Leicester City vs the Premier League
10th September, 2024
Clever lawyers and accounting, or a classic dilemma over contractual interpretation? The answer is, unsurprisingly, a bit of both.
On 30 August 2024, an independent appeal board upheld Leicester City’s appeal of an independent Commission’s finding that it had jurisdiction to hear the Premier League’s (PL) case against Leicester. The case concerned Leicester’s alleged breaches of Profit and Sustainability Rules (PSRs).
The PL referred Leicester to an independent Commission in March 2024 regarding its purported losses of £129.4m over the relevant seasons leading up to (and including) the 22/23 season. These losses exceeded the permitted £105m losses (under PSR) over the same period.
Leicester’s original challenge of the Commission’s authority to hear the case was dismissed, but this was appealed by Leicester.
Leicester argued that:
- They had not breached the PSRs; and,
- In any event, the PL did not have jurisdiction to punish them because they had already been relegated to the Championship (which falls under the jurisdiction of the English Football League (EFL) and not the PL) before their accounting period ended. This meant they were instead bound by EFL rules at the time of the alleged breach.
In summary, the appeal board decided that:
- The PL could not say for certain whether Leicester was in breach of the PSRs because their accounting period ended after they were relegated (i.e. because they could have sold players and/or reduced their losses in the period between relegation and the end of the relevant accounting period)
- In turn, Leicester were no longer bound by the PSRs.
Key factors in the appeal outcome were that Leicester moved their accounting reference date to 30 June 2023, beyond the date of their relegation, and had already transferred their share in the PL to Luton Town (one of the three clubs promoted to the PL), on or around 13 June 2023. This effectively meant that (i) Leicester were no longer a member of the PL by the time their 22/23 accounting period had concluded and, therefore, (ii) Leicester could not be punished for exceeding the PSRs’ permitted loss threshold, despite being a member of the PL during the 22/23 season and the seasons preceding it that were subject to the calculations (but, crucially, not a member of the PL for the last two weeks of their 22/23 accounting period).
Many would argue that Leicester have “been let off” on a technicality because of a clever interpretation of the regulations. According to the appeal board, it was merely an interpretation of the literal words on the page.
The appeal board was not persuaded by the PL’s submissions that the words had to be interpreted in a manner which made them enforceable against relegated clubs, as doing otherwise would undermine the clear intent of the PSRs. The appeal board’s opinion was that the PSRs were “far from well drafted” and “confusing“. Whatever lawyers’ opinions on those remarks may be, the appeal board stuck rigidly to the words on the page and found that it was inappropriate to use principles of business efficacy or ‘common sense’ to make the PSRs enforceable against Leicester. This critical decision is likely to cause controversy among lawyers and fans alike. Clubs that recently received points deductions will scrutinise the position with interest, as will Leicester’s immediate PL rivals this season, who may have been hoping (or assuming) that Leicester would receive a points deduction this season. It remains to be seen whether the PL will appeal this decision and/or if Leicester may be charged again for the period including the accounting year 23/24, or whether they will have balanced their books sufficiently.
Outside of the sports setting, this decision is a reminder (as if we needed it) that every single word can count for a lot because a court will not always give effect to what (according to some) might seem the obvious intention of the contracting parties. At its core this is a very basic contract law case, but one decided in the high stakes and somewhat emotive context of professional football.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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