What next for Leicester City's PSR case with points deduction still possible

[davieG]

https://www.leicestermercury.co.uk/sport/football/football-news/what-next-leicester-citys-psr-9530264

 

How City won their appeal, what it means for Steve Cooper and his players, and why issues around the 23-24 accounts mean that they are not yet completely out of the woods

Sport
ByJordan Blackwell
13:32, 4 SEP 2024

It should not be understated how significant Leicester City’s victory on appeal is. The points deduction they have saved themselves means it’s bigger than any single win they will earn on the pitch this season.

But City are not out of the woods yet. There’s another set of accounts that need to be assessed for potential breaches of Profit and Sustainability Rules (PSR) before it can be definitively said that they will not receive a points deduction over their finances this season.

Here, we’ve compiled the most common and pressing questions on City’s dispute with the Premier League, their PSR cases, and what happens next.

 

How did City win their case?

An independent appeal board agreed with City’s argument that the Premier League’s rules did not apply to them when they were charged with a breach of PSR. On June 30, 2023, the final date of the 22-23 accounting period, and the final date of the three years of finances that the Premier League were due to assess, City were not a Premier League club.

Following their relegation in May 2023, City’s Premier League shares were passed to Luton on June 13, 2023. At that point, they ceased to be a Premier League club and were no longer subject to their rules.

That was the basis of City’s argument. Under the Premier League’s own definition of a member club, City were not one.

Despite the commission’s original finding that determining a specific date of the alleged breach of the £105m losses threshold was not necessary, the appeal board agreed with City’s argument that their finances could not be assessed until the financial period had concluded. Therefore no judgement could be made on whether they had exceeded the £105m threshold until after June 30, by which point they were not a Premier League club.

 

Why was the change to the accounting date significant?

On April 23, 2023, City extended their accounting period, moving the final date from May 31, 2023, to June 30, 2023. This is significant because had their financial year ended in May, they would not yet have passed their Premier League shares to Luton, and so their argument that they were no longer a Premier League club would have been invalid.

City informed the Premier League of their decision to change their accounting period on March 8, 2023, more than a month before it officially came through. It’s deemed that there is nothing untoward in City changing their accounting period. They are permitted to do so within the Premier League’s rules, and can even have an end date as late as July 31.

 

Can the Premier League appeal this judgement?

Yes, technically. But it seems they are very unlikely to do so, and even less likely to win. Their appeal would have to be on the basis that the appeal board was not fit for purpose, but, as City were keen to point out, it was made up of a panel of three experienced, senior lawyers, two of whom were former Court of Appeal judges.

 

So it’s done?

Yes. City have not breached PSR for the 22-23 season. That is now definite. They will not receive a punishment, points deduction or otherwise, for that season’s finances.

Is that including the charge over failing to submit their accounts?

Yes. So there were two charges originally, one for the alleged breach of PSR, and the other for failing to submit their latest audited accounts. Again, at the point at which they were charged over such an alleged offence, they were not a Premier League club and so the charge is dismissed.

 

How many points would City have been deducted?

Seven, possibly. It is not in dispute that City exceeded the £105m threshold. They admitted in their own accounts, published in the spring, that they “anticipated they may be found not in compliance” with PSR.

The details emerging from the appeal board’s judgement shows that the Premier League’s PSR calculation of City’s finances came in at £129.4m. That’s £24.4m above the threshold.

The rules set out by the Everton and Nottingham Forest cases are that a PSR breach leads to a three-point deduction, with a further deducted point for every £6.5m a club is above the threshold.

That works out at seven points taken away. However, there would have been arguments over the exact figure at which City had exceeded the threshold, while mitigating circumstances can often crop up during hearings and judgements. So it’s not definitive that it would have been a seven-point deduction.

Why might City still be unhappy, despite winning their appeal?

There are not full-on celebrations going on inside the club. It seems there is still some frustration that because of this process and the time it took to conclude, it affected their transfer business this summer.

It’s quite clear that they were not as attractive a club in the transfer market because they had a potential points deduction hanging over them, one that was public knowledge. Therefore, they may feel they weren’t able to recruit players they otherwise would have enticed had the case never been brought.

 

What does this mean for City’s season?

For Steve Cooper and his players, they can get on with the Premier League campaign knowing that one of the big factors potentially affecting their season is now out of the window. But it’s not the case that they definitely won’t receive a points deduction this season, because there is still the matter of their 23-24 finances. More on that further down.

 

What does this mean for the Premier League?

They’ve said they’re “surprised” and “disappointed”, but they’re probably a little embarrassed as well. This has come about simply because their rules are not watertight. They were acting on the spirit of PSR and not on the wording, and so it’s likely to mean a rewrite of their own regulations so that no club can copy what City have done.

 

What does it mean for other clubs?

There’s bound to be anger. It will be seen around the country that City have got off on a technicality. The clubs in particular who will be frustrated are Everton and Forest, who received points deductions for their breaches of PSR; Leeds, who may feel they were denied promotion at City’s expense; and this season’s relegation battlers, who will be frustrated if City finish above them by seven points or fewer.

 

What does it mean for the January transfer window?

Not a lot, really. As a Premier League club, City still have to pay attention to PSR in case of future breaches. They don’t intend to be relegated so that they can call on this argument every time.

 

What about the 23-24 finances? Are City in the clear?

This is now the focus for City. Because, no, they’re not in the clear on the three-year accounting cycle ending with 23-24. Mainly, that’s because they have not been assessed yet, but the EFL, whose jurisdiction City were under, suspected that the club may be in breach of PSR, hence placing them under a transfer embargo.

City made moves to help stay within the threshold late in the financial year, receiving around £10m in compensation for Enzo Maresca and his staff’s move to Chelsea, plus £30m for the sale of Kiernan Dewsbury-Hall to Stamford Bridge, but it’s not certain they stayed within the £83m of allowable losses. City will now be putting together their own PSR calculation to submit to the Premier League by December 31.

 

Who is in charge of analysing City’s 23-24 finances? The EFL or the Premier League?

This is a tricky one. You would suspect the EFL, because City were in the EFL in the 23-24, but there may be a handover, and so it then comes down to the Premier League’s judgement again. For now, that’s not certain.

Does the same defence not apply – that City were not an EFL club at the point at which their financial year concluded?

It appears not, simply because the EFL have covered for this possibility. In their rulebook, under financial fair play judgements, it states: “If a Club is promoted or relegated out of the Championship Division that Club shall, notwithstanding promotion or relegation, remain bound by these as if it were still a Championship Club, until such time as it has complied with all of its obligations relating to its last Season as a Championship Club.”

And in any case, as mentioned above, there may have been a handover, with the Premier League now in charge of assessing City. This is going to be a hot topic for the remainder of this season.

 

When will the 23-24 finances be assessed?

Essentially, it will begin whenever City submit their PSR calculation. They have to submit their own assessment to the Premier League by December 31, even though it is for a season in which they were in the EFL.

From there, the governing bodies will make an assessment. So last season, Everton and Forest were charged in January after submitting their PSR calculations before the end of December, and they had received their punishments before the end of the season. Forest’s failed appeal was also decided before the end of May.

 

If City are in breach for 23-24, what would be the punishment and when would it be applied?

Again, this is uncertain. It likely would be a points deduction and likely would come in before the end of this season, but the uncertainty around City being an EFL club at the time may mean there’s more of an argument to be had. But in short, and this is important, City could still receive a points deduction this season for last term’s finances, albeit so could all of the 19 other clubs in the Premier League.

 

Does the ruling on 22-23 finances make a difference for 23-24?

Possibly, yes. This is pretty interesting. The EFL has a double jeopardy ruling, by which a club’s losses are capped if they have already been punished for a PSR cycle.

Let’s say City had been found in breach of PSR for the three-year cycle ending in 22-23 and had been punished for that. When the EFL then comes to assess the three-year cycle ending in 23-24, they would cap the losses for the first two of those three seasons, because essentially they’ve already been assessed.

In the Premier League, allowable losses stand at £35m per season. In the Championship, it’s £13m per season. Applying the double-jeopardy rule, the EFL would have capped City’s losses at £35m for 21-22 and 22-23, the first two years of the cycle they are assessing, and so essentially, they would be solely judging City on whether they exceeded the £13m allowable losses for 23-24.

That City have not been punished, it means the full three-year cycle will be considered and the club judged on whether they have exceeded the allowable £83m losses. Before City could have employed the double-jeopardy defence, but now don’t have that in their back pocket.

[Bourbon Fox]

Oh they're really going to want to nail us now

[Pliskin]

2 minutes ago, Bourbon Fox said:

Oh they're really going to want to nail us now

Want, and can are two different things.

[FoxTimmy2]

We should really be eye'ing European places now.

 

Up the foxes! 

[Nolucklcfc]

Wonder whether we will be found in breach. If we are and get a deduction, the abuse we are gonna get back 😂

[Nolucklcfc]

Also a reminder of what Percy said in June 

[Qwerty]

My understanding is that we knew we’d be in breach for the last 3 year cycle ie 20/21, 21/22, 22/23.  
We’ve managed to avoid the charge for that 3 year cycle, due to being relegated in summer 2023.

We’re going to submit accounts for 23/24, along with all the other PL teams, this December.  Then they will look at the previous 3 years ie 21/22, 22/23, 23/24.

We think we’re Ok for 23/24 because we sold KDH and Maresca. 
We should be Ok for 22/23, because summer 2022 was when we barely spent any money, leading to Rodgers having a big strop. 
So I suppose it may come down to how bad 21/22 was.

[Chrysalis]

EPL are going to do a mid season review like the EFL attempted, but its another flawed rule, as players can be sold after end of the season.

 

The sport really needs an independent regulator, what we are witnessing is the result of a mess when clubs themselves design the rules, of course most clubs will be self interests as priority.

 

In my mind a independent regulator would never make a spending limit based on revenue as it is unsporting, they also wouldnt be doing things based on emotions but instead on legal reality.

 

UEFA also are renaming their rules, as they have realised it is nothing to do with fair play.

 

Most other sports that have spending restrictions apply the same rules to every competitor.  As an example in F1, the richest teams had to make huge cuts, as they were not based on revenue.

Edited 4 September by Chrysalis

[st albans fox]

6 minutes ago, Qwerty said:

My understanding is that we knew we’d be in breach for the last 3 year cycle ie 20/21, 21/22, 22/23.  
We’ve managed to avoid the charge for that 3 year cycle, due to being relegated in summer 2023.

We’re going to submit accounts for 23/24, along with all the other PL teams, this December.  Then they will look at the previous 3 years ie 21/22, 22/23, 23/24.

We think we’re Ok for 23/24 because we sold KDH and Maresca. 
We should be Ok for 22/23, because summer 2022 was when we barely spent any money, leading to Rodgers having a big strop. 
So I suppose it may come down to how bad 21/22 was.

 

it’s reported that we failed to 23/23 @ 129m 

so for the year to June 24 we need to find savings to bring the running loss below 83m.  That’s 46m.better than where we were. 

 

But remember that the income from parachute will be around 35m lower than what we took the previous season. So that’s crudely 81m 

commercial and match day income will also be down. 
salaries will be markedly lower unless we had a bonus agreement to refund  most of thatdrop in the event that we bounced back 

 

I think it’s going to be very close. 

[dave12]

37 minutes ago, Qwerty said:

My understanding is that we knew we’d be in breach for the last 3 year cycle ie 20/21, 21/22, 22/23.  
We’ve managed to avoid the charge for that 3 year cycle, due to being relegated in summer 2023.

We’re going to submit accounts for 23/24, along with all the other PL teams, this December.  Then they will look at the previous 3 years ie 21/22, 22/23, 23/24.

We think we’re Ok for 23/24 because we sold KDH and Maresca. 
We should be Ok for 22/23, because summer 2022 was when we barely spent any money, leading to Rodgers having a big strop. 
So I suppose it may come down to how bad 21/22 was.

Surely the past 3 cycle is now irrelevant, when it has been found that we didn’t breach the rules in 22/23, meaning that there is a year missing from the cycle and cycle is effectively incomplete and irrelevant???

[Spudulike]

3 minutes ago, st albans fox said:

 

it’s reported that we failed to 23/23 @ 129m 

so for the year to June 24 we need to find savings to bring the running loss below 83m.  That’s 46m.better than where we were. 

 

But remember that the income from parachute will be around 35m lower than what we took the previous season. So that’s crudely 81m 

commercial and match day income will also be down. 
salaries will be markedly lower unless we had a bonus agreement to refund  most of thatdrop in the event that we bounced back 

 

I think it’s going to be very close. 

Must be close as the club wouldn't even fork out a small transfer fee for Sensei.

 

That said, I can't accept the club really is so incompetent that it would actually breach.

[STUHILL]

8 minutes ago, Spudulike said:

That said, I can't accept the club really is so incompetent that it would actually breach.

hmm 

[Chelmofox]

42 minutes ago, Spudulike said:

Must be close as the club wouldn't even fork out a small transfer fee for Sensei.

 

That said, I can't accept the club really is so incompetent that it would actually breach.

Hmm. I don’t think the club wanted Sensei once Milan started to play silly buggers. Not sure they really wanted him before that. Very much an Enzo ego trip. 

[Daggers]

[coolhandfox]

52 minutes ago, Spudulike said:

Must be close as the club wouldn't even fork out a small transfer fee for Sensei.

 

That said, I can't accept the club really is so incompetent that it would actually breach.

We choose not to as he hand a ankle issue, Inter want more money then we want to pay due to the risk associated with the player.

[iancognito]

1 hour ago, Chrysalis said:

 

 

The sport really needs an independent regulator, what we are witnessing is the result of a mess when clubs themselves design the rules, of course most clubs will be self interests as priority.

 

 

OFFOOT would be as ineffective as OFGEM, OFWAT and all the rest. There's a lot wrong with top flight football and the distribution of cash etc but I can't see that a regulator would be anything more than another ineffectual sheriff - like the PFA or supporters trust - to get annoyed with when they fail to stop clubs doing exactly what they want

[iancognito]

56 minutes ago, Spudulike said:

 

 

That said, I can't accept the club really is so incompetent that it would actually breach.

There's nothing from our actions in the last 3 or 4 years that would convince me we're remotely competent.

Our finest transfer in that time has been employing De Marco, we just seem to have spent our time hoping the issue would go away.

[Pita]

Because the PL are useless and only look after the top few teams now they are crying like a bunch of babies 

[HybridFox]

It's a win for football once again not being bullied by the elite cartel. F*** em

[ACF]

1 hour ago, dave12 said:

Surely the past 3 cycle is now irrelevant, when it has been found that we didn’t breach the rules in 22/23, meaning that there is a year missing from the cycle and cycle is effectively incomplete and irrelevant???

Didn’t breach the rules because they’re so poorly written, and did not overspend are two very different things!

 

We didn’t argue we didn’t overspend, so that period will certainly become involved.

 

The other bit that i think is quite important, we made a lot of effort to reduce our spend following relegation, didn’t sign anyone in Jan, didn’t replace Casadei, sold Maddison, Barnes, KDH, lost Maresca, didn’t resign Fatawu, Ndidi until post July 1.

How many £ms of wages left as free agents?
 

We had high wages coming down, that whilst there were cuts, we couldn’t do much about the wages we were left with - it’s not as if we increased the contracts.
 

We made a lot of effort to get there. If we hadn’t have pissed off the PL/EFL, I would be comfortable. These accounts are going to take forever and a day, they’ll be reviewing them very closely to find a way to get something to stick.

 

The other part is I’m not sure there actually any punishment until we drop back down.

[Wiggy Fox]

37 minutes ago, Daggers said:

You should make a big tifo of that for the Everton game 

[Wiggy Fox]

3 minutes ago, Wiggy Fox said:

You should make a big tifo of that for the Everton game 

Make another one with the names of the independent panel on it and thank you! Anyway those names will be published or does that remain private? 

[Fox forever]

11 hours ago, ACF said:

Didn’t breach the rules because they’re so poorly written, and did not overspend are two very different things!

 

We didn’t argue we didn’t overspend, so that period will certainly become involved.

 

The other bit that i think is quite important, we made a lot of effort to reduce our spend following relegation, didn’t sign anyone in Jan, didn’t replace Casadei, sold Maddison, Barnes, KDH, lost Maresca, didn’t resign Fatawu, Ndidi until post July 1.

How many £ms of wages left as free agents?
 

We had high wages coming down, that whilst there were cuts, we couldn’t do much about the wages we were left with - it’s not as if we increased the contracts.
 

We made a lot of effort to get there. If we hadn’t have pissed off the PL/EFL, I would be comfortable. These accounts are going to take forever and a day, they’ll be reviewing them very closely to find a way to get something to stick.

 

The other part is I’m not sure there actually any punishment until we drop back down.

Punishment for 3 years ending June 24 ( if we have failed) will be dealt with by PL as we are a PL club as at 30 June 24 and points deduction will be made this season. Now we have Rejoined “club” we comply with new rules and our PSR calculation needs to be with PL by December this year ( as with all20 clubs) and punishments handed out around Feb 25. 

[Trent Steel]

soak it up peeps, they wont doing anything else this season, if anything it will be next and they will try. but sod em

 

i've been bombarded with cheating bin dipper messages since the news came out from florist scum, so they are trying to tell me that if they found a loophole to avoid points deduction they would use it ? absolute b****cks, w@nkers!

[Supergray22]

14 hours ago, st albans fox said:

 

it’s reported that we failed to 23/23 @ 129m 

so for the year to June 24 we need to find savings to bring the running loss below 83m.  That’s 46m.better than where we were. 

 

But remember that the income from parachute will be around 35m lower than what we took the previous season. So that’s crudely 81m 

commercial and match day income will also be down. 
salaries will be markedly lower unless we had a bonus agreement to refund  most of thatdrop in the event that we bounced back 

 

I think it’s going to be very close. 

That’s exactly what I’ve been thinking. The clubs transfer behaviour before the end of the accounting period suggest they were aware of how close these figures were before the end of the accounting period. However it just worries me that they had the wrong target figure.