Guidance on PSR Rules from Premier League’s Independent Commission in Leicester City’s case

The Premier League’s Independent Commission has provided highly relevant guidance that will be useful to clubs in the future when faced with charges for alleged breaches of the Premier League Profit and Sustainability Rules (“PSR”). This is particularly relevant for those cases where issues of jurisdiction arise, especially regarding clubs which have been relegated.

In a decision published by the Premier League on 4 July 2024, relating to Leicester City  alleged breach of PSR, the Commission determined that it has both personal and temporal jurisdiction to determine Complaint. This article analyses the decision and sets out the guidance provided by the Independent Commission.

Article Highlights

• Background
• Objection to the Commission’s Jurisdiction
• The Regulatory Framework
  • Membership of the Premier League
  • The relevant PL Rules and PSRs
• Leicester City’s position
• The Commission’s approach to interpretation of the PL Rules and PSRs
• The first argument – No personal jurisdiction
• The second argument - No temporal jurisdiction
• The significance of the decision

Background

The Premier League is about to roar back with the 2024/25 football season, and it promises to entail hard-fought battles both on and off the pitch. As most football fans will know, several clubs have been the subject of investigation by the Premier League in respect of its profit & sustainability regulations. Everton and Nottingham Forest both received points deductions (four and six points respectively) in the 2023/24 season for PSR breaches, with Manchester City and Chelsea still under investigation. Leicester City has also been subject to the Premier League’s scrutiny in respect of alleged breaches of the PSRs and the Premier League Rules for the 2022/23 Season (“PL Rules”).

In a previous article published in LawInSport, colleagues Nick Daly and Samuel Rabinowitz outlined the position in relation to Leicester City^[1]. They analysed the decision made by the English Football League’s Club Financial Reporting Unit requiring Leicester City to submit a budget / business plan, which was subsequently held to be ultra vires (‘beyond the powers’) and of no legal effect (in a decision on 16 January 2024).

On 21 March 2024, the Premier League referred Leicester City to an Independent Commission (“Commission”) for an alleged breach of PSRs in relation to the 2022/23 Season, and failing to submit their audited financial accounts (“Complaint”).

The previous article also examined the first stage of those allegations. Initially, the Premier League requested an expedited procedural timetable to resolve the matter. That was on the basis that the Premier League wanted the Complaint to be determined before 4 May 2024, so that any penalty could be imposed and have effect before the conclusion of the 2023/24 Championship Season. For that to occur, the EFL needed to have the power to impose a sanction in the Championship as a consequence of a decision by the Premier League or a Commission appointed under the PL Rules. Leicester City contested that the EFL had such a power, and subsequently the Premier League withdrew the request for expedition. Despite that withdrawal, Leicester City still pursued its interim injunction application. This was ultimately refused in a decision dated 8 April 2024, where the Panel concluded that “no interim relief is necessary or appropriate”.

Leicester City was able to avoid expedited proceedings, thus ensuring that any potential points deduction would not hamper its promotion bid to rejoin the Premier League. In the event, Leicester City finished seven points clear of third place, so it was comfortably within the top two automatic promotion spots. Given its goal difference, it would have had to receive an eight-point deduction to drop out of the top two automatic promotion spots, and a 28 point deduction to be removed from the promotion play-offs.

While the determination of the Complaint was delayed, the substantive allegations remain afoot. Leicester City took matters a step further and objected to the Commission’s jurisdiction to determine the Complaint at all, on the basis that it did not have personal or temporal jurisdiction. Disputes with respect to jurisdiction are common in the commercial sphere, and they can provide a cut-through way for a respondent to avoid a determination of the allegations made against them. As set out in detail below, in a decision published by the Premier League on 4 July 2024, the Commission determined that it has both personal and temporal jurisdiction to determine Complaint.

It is important to note from the outset that, given the Complaint relates to the 2022/23 Season, the relevant rules in force at that time are applicable, i.e. the PL Rules for the 2022/23 Season. The subsequent changes which have been made to those rules cannot be used by the Commission for the purposes of interpretation of the previous version.^[2] It is notable that the Premier League acknowledged that “it is not easy to construe these rules” and that “they are not perfectly drafted”.^[3] That seems to indicate that further redrafting may be necessary to provide clarity going forward, albeit it will not have retrospective effect.