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Lessons from the pitch: UEFA vs Manchester City FC

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Member: Roger Isaacs

An ongoing financial dispute between UEFA and Manchester City FC, which has seen the football club banned from competing in the Champions League for two years and fined £25m, could lead to further investigations according to UEFA.

Manchester City FC is facing an ongoing battle with UEFA under the financial fair play (FFP) rules relating to the level of sponsorship from Abu Dhabi companies it declared for the years since 2016. This follows on from separate findings that the football club had overstated its sponsorship from 2012 – 2016.

Much of this sponsorship during this period came from Abu Dhabi’s state airline Etihad, which is owned by Manchester City FC’s owner, Sheikh Mansour of the Abu Dhabi ruling family.

An in-depth investigation into Manchester City’s finances was conducted by UEFA’s club financial control body (CFCB), which was based on internal Manchester City FC emails published by the German publication, Der Spiegel, covering the 2012-16 period.

UEFA’s investigatory chamber (IC) is responsible for assessing the financial submissions of European football clubs competing in the Champions and Europa Leagues. It had approved Manchester City FC’s sponsorship figures since 2016, before the emails were published in November 2018.

However, the investigation into Manchester City FC, which uncovered the overstated sponsorship means that the IC must now reconsider the period since 2016 to see whether similar sponsorship went on within the football club.

As part of this investigation, the IC will have to consider whether Manchester City FC’s submissions for those years are reliable or whether the football club was being subsidised.

An internal consultant’s report on Etihad’s finances produced in 2010 appeared to note that the Abu Dhabi’s executive council, in effect the government, “covers” the Manchester City FC sponsorship.

Manchester City FC and Etihad have denied that the sponsorship was in any way subsidised, with the football club claiming that the CFCB ignored “irrefutable evidence”.

In a statement, Etihad said: “The airline’s financial obligations, associated with the partnership of the club and the broader City Football Group, have always been, and remain, the sole liability and responsibility of Etihad Airways.”

UEFA must also consider whether the Abu Dhabi sponsorships are technically “related” to the owner, Mansour. The FFP rules seek to limit football clubs’ losses even if bankrolled by an owner and so “related” sponsorships are scrutinised to determine if they are for genuine market value, or are in effect an owner putting money into a football club under the pretence of commercial sponsorship.

This was previously scrutinised by forensic accountants appointed by the CFCB who made inquiries into the football club and found that three of the Abu Dhabi sponsors were related to Manchester City FC, because Mansour was the chairman of the funds which owned them, which are state-owned. The football club fiercely rejected those findings and insisted that none of the Abu Dhabi sponsorship was related.

UEFA agreed to a settlement with Manchester City FC after this initial investigation, as the football club was assessed as having made a €180m loss for FFP in 2012 and 2013 when the rules permitted a loss of €45m.

Now that UEFA and its chambers have concluded that the Etihad sponsorship was subsidised, at least for the 2012-16 period, the IC may have to examine again whether the airline and other sponsors are related to Mansour and also look at the period since 2016.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “The IC, like many other investigatory bodies, is likely to assess many other European football clubs’ latest financial submissions over the coming weeks for their compliance with FFP rules in light of its recent findings.

“Football is a sport beloved by our nation, but like any other multi-billion-pound industry it is regulated by very strict financial rules. Although Manchester City FC denies a breach of the rules, UEFA seems to have conducted a thorough investigation to reach its findings, which appear to have been based on a detailed work by financial forensic investigators.”

Author: Roger Isaacs
21 February 2020

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