Shown The Red Card? Manchester City And Girona In The Context Of UEFA's Rules On Multi-Club Ownership

At a glance

This article will be the first of a series of publications discussing multi-club ownership ("MCO") in the world of football.

In recent weeks, the case of Manchester City Football Club ("Manchester City") and Spanish club Girona Futbol Club, S.A.D ("Girona"), both of which are owned to differing degrees by The City Football Group ("CFG"), has generated publicity and raised questions following the qualification of both clubs into next season's UEFA Champions League. Manchester City have been perennial qualifiers in the competition since 2011/12 but it is Girona's surprise qualification (following the best season in their 93-year history), which has created a potential issue for CFG. Under Article 5 of the UEFA club competitions regulations, (the "UEFA Rules"), which is explained more fully below, the default position is that the two clubs under common ownership are prohibited from competing in the same UEFA competition.

This is not the first time this issue has arisen.

In recent years, there have been multiple instances of two clubs within the same MCO group qualifying for the same UEFA competition. However, in most cases, such issues have been resolved to UEFA's satisfaction. RB Leipzig and RB Salzburg successfully demonstrated to UEFA that the clubs could separate any common "control and influence". Both clubs proceeded to compete in the UEFA Europa League and indeed were drawn together in the group stage of the 2018/19 UEFA Europa League.

Another approach which affected owners have taken when faced with this issue, has been to divest their interests in order to bring their shareholdings down below the 30% threshold, as set out in the UEFA Rules. We saw this when Aston Villa's owners, V Sports, decreased its stake in Vitória S.C. of Portugal from 46% to 29% in June 2023 in order to receive approval from UEFA for both clubs to play in the UEFA Europa Conference League in the 2023/24 season.

It is, however, one thing for an investor group to divest itself of an interest in a club, which plays outside of UEFA's 'big five' leagues (England, Spain, Germany, Italy and France) and which has qualified for UEFA's secondary and tertiary competitions, being the UEFA Europa League and the UEFA Europa Conference League; but it is another matter for an owner of the 'big five' clubs, who have qualified for UEFA's primary competition, the UEFA Champions League. In 2022/23, the total distributions to clubs playing in UEFA competitions was €2.732bn, of which €2.032bn (74%) was distributed to clubs competing in the UEFA Champions League and the UEFA Super Cup, €465m was distributed to clubs participating in the UEFA Europa League and €235m was distributed to clubs participating in the UEFA Europa Conference League. The spoils of the UEFA Champions League are very much more lucrative.

Ahead of the start of the 2024/25 UEFA Champions League, time is running out for CFG and UEFA to find a resolution.

UEFA Rules

In a recent Club Licensing Benchmarking Report, (the "Report"), UEFA acknowledges the rise of MCO in football by stating that "300 clubs worldwide are now part of a multi-club investment structure up from less than 100 five years ago and less than 40 in 2012." ¹ In the English Premier League during the 2023/24 season, 14 out of 20 clubs were linked to an MCO.

UEFA defines MCO as "a situation where a party exerts control and/or decisive influence over more than one club".² Under UEFA Rules, "to ensure the integrity"³ of its competitions, owners who have "control or influence over more than one club"⁴ are prohibited from having multiple clubs competing in the same UEFA competition. Safeguarding "integrity" in a MCO sense, refers to preventing the richest owners from owning multiple clubs and potentially impacting the sporting integrity of UEFA's competitions – the most prestigious in European football.

Under the UEFA Rules, an individual or legal entity has "control or influence" in a club if it has one of the following:

1. a majority of the shareholders' voting rights;
2. the right to appoint or remove a majority of the board;
3. a majority of the shareholders' voting rights; or
4. a "decisive influence" in the club's decision-making.⁵

In applying UEFA's Rules, it is thought that CFG are deemed to possess "control or influence" in the two clubs because of its decisive influence and it is widely reported that CFG continues to own 100% of Manchester City and 47% of Girona.

However, UEFA has also identified "new forms of co-operation and influence" between clubs. Such "new forms" are understood to be reflected, for example, in transfer dealings between clubs. The complicated case of Brazilian winger Sávio Moreira de Oliveira, known as Sávio, demonstrates this. Sávio was signed by French club ES Troyes AC ("Troyes"), a club within CFG group in June 2022. Despite being Troyes' record signing, Sávio has never played for them, but has instead been loaned out three times, most recently to Girona for the 2023/24 season. Sávio was one of the standout performers in Spain in the 2023/24 season, earning a call up to the Brazil national squad and being named in La Liga's team of the year. In February 2024, it was widely reported that Manchester City had agreed a deal to sign Sávio from Troyes this summer. All this has gone on amidst the backdrop of Troyes having a torrid season and being unceremoniously relegated this month to the French third tier, marking back-to-back relegations.

We therefore query whether UEFA's Rules will need to be updated to reflect potential transfer dealings between MCO clubs to reflect these new forms of co-operation and influence.

Relaxation of the UEFA Rules

UEFA relaxed its restrictions on MCO earlier this month, where a club, which is excluded from one UEFA competition "may still be admitted to another UEFA club competition (i.e. in descending order: UEFA Champions League, UEFA Europa League or UEFA Conference League) to which the national association has access." ⁶

To ascertain which club falls into the lower UEFA competition, the following criteria applies in descending order:

1. the club which qualifies on sporting merit for the most prestigious UEFA club competition (i.e., in descending order: UEFA Champions League, UEFA Europa League or UEFA Europa Conference League);
2. the club which was ranked highest in the domestic championship giving access to the relevant UEFA club competition; and
3. the club whose association is ranked highest in the access list.⁷

We consider the relaxation of the rules is in keeping with the times, for the following reasons:

a) It reflects the changes in modern football, as MCO numbers continue to rise in the European game.

The original UEFA Rules (i.e. the original set of rules prior to the changes on 1 May 2024) were established over 20 years ago. Such rules did not account for the growing numbers of MCO. UEFA could not afford to keep these rules the same – they needed to be adapted.

b) The original rules did not align with UEFA's strategy, in terms of the format, scope and plans for its UEFA competitions.

In 2021, UEFA established the UEFA Europa Conference League. By creating a new competition, the likelihood increases of MCO clubs qualifying in a wider range of UEFA competitions. Similarly, the number of teams competing in the 2024-25 UEFA Champions League has been raised from 32 to 36.

c) Allowing more teams to compete in its UEFA competitions generates more financial rewards for UEFA.

The expansion of the UEFA competitions from next season, and the subsequent TV and broadcast deals, is understood to be likely to generate a near €1bn increase in revenue for UEFA.

The Case of Manchester City and Girona – Our Thoughts

Numerous outlets have reported that UEFA has presented CFG with "divestment options", following its restrictions on two MCO clubs competing in the same UEFA competition. In accordance with the UEFA Rules, CFG would be required to make changes to the constitution and/or governance of Girona, as Manchester City finished higher in its domestic league.

The options available to CFG are as follows:

1. CFG can transfer all its shares in the club to an independent, blind trust, which CFG can select and is managed by an UEFA-appointed panel ("Option One"); or
2. CFG can reduce its ownership stake to below 30%, by selling its shares to a separate third party ("Option Two", which, together with Option One are the "Options").

We understand that CFG has until 3 June 2024 to adhere to one of the Options, and thus reduce its participation in Girona. Otherwise, we understand that, in accordance with the UEFA Rules, Girona would be demoted to the UEFA Europa League.

It does, however, remain to be seen whether CFG will select Option One or Option Two. We consider that CFG might be minded to select Option One, as the group would retain legal and beneficial ownership in Girona (and with it, the spoils of the UEFA Champions League revenue) and have control in selecting the trustee; we suspect that this would also outweigh the perceived costs associated with having to suspend or unpick any group arrangements, which may be deemed offensive to a blind trust construct. There is also the precedent for Option One, which was recently used in 2023 by MCO clubs AC Milan and Toulouse and their private equity sponsor, Red Bird Capital.

This contrasts with Option Two, where CFG would relinquish a proportion of its ownership and control in Girona, by way of a transfer of certain interests to "a separate third party".

In any case, UEFA has demonstrated a pragmatic approach to the increased prevalence of MCO, resonating with the current MCO landscape in football. UEFA places the burden upon MCO owners, including CFG or Red Bull, to demonstrate that its "control or influence" in multiple clubs has been reduced.

We do, however, question whether UEFA can continue to uphold its objective to "ensure integrity," by allowing MCO clubs, and some of football's richest owners, to compete in the same UEFA competition without further restrictions to protect sporting integrity. As MCO numbers continue to rise and UEFA further expands its competitions, we anticipate that other MCO clubs will be in a similar position to Manchester City and Girona. We, therefore, consider that UEFA will need to publish more substantive regulations and guidance for MCO clubs, which qualify for the same UEFA competition. Reacting to such matters on a case-by-case basis will likely not be sustainable for UEFA because, given the current trajectory, there is likely to be a multitude of MCO clubs qualifying for its UEFA competitions in one season.

Either way, this is an interesting time for MCO clubs in world football and their investors.

We await CFG's decision on 3 June 2024.

Part 2 of this series is now available, here.

Footnotes

1. https://cdn.vev.design/private/aTCxVXgBbmVvmw45NvpIseApVuy2/251fjd-uefa-benchmarking-ecfil-report.pdf, page 70

2. PowerPoint Presentation (uefa.com), page 206

3. Article 5.01 – https://documents.uefa.com/r/Regulations-of-the-UEFA-Champions-League-2024/25/Article-4-Admission-criteria-and-procedure-Online

4. Article 5.01(c) – https://documents.uefa.com/r/Regulations-of-the-UEFA-Champions-League-2024/25/Article-4-Admission-criteria-and-procedure-Online

5. Article 5.01(c) – https://documents.uefa.com/r/Regulations-of-the-UEFA-Champions-League-2024/25/Article-4-Admission-criteria-and-procedure-Online

6. Article 5.04 – https://documents.uefa.com/r/Regulations-of-the-UEFA-Champions-League-2024/25/Article-5-Integrity-of-the-competition/multi-club-ownership-Online

7. Article 5.02 – https://documents.uefa.com/r/Regulations-of-the-UEFA-Champions-League-2024/25/Article-5-Integrity-of-the-competition/multi-club-ownership-Online

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