Problems for UEFA While Implementing the Financial Fair Play Regulations - Example

UEFA’s Introduction of Financial Fair Play Table of Contents Introduction 3 A Brief Analysis of the Reasons for UEFA’S Introduction of Financial Fair Play 4 Problems for UEFA While Implementing the Financial Fair Play Regulations 9 Problems for the Leading Football Clubs While Complying With the Financial Fair Play Regulations 11 Conclusion 14 References 16 Introduction The Union of European Football Associations (UEFA) was established in the year 1954 in Basle, Switzerland, which brought handful of chief football supervisors of that time along with their pioneering vision. The important motive or the vision of the football supervisors of that time was to promote as well as to ensure harmony and team spirit amid the football community of Europe. Gradually, by deeply focussing upon the motives, UEFA ultimately transformed as a guardian of football in the geographical territory of Europe with the aim to defend and nurture the well-being of the sport at all levels (UEFA, 2012). After the initial establishment of UEFA, in the year 1960, it was observed that it possessed only three people as workers or staffs on a full-time basis. However, as days passed by, the staffs have considerably risen to a huge figure. Presently, more than 340 staffs are employed in UEFA with more than 29 various nationalities that include supervisors, IT specialist, journalists, coaches, secretaries and translators among others. These individuals are essentially employed in the administrative department of UEFA that is located in western Switzerland in the town of Nyon (UEFA, 2012). During the time of formation of UEFA, the body mainly consisted of 25 nationwide associations. However, the number of member associations rapidly increased during the start of the year of 1990. The reason for rapid increase of the member associations was due to the political advancements that took place in Eastern Europe and the disintegration of the USSR. Currently, there are 53 member organisations which are present under the body of UEFA (UEFA, 2012). The President of UEFA is Michel Platini who holds the vision of advancing as well as developing the association and also is focussed upon the duties and the responsibilities of UEFA in order to assist and to support the UEFA member organisations (UEFA, 2012). Moreover, along with the President, the other officials of UEFA comprise Vice-Presidents, Members and an Honorary President. The different officials possess various functions and duties for the sake of UEFA and their ultimate aim is to develop as well as to foster the association (UEFA, 2012). In the paper, the aspect of UEFA’s commencement of Financial Fair Play and the adequate reasons for the introduction of Financial Fair Play will be taken into concern. Various features such as evaluating the major difficulties that UEFA would face in implementing the regulations of Financial Fair Play and problems that might be faced by the leading clubs while meeting with the regulations will also be portrayed in the discussion. A Brief Analysis of the Reasons for UEFA’S Introduction of Financial Fair Play The conception of Financial Fair Play (FFP) was unanimously accepted by the Executive Committee of UEFA in the year 2009 especially for the well being of the sport i.e. football. The introduction of Financial Fair Play was supported by the entire football fraternity along with laying certain principal targets. The targets include forming grater discipline and consistency particularly in the finance segment of the football club, diminishing the pressures upon the transfer charges as well as the salaries that would limit the inflationary consequence and to promote the football clubs in order to remain strongly competitive with their earnings (UEFA, 2012). The Financial Fair Play rules state that every individual football club belonging to Europe would have to show their financial accounts regarding the expenditures that are linked with the sport of football. In this context, the football clubs would have to show their spending upon the transfer charges as well as the salaries along with creating revenues through commercial sources like sponsorships and revenues that are generated from television. In the financial account, certain investments in order to develop the stadium along with training grounds for youth advancement would be exempted in the new format of regulations (Gittings, 2012). Moreover, the important reasons or objectives of UEFA for the introduction of Financial Fair Play also include promoting long-term investments especially in the youth segment and infrastructure, defending the long-term feasibility of the football of European clubs and ensuring the football clubs of Europe regarding settling their any sort of liabilities in a timely approach. The above discussed reasons or objectives were enthusiastically supported and approved by UEFA in order to consider the systematic financial environment of individual football clubs that prevail in Europe. The Executive Committee of UEFA greatly focuses upon the individual football clubs of Europe that compete with each other and also are looking for controlling the broader effect of inflation that the individual clubs invest upon the salaries and the transfer charges of its members or players (UEFA, 2012). Noticeably, it has been recognised that many football clubs that prevail in Europe have suffered from stern financial losses. The broader vulnerable financial situation has generated a hard market circumstance especially towards the football clubs of Europe. The difficult market situation due to vulnerable financial circumstances eventually affected upon the aspect of revenue creation and also formed extra hard challenges towards the football clubs of Europe. In this connection, most of the football clubs of Europe have experienced with severe liquidity shortfalls like late payments to the members, working staffs and other officials of the authority (UEFA, 2012). Therefore, due to the above discussed consequential facts, the entire football family of Europe requested for introducing the facet of Financial Fair Play and in consultation with other associations, UEFA brought in the idea of introducing Financial Fair Play for the sake of the football clubs prevailing in Europe. The other objective of introducing the regulations of Financial Fair Play also include promoting and constantly enhancing the benchmark of the sport of football that prevails in Europe along with providing utmost priority towards the training and care of youth players in every individual football clubs of Europe. The new introduction of Financial Fair Play would also make sure that an individual football club of Europe possesses a satisfactory intensity of management and working authority. Moreover, the new regulation relating with Financial Fair Play would also help to become accustomed with the various sporting infrastructure of the football clubs for the purpose of delivering appropriate, well structured and safe facilities towards the players, media representatives and viewers (UEFA, 2010). In addition, the introduction of Financial Fair Play would also look forward to defend the integrity and smooth execution of the various UEFA football club competitions. The new regulation facilitates in the advancement of standards for the football clubs of Europe particularly in the field of economic, sporting, lawful, infrastructure and managerial-related aspects throughout Europe. The other important reason for introducing the regulations of Financial Fair Play is to place the essential significance upon safeguarding of the creditors by making sure that the football clubs prevailing in Europe could successfully settle their liabilities both long and short-term with the players and other different officials of the authority promptly (UEFA, 2010). According to UEFA, the new regulations of Financial Fair Play would commence from the season of 2013-2014 and would be applicable only in the Europa League and in the Champions League. The new regulations of Financial Fair Play would not be applicable for the domestic leagues as yet but it has been observed that the Football League has currently taken an important decision of initiating certain versions of the regulations that are portrayed in the Financial Fair Play especially for the championship clubs that will come into force in the upcoming years (Geey, 2011). The basic reasons for the formation of Financial Fair Play rules are to make sensible as well as logical investments particularly in the development of the youth along with in the advancement and progression of the football clubs that prevail in Europe. In lieu of this, the infrastructure of the football clubs generally include the development relating with the training ground and stadium along with logical expenditures that are made for the football club’s academy. UEFA very much desires to make certain investments especially towards the stadium, training purposes and clubs academies due to the fact that the association does not want to include the financing as well as running expenditures in the calculation of “break-even” relating with the rules of Financial Fair Play (Geey, 2011). In this connection, the conception of “break-even” fundamentally signifies that the expenditures should be equal with profits. The introduction of the new regulations relating with the Financial Fair Play deeply concentrated upon the requirement of the aspect of break-even which denotes that the football clubs belonging to Europe should not pay out much more than the revenue that they have attained over a considerable period of time. In other words, the main objective of UEFA is to maintain an effective break-even outcome in which the income or the profits would be more than any sort of related expenditure (UEFA, 2010). The fundamental regulation of Financial Fair Play is the requirement of “break-even” aspect. According to this particular rule of “break-even”, the ‘relevant expenditures’ of each individual football clubs that prevail in Europe are not permitted to exceed the ‘relevant revenues’ by a certain extent. As the financial market position is quite vulnerable and most of the football clubs have gone through with liquidity deficits, the fundamental rule of Financial Fair Play i.e. the aspect of “break-even” is very much required for the football clubs in Europe (Vopel, 2011). Apart from seeking for break-even result, UEFA introduced the notion of Financial Fair Play rules in order to avoid or to ignore any sort of payable over dues towards other different clubs, working staffs and other officials of the authority. With the formation of the Financial Fair Play rules, UEFA also greatly emphasised upon the provision of the information relating to financial concern in the future. The chief reason for emphasising upon the condition of the financial information in future is to make sure that the football clubs could meet with their any sort of future or long-term obligations (UEFA, 2010). Collectively, it can be stated there lays various reasons or objectives for the introduction of Financial Fair Play Regulations which are discussed above. However, in this regard, the most noteworthy and foremost reason or objective for the establishment of new Financial Fair Play Regulations lies in the fact of defending the financial steadiness in the long run of the football clubs that generally prevails in Europe, reinstating the competitive equilibrium between the different football clubs and the leagues and finally sustaining the aspect of break-even result (Vopel, 2011). The introduction of the new regulations of Financial Fair Play generally acts as a guideline through which the economic landscape of the game of football would be reshaped in order to overcome the vulnerable market situation and the liquidity shortfalls that are faced by the football clubs of Europe. The new regulations are introduced and are also approved by the entire football family of Europe that might become a practical solution towards enhancing as well as raising the overall scenario of the football clubs in Europe (Conn, 2011). Thus, it can stated that the significant objectives and the reasons of establishing the rules based upon Financial Fair Play are to enhance as well as to raise the economic capability of the football clubs along with credibility and transparency. Moreover, the formation of the new regulations of Financial Fair Play generally strives for defending the sustainability as well as the feasibility of each individual football club that prevails in Europe in the long run (UEFA, 2012). Problems for UEFA While Implementing the Financial Fair Play Regulations With the introduction of the new regulations, it is obvious to the fact that the new regulations are largely expected to impose significant impact upon the competitive equilibrium that would take place between the leagues and the football clubs. Though there are numerous reasons for the establishment of Financial Fair Play set of laws that look forward to enhance and raise the long-term feasibility of the football clubs of Europe, various difficulties can be faced by UEFA while executing the new regulations (Herbert, 2011). The application of the new regulations based upon Financial Fair Play would commence from the forthcoming season of 2013-2014 and could bring various problems for the UEFA while executing the regulations. The issue of paying taxes can be a major problem for UEFA while implementing the Financial Fair Play set of laws. UEFA would have to tackle with the factor of paying taxes by which the advantages are provided to the football clubs with the introduction of the new regulations. It has been recognised that few of the countries make their football clubs to pay less tax which is considered as unfair a way of national legislation (ESPN Star Sports, 2012). The other significant difficulty that might be faced by UEFA regarding the fact that the introduction of the Financial Fair Play set of laws are only applicable towards the top teams that usually participate in different club competitions in UEFA. The differentiation between the football clubs regarding the application of the new regulations might possess a major impact upon the governing structure of UEFA and it can face a huge problem by considering the fact. This particular problem of differentiation could be considered as an unfair financial competition as well as unethical issue that can pose several real risks towards the football clubs as well as towards their supporters (Marquez & Martin, n.d.). Moreover, the other problem that could be faced by UEFA is regarding the lawful context of the established rules of Financial Fair Play. The new established regulations may not work in an appropriate designed way rather could be deemed as an unlawful aspect. The newly introduced regulations could be deemed to be illegal due to the fact that delivering certain regulation towards the football clubs involves lot of money (Marquez & Martin, n.d.). In addition, UEFA could also face certain other problems if proper investigation is not done before implementing the newly formed rules of Financial Fair Play. The investigation could be regarding the newly introduced regulations whether it is effective or not with respect to the targets of regulation and are not contradictory with respect to other different objectives of regulation. The investigation would also be regarding whether the newly formed regulations are efficient towards maintaining the expenditures while executing, monitoring and enforcing them. Moreover, the investigation can also be regarding the rule of “break-even” that whether it is effective or not with regard the objectives of the newly formed regulations (Guardian News and Media Limited, 2012). Thus, it can be stated that the above discussed obstacles or difficulties can be faced by UEFA while implanting the Financial Fair Play regulations by a certain level. Problems for the Leading Football Clubs While Complying With the Financial Fair Play Regulations While complying with the newly established Financial Fair Play set of laws, certain major difficulties might be faced by the football clubs of Europe. The football clubs have to limit their amount of spending that ultimately can emerge as one of the crucial problems for them. As every football club has to show their financial account regarding their spending upon transfer charges and salaries, the football clubs have to limit their amount as well as spending power according to the newly established regulations based upon Financial Fair Play (Gittings, 2012). Moreover, certain football clubs such as Manchester City, Barcelona and Chelsea among others have posted huge annual financial losses which would be severely scrutinised due to the formation of rules based upon Financial Fair Play. As the spending power and amount have to be very much limited for the football clubs, the clubs in practice will not be able to buy any highly priced player and at the same time the football clubs of Europe will not be permitted to invest more than 55 percent of their incomes on player wages (Burt, 2011). The other significant problem that might be faced by the football clubs while complying with the Financial Fair Play set of laws is that UEFA would impose strict regulations upon every individual football club of Europe regarding the aspect of the rule of “break-even”. In order to make the rule successful, UEFA mentioned in the newly formed regulations that it is mandatory for every individual football club of Europe not to invest more than the profits that it generates in a financial year. This particular regulation of the rule of “break-even” is mainly imposed by UEFA upon the football clubs that are prevailing in Europe in order to maintain the financial discipline in the sport of football (Szymanski, n.d.). The introduction of the new Financial Fair Play rules might generate significant threat towards the long-term endurance of the football clubs of Europe as the new regulations impose severe rules regarding limiting their spending power. Most of the football clubs of Europe are not satisfied with the proposals that are formulated in the new rules of Financial Fair Play. As a result, they created a lawful challenge against UEFA by stating the fact that the new regulations based upon Financial Fair Play which are introduced by UEFA are unfair and would restrict the football clubs from competing in any football championship (Financial Fair Play, 2012). It has been recognised in the UEFA’s benchmarking report for the financial year 2010 that in spite of the vulnerable financial market situation, the report depicts that the higher division football clubs in Europe raised their revenue by 6.6%. In order to resolve this issue and to establish a financial discipline in the sport of football, UEFA introduced the Financial Fair Play regulations which eventually created various problems for the football clubs that are prevailing in Europe (European Club Association, 2011). Conclusion After acquiring a brief idea regarding UEFA and its newly established Financial Fair Play set of laws, it can be stated that according to UEFA, the purpose of Financial Fair Play is to maintain the competitive equilibrium along with improving the long-term feasibility of the football clubs that prevail in Europe. In order to enhance the long-term sustainability of the football clubs in Europe, utmost importance needs to be given towards the rule of “break-even”. The rule would limit various deficiencies of the football clubs and also would restrict the influence of the investors by a significant level. UEFA generally introduced the regulations of Financial Fair Play due to several important reasons. The reasons are all related towards the progression as well as the advancement of the football clubs prevailing in Europe. According to UEFA, the introduction of the Financial Fair Play would reshape the financial structure along with possessing a large impact upon the future of the football clubs in Europe. Though the introduction of the new regulations based upon Financial Fair Play is fundamentally based upon the enhancement as well as advancement of the football clubs in Europe, certain problems might be faced by UEFA while implementing the new regulations towards the football clubs. Furthermore, the football clubs would also face certain significant difficulties with UEFA while complying with the new regulations that are based upon Financial Fair Play. The Financial Fair Play regulations will begin in the season of 2013-2014 and hence it is highly doubtful if the new Financial Fair Play regulations are positively justified in terms of financial aspects. Thus, it would be apparent from the season of 2013-2014 that how much will football respond to the new regulations and how fair it result to be. References Burt, J., 2011. West Ham Considering Legal Moves Against Football League’s Plans For Financial Fair Play Rules. Teams. [Online] Available at: http://www.telegraph.co.uk/sport/football/teams/west-ham/8974105/West-Ham-considering-legal-moves-against-Football-Leagues-plans-for-financial-fair-play-rules.html [Accessed April 05, 2012]. Conn, D., 2011. Just How Fair is Michel Platini’s Financial Fair-Play Ruling? Sport. 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Vopel, H., 2011. Rules of the UEFA Financial Fair Play. Research Reports. [Online] Available at: http://www.hwwi.org/fileadmin/hwwi/Publikationen/Externe_PDFs/1210201.pdf [Accessed April 05, 2012]. Read More