Summary
The Appeal Board allows Everton’s appeal against the decision of the Commission to impose an immediate ten point deduction. The Appeal Board substitutes a sanction of an immediate six point deduction. This is an appeal by Everton Football Club against the decision of a Premier League Commission to impose a sanction of an immediate ten point deduction for a breach of the Premier League Profitability and Sustainability Rules (“the PSR”). The PSR, and the procedure for their enforcement, were agreed by all Premier League Clubs. Before this Appeal Board, the Club accepts that it breached the PSR for Season 2021-22 by having losses, as calculated by a formula set out in the PSR and as found by the Commission, of £124.5m which exceeded the upper loss threshold of £105m. It appeals against only the sanction imposed. The Club relies on nine grounds of appeal. Seven relate mainly to how the Commission dealt with various mitigating and aggravating factors. The Appeal Board refuses the appeal on all these grounds, concluding that the Commission’s approach to these issues was correct and the evidence supported its conclusions. However, on the other two grounds, the Appeal Board concludes that the Commission made legal errors. First, the Commission found that, in relation to what it told the Premier League about its new stadium debt (which affected the calculation on which the relevant losses were calculated), the Club had been “less than frank” and breached another Premier League Rule (rule B.15) which imposes an obligation of “utmost good faith”. The Appeal Board concludes that the Commission was wrong to make those findings, because those allegations had not been made against the Club. Whilst the representations made by the Club about the stadium debt were materially wrong, it was not the Premier League’s case that that was anything other than an innocent mistake. Second, the Commission was wrong not to take into account available benchmarks (e.g.the approach taken in English Football League (“EFL”) Guidelines cases), which had been relied upon by the Club, when it addressed the proportionality of the sanction. These errors were material, in that they affected approach and conclusion of the Commission in relation to sanction. As a result, the Appeal Board sets aside the sanction imposed by the Commission and, at the request of the parties, itself has considered the appropriate and proportionate sanction. In doing so, the Appeal Board considers (i) The aims of the PSR, which include protecting the integrity of the competition, preventing clubs from taking undue financial risks with player spending which may give them a relative sporting and financial advantage over other clubs.(ii) In all the circumstances, including relevant mitigating and aggravating factors, what sanction is proportionate in that it is necessary and sufficient to achieve those aims but does not exceed what is reasonably required to achieve them.3In assessing the appropriate sanction, the Appeal Board has taken into account, among other things( i) The breach was a serious matter in that it exceeded the £105m threshold by a significant amount, both in percentage and monetary terms (nearly £20m). The Board agree with the Commission that the main reason for the Club’s breach was that it did not manage its finances, as prudently it should have done, so as to operate within the generous threshold of making no more than £105m losses over the relevant period.(ii) The remaining mitigating factor is “trend”, i.e. the losses incurred by the Club reduced year-on-year throughout the relevant period. However, given that the losses in the first two years were each over £50m and aggregated over £110m,before the Club put brakes on player spending for the final year of the period, the extent to which that evidenced prudent financial planning aimed at sustainably reducing losses was restricted. The mitigating effect of this factor is limited.(iii) On the other hand, there are two aggravating factors: the extent to which the PSR losses were over £105m, and the Club’s provision of incorrect information to the Premier League in relation to the new stadium costs.(iv) Whilst there are clear and obvious differences between the Premier League and the Football League, the Football League scheme for profitability and sustainability is structurally similar to that of the Premier League, and the EFL Guidelines for sanction in this area are the closest available benchmark. A six point sanction is broadly in line with those. It is also not out-of-kilter with any other available benchmark, including those under the Premier League Rules themselves (such as the automatic sanction for insolvency of nine points).In all the circumstances, including relevant mitigating and aggravating factors, the Appeal Board considers that a six point immediate points deduction is appropriate and proportionate in that it is a sanction both necessary and sufficient to achieve the aims of the PSR. This summary is for the assistance of those reading this Decision, but does not detract from or alter the full reasoning in the Reasoned Decision.
