SilverFox2
Well-Known Member
Many thanks Chris, that cleared up many areas I was only partially understanding.I did. You just didn't understand it. :)
Anyway, you asked me (in a post I can’t now find) what I thought about the introduction of the APT rules in the first place, and how the tribunal had viewed that. The answer is quite a long one.
Let me start by summarising the evidence on which the PL relied at the tribunal as justifying its decision to introduce the APT rules. The PL witness who dealt with this was a guy called Herbert. (Stop sniggering.) He said (para.s 17-18) that there had been some consideration of how to prevent “another Portsmouth” (who went into administration in 2009 or so), that the PL was motivated by the proceedings brought against City in relation to alleged breaches of the rules dating back over many years, and thirdly a number of clubs – the redshirts in particular – had said that the existing rules on Related Party Transactions were not effective because they relied on clubs to make self-declarations when they had entered into RPTs.
So here is my own assessment, FWIW, of those three matters.
I can well understand that any sensible regulator would want to prevent its member entities from embarking on courses of action that result in that club entering administration. The problem is – and I have not researched this, this is from memory but my recollection is consistent with what others have posted – that Portsmouth’s problems really began when the previous owner (who had made substantial loans to the club) wanted his money back because of his own financial problems. The result was that the club got into an extremely poor financial position such that staff ended up not being paid. (A colleague of mine is very close to someone who worked there during this time, so I have perhaps particular reason to remember it.) However the APT rules, when they were introduced explicitly and deliberately excluded shareholder loans from their scope.
So there is something of a disconnect, it seems to me, between the PL’s motivations and its subsequent actions. The very thing that did for Portsmouth is the very thing that the new rules did not address. So how did the PL get into that state?
It seems to me the likelihood is that Mr Herbert was telling the truth when he said that there had been concern for some time about how to stop another Portsmouth, but the error seems to me to be to assume that this was the motivation (at least in part) for the APT rules. The tribunal accepted that the NUFC takeover was what they described as the “catalyst” for the new rules, but I struggle to see why they did not go further than that. I, personally, cannot see how it can reasonably be said that the NUFC takeover simply brought the Portsmouth concern, if I can call it that, to a head, when that fiasco occurred over a decade earlier and the remedy the PL alighted upon would not have prevented the Portsmouth concern in the first place.
We have, of course, been down this road before. When UEFA’s FFP rules were first mooted, their object was avoiding clubs entering into unmanageable levels of debt. Yet somewhere along the way UEFA somehow got persuaded that the real evil in the game was not levels of debt, it was levels of investment. So it is not without precedent that an objective with laudable aims is hijacked in order to promote the self-interest of the existing elite. I wonder if the truth of the matter is that this is what has happened here.
So on to the second point, that the PL has itself brought proceedings against City alleging PSR breaches over many years.
Yes, you read that correctly, the PL relied on allegations made against MCFC – which are being disputed and determined even as we speak – as a reason to change the rules.
In 2021.
Even though the PL’s charges were not even brought until the early part of 2023.
I have to confess I read that part of the decision and thought WTF? The evidence given by Mr Herbert is redacted about the disciplinary hearing (para 186) but the tribunal go on to record their view that the length of time those proceedings have taken illustrates why a move from a system of retrospective analysis of RP/AP transactions to a prospective approval of them might be considered to have merit. Which I think is the essential meat of the tribunal’s decision.
Then we have the third element, the fact that (para 185) “both the PL and the clubs that gave evidence had concerns since at least 2018 that the PSR were being circumvented by the failure to report sponsorships with RPTs.” The clubs’ evidence was that the rules were defective because allowing a system of self-certification was essentially a cheat’s charter.
The tribunal seemed to accept that the fact that the clubs and the PL had these concerns was in itself justification without moving to consider whether there was any actual merit in those concerns. In other words “it clearly worried them, and so we find that it was reasonable to move away from the previous system to the new system.”
I have a number of problems with that. The first is that what is, and what is not a Related Party Transaction is something that has been well settled for years, decades even. I remember in about 2014 debating on this forum the charge that City’s sponsorship by Etihad was an RPT when, in accordance with UEFA’s own definition of RPTs – which they had cut and pasted from IAS24 – it plainly was not.
The second is that the accounts of PL clubs are audited, and usually the auditors are big, well known firms with big reputations. They know what RPTs are. (City’s auditors were BDO, for instance.) So the basic charge that the RPT rules required nothing more than self-certification was horseshit. The whole point about auditors is that they put their professional reputations on the line when they sign off a set of accounts. The auditors who look at major transactions, such as sponsorship agreements, are well able to determine what is an RPT. So the concern that the RPT system was inherently unreliable because it relied on self-certification seems to me to be fundamentally flawed.
More importantly, there is not a single suggestion of a single example of any club, City or otherwise, who failed to disclose any RPT. Not one. We have to be a bit careful on this because sometimes not all the evidence is summarised in a tribunal’s judgment and there may be particular reasons why the tribunal did not refer to any evidence about any actual undeclared RPTs which may have taken place. However on the face of it there is not a single instance of any undeclared RPTs which would justify the concerns of the redshirts and others.
Call it scaremongering, call it paranoia, call it horseshit, there doesn't seem to have been any evidential basis for it, whatever it was.
The real problem, it seems to me, is that the RPT rules did not apply to transactions between unrelated parties within the (widely understood) meaning of the rules. The real substance of the matter is betrayed by the request for an emergency meeting that came 5 days after the NUFC takeover which was made by someone whose name has been redacted (para 21 – but I think we can narrow that down to a shortlist of about three suspects). At that meeting he asked that consideration be given to adopting a new rule which should have “the widest possible definition of a ‘related party.’”
So there you have it. The redshirts, and perhaps others, had gnashed their teeth for years about the fact that HH Sheikh Mansour and Etihad are not related parties under the long-established definition, so they wanted to change the goalposts. And they wanted to do so before NUFC came barging up to the top table.
So they did.
As I say, the tribunal do not assess this concern about self-certification on its own merit, for otherwise they would surely have pointed to the matters I have identified, and probably to much more besides. They seem to have proceeded on the basis that the PL should be given a fairly wide margin of appreciation in respect of how it regulates itself, and their overall conclusion seems to have been that the concerns about, shall we say, the potential for abuse of the RPT self-reporting regime, and the delays caused while for instance the PL allowed the UEFA claim to run its course, justified changing from a system of retrospective analysis to prospective approval.
The way that they express it is to say (para 189) that “there was a sufficient evidential basis for the PL and the clubs to conclude that the ex post PSR rules were ineffective in controlling APTs.”
As conclusions in these sort of cases go, this is not surprising. Tribunals like this tend not to approach cases like this on the basis that they can just substitute their own judgment about what is reasonable, proportionate or necessary for the judgment of the actual decision maker – that is to say, the PL - itself. Rather, they regarded their role as being to decide whether it was permissible for the PL to act in the way they did. It was not, in their view, a perverse or extreme reaction to the problem the PL regarded as being before them.
To put the same point another way, if there is a good-faith justification for a course of action that is actually driven by bad-faith motivations, the tribunal will not necessarily see it as its job to disentangle the two. Some may not like that, but that's just how it is.
Oh, and maybe they decided not to kick up a fuss about the Portsmouth thing in their decision because they knew what they were going to say about shareholder loans.
It is great to have your and other members "Legal Matters for Dummies" available to prevent a great Legal term explanation being simply left unread by my uneducated brain.