Leicester City have escaped a point deduction for an alleged PSR breach on a technicality after an appeal board accepted their argument that they were not technically a Premier League club at the time of their breach.
That’s because Leicester had already legally become a EFL club before the end of the 2022/23 financial year, and successfully argued on appeal that the Premier League therefore had no jurisdiction over them.
It’s important to stress that this is not at all what the Premier League wanted – and they feel the decision is unfair on other clubs who have previously been punished.
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Premier League has already admitted PSR has been undermined
The Premier League themselves argued at the initial hearing on the matter that if they were not held to have the right to punish Leicester in these circumstances, it would – in their words – ‘allow a relegated club to escape all disciplinary consequences of a breach of the PSRs, however serious the breach and regardless of the unfairness to compliant clubs’.
They went on: “The effectiveness of the PSRs would be undermined and the competition brought into disrepute. Other clubs and their supporters would feel an entirely justified sense of unfairness.”
They’re bang on on all those points. Nottingham Forest and Everton, in particular, feel very aggrieved having been docked points last season (twice, in Everton’s case) for PSR breaches of their own – to say nothing of Leeds United, who were relegated alongside Leicester and then missed out on promotion after the Foxes claimed one of the automatic promotion spots. (Leeds finished third)
But in the view of the appeal board, the Premier League's issue was that they had written the terms of PSR in a black-and-white way that did not reflect the actual intentions of what they were trying to do.
This is a constant battle in all aspects of law. Language can be imprecise, meanings can change, and unexpected circumstances can arise that the lawmakers had not considered.
However, as a general rule, courts judging matters of contract law are loath to allow things to stray too far from the letter of the contract, just because common sense suggests they should.
Under any common sense interpretation, Leicester were a Premier League club in 2022/23. Of course they were. Duh. They played 38 Premier League games, and did not play their first Championship game until August, after the 2022/23 financial year had ended.
But the way PSR was written allowed Leicester a loophole that they have successfully exploited by arguing that the letter of the contract should apply, and not the spirit.
As the independent panel noted when explaining how they reached their judgment (bold emphasis our own): “The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed.
“Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party.”
The unwritten implication there is that the Premier League have been unwise in how they have written PSR, with the board’s decision noting that ‘the Rules are, in relevant parts, far from well drafted’. Leicester’s arguments, meanwhile, have been very astute.
Leicester’s appeal is just the latest blow to the efficacy of PSR. We have previously seen clubs gaming amortisations to their advantage, realising that the way profits and losses are recorded on player transfers can be used to sidestep the regulations in a ludicrous by entirely above-board way – leading to the ‘unofficial transfer deadline day’ on 30th June and the sudden rise of what amount to swap deals.
And now there is this ruling, which effectively makes it so that if a club gets relegated from the Premier League, they can go out and trolley-dash through however much spending they want through to the end of June and nobody can touch them for it.
That’s an extremely specific circumstance, and does not render the Forest and Everton decisions retrospectively wrong – but their sense of injustice is entirely valid nonetheless. By the Premier League own admission, PSR has been undermined, and in quite a serious and legitimate way.
The spirit of the law is well-intended, but has controversial side-effects. The regulations were brought in because down the years, enough clubs have demonstrated an inability or unwillingness to manage their own finances responsibly that the suits felt they had to step in and force it upon them.
The alternative, they feared, was a return to what we had from the late 1990s through to the early 2010s, when a whopping 38 clubs up and down the pyramid went into administration or CVAs (some of whom did so more than once). We’ve had just five since 2013 – which, of course, is still five too many, but a significant improvement.
The controversy is that it is now also much more difficult for clubs to do what Blackburn Rovers did in the 1990s, Chelsea did in the 2000s, and Manchester City did in the 2010s: spend loads of money their owners actually can afford to take a club to new levels of success.
Aston Villa and Newcastle United, in particular, have complained about the closed shop that creates at the top of the division – despite both having succeeded in breaking into the top four over the past couple of seasons. A gradual revenue growth over many years, as Tottenham Hotspur have pulled off, requires far too much patience for those clubs, their owners or their fans to be happy with. Cry me a river, those lower down the leagues might say.
Are the drawbacks of PSR really worth the hassle at this point?
But the result is that practically nobody is happy with the state of financial regulation in English football. Those at the top of the Premier League are unhappy at being shackled. Those further down the division are now unhappy that loopholes have allowed Leicester off the hook.
All the while, most of those in the EFL continue to rack up considerable debts in the hope they might be able to one day join the ramshackle Premier League party.
We are, to an extent, sympathetic to the football authorities; there are no easy answers to these problems, and drafting law is a notoriously difficult job.
But Leicester’s case will have all future clubs poring through the Premier League rule book whenever they get into trouble to see what other gaps they can find in the rules. Or rather: they’ve all already been doing that, but now it’s been very vividly shown to all and sundry that it is possible to do so.
The Premier League’s worst fears have come to pass: any conspiratorial feeling that PSR is not entirely fit for its intended purpose has now effectively been confirmed. It was already difficult enough to convince aggrieved fans to accept any wrongdoing from their clubs; now it is virtually impossible.
English football's powers that be may now need to think seriously about whether all the red tape is really worth the hassle, given that a savvy enough legal team can still find ways to cut through it.
There are other ways to encourage a bit more financial responsibility at clubs, most of which have already been suggested by the Football Governance Bill. Getting that through may prove to be more effective than this mess that has left the Premier League looking daft and nobody feeling particularly happy.
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