The Memo: Everton’s point deduction and its impact on English football

James Westmacott – 4 December 2023

In a case that spanned eight long months, an independent commission finally ruled that Everton would be immediately deducted 10 points in the current Premier League season for a previous breach of the League’s Profitability and Sustainability Rules (PSRs). The docking of 10 points – the most severe punishment ever dealt to a Premier League team – lands Everton in the relegation zone (at the time of writing at least), leaving them vulnerable not only to on-field trouble, but also further legal action from rival clubs irked by the Merseyside club’s wrongdoing.

Most sports will have their own regulatory framework, which essentially set out the regulations that you agree to be bound by when you participate in that sport. Premier League clubs are required as part of the PSRs to submit annual accounts in order to prove that they have not broken any financial rules. Such rules are designed generally to prevent clubs from spending beyond their means, and to ensure that all commercial deals are not skewed beyond fair market value. They also serve to keep clubs compliant with the principles laid out in the UN Sports for Climate Action Framework regarding environmental sustainability. Respecting and upholding the rules in turn leads to greater transparency between clubs and governing bodies, long-term sustainability for clubs, more advanced youth development and infrastructure, and the maintenance of just sporting competition. In short, the rules themselves are a good thing.

In the case of Everton, rule E.15 - as set out in the Premier League’s regulatory handbook – remains the determining factor when it comes to the club’s punishment. The rule states that clubs must not lose more than £105m over three years in footballing costs; things like player acquisitions, academy expenditure, and wage inflation. The independent panel ruled that Everton instead exceeded the threshold, recording losses amounting to £124.5m. Fines, points deductions, and even expulsion from the league were among the potential penalties that stared Everton down the barrel, but the commission settled on a 10-point deduction.

Where there are breaches in these kinds of rules, most governing bodies refer the case to tribunals or disciplinary panels, which enforce that particular sport’s rules. While they are not courts of law, they serve as a dispute resolution forum where matters directly relating to conduct can be dealt with quickly.

This case was referred to Murray Rosen KC by Premier League officials, as the former currently acts as the Chair of the Premier League’s Judicial Panel – an independent and separate body to the Premier League board occupied by business executives rather than legal professionals. The Judicial Panel was created back in 2019, with the primary aim of having those with a mountain of legal experience and expertise making informed decisions on complex cases. In order to qualify for his position, Rosen was required to demonstrate at least 15 years of experience as a lawyer, in addition to displaying expertise in sports, commercial, and competition law. Rosen previously held chairmanships for a number of professional associations and disciplinary tribunals in sporting disputes and is currently an international arbitrator for the Court of Arbitration for Sport in Lausanne.

While Everton’s 10-point deduction may appear harsh in sporting terms, the reality remains that this is only the beginning. Everton’s relegation rivals in seasons gone by like Burnley, Leeds, and Leicester – who can now claim they were unfairly relegated due to Everton’s breaches – have already revealed plans to sue Everton for £300m (£100m for each of the three relegated clubs). Relegation from England’s top-flight is reported to cost clubs up to £100m as a result of losses in club value, TV deals, and player sponsorship. Southampton - another club that was relegated last season - have also spoken of plans to join the lawsuit, with the aforementioned clubs having been given 28 days to confirm they want to go ahead.

The controversy though does not end there, with Everton’s case posing potentially huge consequences at the other end of the table. Manchester City – who have been crowned Premier League champions on seven occasions in the last 12 years, have also been charged over 115 breaches spanning a decade. Everton, contrastingly, had been accused of just one. Chelsea are also under investigation for their financial activities between 2012 and 2019, alongside allegations that the club’s previous Russian oligarch owner Roman Abramovich made undeclared payments from his personal companies over footballing matters.

You’d be forgiven then for thinking that the magnitude of Manchester City and Chelsea’s potential breaches far outweigh Everton’s, perhaps hinting at consequences far greater than a 10-point deduction. City’s predicament also differs from Everton’s in another way. Whilst under investigation, Everton had fully cooperated with the authorities and published all financial statements, perhaps indicating a genuinely unintentional breach of the league’s rules. As The Guardian reported, City on the other hand have reportedly fallen short of providing a valid picture of the club’s financial situation, and have failed to disclose accurate accounts of internal staff remuneration including players and coaches. The club has also reportedly refused to collaborate with the Premier League and their ongoing investigation.

The course of action the Premier League and its judicial panel will take will of course be revealed in time. But for now, the questions remain: has the punishment dealt to Everton now set the precedent, thus leaving Chelsea and Manchester City with a far more damning penalty looming? Or will the Premier League be reluctant to face the financial repercussions of engaging in a legal battle with some of the world’s richest football clubs? Everton can appeal against their 10-point deduction, though clubs are not able to take their cases to legal courts or the International Court of Arbitration for Sport. But with the Premier League deciding that now is the time to act, the consequences of such a case will reverberate throughout English football’s boardrooms for some time.

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