AC Milan have been disqualified from the Europa League in 2019/20 as part of an agreement with UEFA following their breach of the Financial Fair Play break-even obligations. The statement was published by the Court of Arbitration for Sport (CAS) on Friday. AC Milan had appealed against UEFA's decision to exclude them from participating in the next UEFA Club competition for which it qualified in the 2022/23 ad 2023/24 seasons, unless it was break even compliant at 30 June 2021. But does the agreement risk undermining the obligations that UEFA is trying to protect?
Financial Fair Play
UEFA's Financial Fair Play Regulations were introduced at the start of the 2011/12 football season in an attempt to prevent clubs from chasing success by spending more than they earn.
Under the Regulations, clubs can spend up to €5 million more than they earn in any rolling three year assessment period, with a limit on the total losses that are permitted during a monitoring period. UEFA can impose a range of sanctions for breaching the Regulations, ranging from a warning to exclusion from future UEFA competitions.
In an example of exactly the behaviour the Regulations were introduced to prevent, AC Milan was found to have breached their break-even obligations for the 2016/17/18 and 2017/18/19 monitoring periods. The club had invested heavily, gambling that they would reach the top four of the Serie A and be able to offset this investment with the additional revenue gained from Champions League qualification.
Finishing fifth this season, just one point behind Inter, the gamble did not pay off. However Friday's statement is a good example of how engagement with a regulator, in this case UEFA's Club Financial Control Body, can limit the potential damage of sanctions.
Engaging with a regulator
Had the CAS upheld UEFA's decision, AC Milan faced a significant problem. If they failed to break-even by 2021 they would be excluded from a UEFA Club competition if they qualified in 2022/23 or 2023/24. For a club trying to reverse its fortunes and return to profitability this sanction had real teeth, particularly if they managed to qualify for the Champions League (UEFA set aside €2.04 billion for clubs participating in the Champions League in 2018/19, compared with €510 million for the Europa League).
Press reports confirmed that it was AC Milan's CEO that pushed for agreement to bring the sanction forward. Exclusion from this year's Europa League is a significant sanction, however AC Milan hope that by accepting this sanction now, they can clear their lines and push for qualification for the Champions League without the risk of exclusion from the competition.
As with any regulator or governing body, UEFA has to weigh any intervention against its ultimate aims and objectives. The agreement reached with AC Milan sets an example and it demonstrates that UEFA is willing to apply significant sanctions for serious breaches of Regulations. This may deter other clubs from taking the same risk.
On the other hand, some are likely to criticise UEFA's agreement to remove a sanction if AC Milan fail to meet the break-even requirement by 2021. The primary aim of the Regulations is to ensure that clubs live within their means. The original decision gave AC Milan a short window to return to compliance with the Regulations. The unintended consequence of the agreement is that it gives AC Milan an opportunity to repeat their gamble. If they do not qualify for the Champions League in 2020/21 then UEFA may find themselves in the uncomfortable position of having to take action against a further breach that they could have prevented.
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