Everton’s appeal against points deduction: sanction reduced, benchmark set

Joseph Bryan summarises the decision of the Premier League Appeal Board in the case of Everton Football Club Co Ltd v The Football Association Premier League Ltd.

The eagerly awaited decision of the independent Appeal Board in the (first) Everton profitability and sustainability case has been published. The back pages will no doubt focus on the sporting consequences of the reduction of the club’s sanction from 10 points to six points. But, beyond the headlines, the decision will be of interest to sports law practitioners for the Appeal Board’s reasoning and the precedent value of the decision.

Appeal allowed

The reasoned decision of the Appeal Board (The Rt Hon Sir Gary Hickinbottom, Daniel Alexander KC and Katherine Apps KC) is available.

The decision rewards reading in full. In short, Everton appealed on nine grounds, two of which were successful. The successful grounds were, in paraphrase, that the first-instance Commission had erred in:

finding that the club had been “less than frank” and had breached the duty of utmost good faith;[1] and
failing to take into account relevant benchmarks in deciding the sanction.

As to the finding that Everton had been “less than frank” and had failed to act with utmost good faith, which concerned certain representations the club had made to the League about the funding of the new stadium at Bramley-Moore Dock, the Appeal Board considered that the mere fact that the club’s representations had been wrong did not make them “less than frank”; still less did it mean that there had been a separate breach of the duty of utmost good faith. The Commission’s decision on these points was also procedurally flawed because Everton had not had a fair opportunity of responding to these issues.[2]

As to the Commission’s ‘benchmarking’ error, the Appeal Board held that the Commission should have had regard to “existing relevant reference points”.[3] The “most obvious” benchmarks which could and should have been taken into account were the rules and guidelines for sanctioning profitability and sustainability breaches in the EFL.[4]

In light of these errors, and applying the principle of proportionality, the Appeal Board substituted a sanction of six points.[5]

Points of interest

For practitioners, the main points of interest in the Appeal Board’s decision are, it is suggested, the following.

First, subject only to “powerful mitigation”,[6] all clubs in breach of the profitability and sustainability rules will face “a points deduction, and nothing less than a points deduction”.[7] This stark proposition will no doubt reverberate through the boardrooms of the other clubs known to have been charged.
Secondly, the circumstances which will amount to good mitigation for breaches of the profitability and sustainability rules are limited. In particular, a club “cannot plead in mitigation that the breach resulted from adverse circumstances which were of a nature and level that may well befall any PL club during the course of a season, even if the precise circumstances which in fact befall the club in a particular season might not have been foreseeable”.[8]
Thirdly, although, strictly, not binding on future Premier League disciplinary commissions, such a high-profile decision of a distinguished panel (chaired by a former Lord Justice of Appeal) on an appeal in which both parties were represented by counsel will be of the greatest persuasive authority.
Fourthly, the decision emphasises the mutuality of the League’s rules. The League is a “joint venture” involving all the clubs;[9] its rules are a “contract” between them.[10] In particular, the profitability and sustainability rules are an expression of what the clubs themselves consider to be necessary to ensure fair sporting competition and fair revenue sharing.[11] Clearly, sporting and financial advantage are tightly intertwined in the upper echelons of professional football; but, notably, the decision shows that independent panels will not shrink from imposing sanctions which reflect the vital importance of “maintaining the integrity of the competition and thus the sport of football, with deterrence being an important overlapping aim”.[12]
Fifthly, by analogy with “professional regulatory proceedings”, the Appeal Board did not hesitate to apply civil procedural principles in interpreting the regulatory framework.[13] This emphasises the need for clubs to take specialist advice if facing such disciplinary proceedings.
Finally, notwithstanding the error of law identified above, it remains crucial that clubs “fully, frankly and accurately” disclose relevant information to the League.[14]

Is this decision the last word?

This important decision will undoubtedly be scrutinised not only by the immediate parties to the proceedings (the League and Everton) but also by the other member clubs of the League and clubs throughout the professional pyramid. It remains to be seen how other pending proceedings will now be resolved, including those involving Manchester City[15] and Nottingham Forest,[16] along with the further proceedings against Everton.[17] There is also the very real prospect of claims for compensation by third-party clubs.[18]

Changes to financial regulation in English football are also on the horizon: an independent regulator is the subject of a Government White Paper[19] and the Premier League is itself considering aligning its rules with UEFA’s squad-cost ratio model.[20] The principles set out in the Everton case are, however, likely to have enduring relevance whatever form financial fair play takes in future.

[1] Disciplinary Commission, Decision (17.11.23), para. 108. The first-instance decision is available here.

[2] Appeal Board, Reasoned Decision (26.02.24), para. 178.

[3] Ibid, para. 187.

[4] Ibid, para. 190.

[5] Ibid, para. 227.

[6] Ibid, para. 206.

[7] Ibid, para. 201.

[8] Ibid, para. 93.

[9] Ibid, para. 4.

[10] Ibid, para. 5.

[11] Ibid, para. 5.

[12] Ibid, para. 199.