid, when it comes
to a product of that globalisation; Multi Club Ownership.