Chelsea’s ‘Commercially Confidential’ Contract & Why Financial Fair Play Won’t Work

Despite Financial Fair Play looming, clubs are still spending beyond their means. That probably has a lot to do with the loopholes in the ruling...
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Despite Financial Fair Play looming, clubs are still spending beyond their means. That probably has a lot to do with the loopholes in the ruling...

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Financial Fair Play is, to put it simply, UEFA President Michel Platini’s love child. The French footballing hero instigated the idea back in 2009, where clubs can no longer spend beyond their means which might hinder their long-term survival. In theory, the idea is a good one. It will level out the clichéd playing field, meaning the likes of Barcelona, Juventus, Manchester United and Celtic can no longer steamroll their way to the top of their respective league.

Should teams fail to adhere by the rules, then expulsion from European competitions is a possibility. This should have seen the likes of Chelsea and Paris St. Germain curb their summer spending, something that doesn’t look a possibility leading into the final month of the transfer window. Both, for example, have spent heavily this summer, with the likes of Eden Hazard and Oscar moving to Stamford Bridge and Zlatan Ibrahimovic Thiago Silva swapping Italy for France.

Nevertheless, like any major ruling, there are loopholes to be found and if it means a team can continuously spend big to secure glory; chances are it will be exploited.

1)      Sign a big money contract with your former company

After buying Chelsea from Ken Bates back in 2004, Roman Abramovich, clearly thinking ahead, sold his controlling stake in oil company Sibneft to Gazprom for £8.4bn in 2005. Many thought nothing of this, assuming it meant more money could be pumped back into the club in regards to buying players and redeveloping the area around Stamford Bridge.

Seven years later and the sale of the shares have come back to aid Chelsea right in the nick of time. Conveniently, as some may say, the Blues last month signed a deal with Gazprom to ensure they become the clubs global energy partner, the value of which has been deemed “commercially confidential.” Chelsea confirmed the transfer of Brazilian midfielder Oscar for a massive £25m a later that month after the sponsorship deal had been announced ‘publicly’.

It will level out the clichéd playing field, meaning the likes of Barcelona, Juventus, Manchester United and Celtic can no longer steamroll their way to the top of their respective league

2)      Rename your stadium

Last summer, Manchester City opted to change the name of their 47,000 seater home from the City of Manchester Stadium to the Etihad Stadium. The deal will last for the next 10 years with the company, conveniently owned by the Abu Dhabi, who in turn owns a commanding share in the Citizens, courtesy of owner Sheikh Mansour.

Understandably, the deal raised eyebrows across Europe, with City standing to pocket around £100m from the stadium rebranding alone, small change in comparison to the £300m from the shirt sponsorship. It was the first real challenge of the FFP ruling, with the club’s owners forced to pass a ‘fair value’ test. Nevertheless, despite the complaints from the likes of Barcelona and Manchester United, UEFA failed to see anything wrong with the deal made by City and allowed it to go through.

3)      Wages

Players on big money wages that had signed contracts prior to June 2010 are, surprisingly, exempt from the FFP ruling, provided the club can prove they an improved trend in their accounts. Clubs that would have been affected by the regulation would have, therefore, worked hard to secure their prized assets to long-term deals.

However, the rule is only in circulation up until the end of the 2014/15 season, meaning teams that had secured players to long-term contracts will be forced to alter the deals or sell the player in question in order to balance the books and break-even. Very few, if any, teams are likely to have pursued this route, however.

City standing to pocket around £100m from the stadium rebranding alone, small change in comparison to the £300m from the shirt sponsorship

4)      TV Deals

If Paris St. Germain have shown clubs anything; it’s to spend until your heart’s content. With the big money signings of Zlatan Ibrahimovic, Thiago Silva and, most recently, Lucas Moura, the Ligue 1 side appear to be flouting the FFP regulations like there is no tomorrow. However, with the big money arrivals, interest in PSG is likely to rise.

Whenever any team is taken over by rich investors and the club in question spend heavily, interest from fans swiftly heightens. It happened with Manchester City and Malaga, prior to their financial implosion, and the same is likely to happen with the Parisian outfit. With the big money acquisition of Lucas, for example, curiosity from Sao Paulo fans is expected to rise.

5)      TV Deals Pt. 2

The recent £3bn deal signed by Sky and BT in June will further line the pockets of the teams in the top tier of English football. The agreement may not come into effect until the 2013/14 season, but will see a 71% increase in funds for each Premier League outfit. To put it into context; the bottom team from the 13/14 season is likely to earn £60.6m more than Manchester City did last season.

That’s right; the year City won their first Premier League trophy in their history will earn less than the team that finished 20th in less than two years time. If teams were worried about the constraints of Financial Fair Play, they must be breathing a huge sigh of relief now, with the financial boost that will come from Sky and BT likely to compensate for much of the debt.

It happened with Manchester City and Malaga, prior to their financial implosion, and the same is likely to happen with the Parisian outfit

6)      Different tax rates

Tax rates substantially differ across Europe, meaning the amount of debt each club undertakes altering from country to country. For example, In England, a player earning around £156,000-a-week gross, they will only take home around £78,000, as opposed to the £102,000 in Spain. Each club’s accounts will vary substantially, but should a club hold their accounts within a nation with a lower tax rate, they are likely to fall within the guidelines set out by UEFA.

7)      Third party ownership

Certain teams, particularly in South America, like to adopt the third party ownership as a means of lowering costs, with outside ownership a way of investing in talent that could increase in value. The Premier League banned the use of third party ownership following the problems it caused in the transfers of Carlos Tevez and Javier Mascherano in 2006.

Club’s make huge savings from not having to completely fund players and can bring in further income from selling the naming rights to outside parties. The entire process is completely permissible under FFP law, with teams across Europe adopting a similar approach. For example, the co-ownership laws in Italy allow teams to ‘sell’ a player to another, where the buying team pays the wages throughout the season; another loophole that will work in the favour of the selling club.

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