Chelsea are under investigation by the Premier League and the Football Association for potential breaches of football rules including financial fair play (FFP), prompting experts to warn that the London club could face a points deduction if found guilty.
The governing bodies are examining secret payments made by companies belonging to Chelsea’s former owner Roman Abramovich.
The payments, details of which were revealed by the Guardian and international partners this week, appear to have benefited the club without being declared in annual accounts. With the number of wealthy owners pouring cash into the English game rising over time, other clubs including Everton and Manchester City are also under scrutiny.
But what rules might have been broken, how will the investigation work and will any top football club ever be punished for flouting FFP?
What is financial fair play?
FFP has become a shorthand used to describe more than one set of regulations but its origins are in a 2009 review by European football’s governing body. Uefa was concerned at the number of clubs spending more than they were earning, in desperate pursuit of success, and racking up unsustainable debts that threatened their survival.
The response was a set of rules introduced for the start of the 2011-12 season. Two years later, the Premier League introduced its own version of FFP, known as the profitability and sustainability rules. Over time, the rules have come to be seen not just as a way of ensuring football clubs are financially secure but also as a way of battling what the former Arsenal manager Arsène Wenger called “financial doping”. This is where wealthy benefactors – such as a billionaire oligarch or a Gulf state – skew competition by ploughing their own money into a club, to in effect buy success.
What are the rules?
The Premier League reviews clubs’ accounts every year and sets a limit on the extent to which they can keep running at a loss. The short version is that clubs must not lose more than £105m over a three-year period. However, some spending does not count towards the calculation. Examples include infrastructure – such as investment in the stadium and training ground – community programmes, women’s football or youth development. These are known as “add backs”.
The rules were loosened during the pandemic, to account for the fact that clubs had increased costs associated with health and safety and lost significant income when fans were banned from coming to stadiums.
Uefa’s restrictions are slightly different and have been adapted over the years. As of last year, clubs can lose €60m under a new football earnings rule, double what was permitted under the previous FFP system. There is also a squad cost rule, which caps spending on wages, transfers and agents’ fees at 70% of revenue.
How does this apply to Chelsea?
A consortium led by the US investor Todd Boehly bought Chelsea in 2022, after Abramovich was effectively forced to sell the club when he was punished by the UK over his links to the Kremlin. At the time, Boehly and his co-investors set aside £100m to cover the cost of any potential financial investigation. During the course of the takeover, the club has said, it discovered that “incomplete financial information” had been submitted to the football authorities between 2012 and 2019 and reported itself to the Premier League, Uefa and FA.
Chelsea reached an £8.7m settlement with Uefa over this in July but that is far from the end of it. Uefa has a statute of limitations that meant it was able to look back only as far as the 2018-19 season. The Premier League has no such restriction. It can look back as far as it likes and impose sporting sanctions, including a points deduction or expulsion from competition.
How are breaches investigated?
If the Premier League spots a breach in a club’s annual accounts, or receives information that suggests those accounts were inaccurate, its board can charge a club with breaking the rules laid out in the Premier League handbook.
Once charges have been issued, the case then goes to a judicial panel chaired by Murray Rosen KC, a veteran sport barrister and deputy judge. Rosen can pick three people from a list of 15 to join the panel adjudicating on the case. They are selected based on relevant expertise, such as accountancy or experience with arbitrations.
Much like a courtroom trial, lawyers from both sides – the club and the Premier League – must then argue their case. Given the money and reputations at stake, this is typically a lengthy process and one that is conducted in private. At the end of it, the judicial panel will make a decision. Unlike a criminal case, the verdict is reached on the balance of probability and does not require proof beyond a reasonable doubt.
If found guilty, the club can take its case to a special appeals panel. However, that is the last chance saloon. The case cannot go any further, to the law courts or the international court of arbitration for sport.
What about Manchester City and Everton?
Both clubs have been charged with breaking spending rules and both clubs deny the charges. The Premier League charged Manchester City with 115 breaches in February 2023. Many football fans appear to believe that no further action is being taken but in fact the case is ongoing, albeit shrouded in secrecy.
Backed by the financial might of Abu Dhabi, City have hired the leading lawyer Lord Pannick KC – who advised Boris Johnson over the Partygate inquiry – to spearhead their defence. So far, this has reportedly included lodging a complaint that Rosen is an Arsenal fan. While Arsenal and City are usually not fierce rivals, the two battled each other for the Premier League title last year and may do so again this season. The case is likely to take considerably longer before a verdict is reached.
Everton have also been charged with breaching FFP and are reportedly facing a swifter resolution that could lead to the club being docked 12 points, sending them plummeting to the bottom of the table. The club has said it is confident that it did not breach FFP rules.
What other rules are relevant?
The reason Manchester City were hit with so many charges is that breaching one rule sometimes indicates another has been breached. For instance, if a club has breached financial fair play, it may also have submitted inaccurate accounts and failed to act in good faith, both of which are not permitted.
In addition, the FA also has the power to investigate. The FA’s remit includes the submission of accurate information on fees received by agents working on transfers. The FA is also investigating Chelsea, as revealed this week.