As the UK Government seeks to put sustainability at the heart of the beautiful game, in this article we consider:
- the UK Government’s intentions for establishing the Independent Football Regulator (the Regulator);
- why the UK Government feels action is required now;
- the possible implications of the Regulator on the sport, and what sanction powers it will have; and
- the timings for the Regulator’s introduction.
This article is the latest in our series on regulation in football, alongside our initial commentary on the proposal for an independent regulator, the King’s speech detailing such plans, and the new era of women’s football.
How did we get here?
The Bill’s introduction to Parliament represents the culmination of several years of UK Government activity focused on increasing regulation in men’s football.
This Bill builds on a White Paper published in February 2023, which itself followed a 2021 fan-led review commissioned by the UK Government in light of the impact of the Covid-19 pandemic and a number of club failures in the English football pyramid (the most high-profile being the collapse of the 1885 founded Bury FC following financial issues).
Each issue shone a spotlight on the growing cracks in English football governance – both in terms of financial sustainability and the overall fragility of these historic clubs which play an essential role in local communities.
What does the Bill do?
Against this backdrop, the Bill states that the Regulator’s key aims are to:
- protect and promote financial soundness of regulated clubs, by imposing a new licensing regime that tests various financial thresholds of clubs and encourages dialogue (and disclosures) in relation to financial planning and performance;
- monitor and improve financial resilience of English football, through imposing obligations on the clubs and policing their compliance with these, with non-compliance risking the threat of sanctions; and
- safeguard the heritage of English football and increase fan engagement and participation, on which the Regulator will regularly report – including a “state of the game” report which will be prepared following the third anniversary of the Bill’s implementation.
License to operate
In a first of its kind move in England, the Bill introduces a licensing framework for football clubs that will allow the Regulator to monitor compliance with the requirements imposed under the Bill. In addition to various requirements relating to corporate governance, clubs must meet three threshold tests to obtain a license: (a) financial resources; (b) non-financial resources (such as performance and corporate governance); and (c) fan engagement.
Each license issued by the Regulator will attach conditions relating to these thresholds, imposing further obligations on clubs in respect of disclosure and dialogue with the Regulator. This new regime, and the way that it is rolled out by the Regulator, will take some getting used to for clubs.
Impact on investment
While the Regulator will have broad powers to impose sanctions under the Bill (see below for further details), the Regulator’s powers will need to be exercised in a way that fosters a balance between ensuring a competitive landscape and avoiding adverse consequences for investors. It will be interesting to see whether the promise of financial stability of clubs (and arguably therefore the financial security of investments) attracts more interest in the sector from stakeholders who had previously shied away from investment.
What does the Bill not do?
As expected, the Bill does not seek to grant the Regulator a right to police the game itself. The Regulator will have no role in monitoring or reviewing the rules of the game or “on-pitch” decisions, and the Regulator’s sanction powers will not extend to sporting penalties, such as points deductions. Such rights will be retained by the Premier League and other competition organisers.
Pay to play?
The Regulator has been given an indicative budget of GBP10 million, which is proposed to be funded by an annual levy on the clubs that are subject to the Bill (of which there are 116). Tracey Crouch (the former sports minister) remarked that “football will be paying for itself”. That is indeed the case, albeit the Bill currently proposes that the Regulator must consult with all clubs in setting the amounts of any such levy. It is in practice a pay to play model – it is a prerequisite to obtaining a license that levies are paid up – with the highest earning clubs paying a greater levy.
Sanctions
Developing on the White Paper’s escalating approach to sanctions, the Regulator will be granted a broad range of powers to sanction offending owners, officials and clubs for non-compliance. The sanction powers fall broadly under two categories, non-financial and financial.
The Regulator’s non-financial sanction powers are wide-ranging. The Regulator has the right to disqualify an individual from being an owner or officer of a regulated club, with the power to make an order to cease a person’s ownership of a club in extreme situations. The Regulator also has the remit to suspend or revoke the operating license of a club if certain aggravating factors are met, such as an intentional and persistent infringement or non-cooperation with the Regulator.
In relation to financial sanctions, the Bill would grant the Regulator the right to impose a penalty of 10% of revenue on a competition organiser, owner or previously regulated club, assuming, by this point, the club would have lost its license. The imposition of a 10% revenue penalty is consistent with the approach taken by antitrust regulatory bodies, such as the Competition and Markets Authority.
Administratively, similar to existing regulators such as the Financial Conduct Authority, the Regulator will publish warning and decision notices to explain any actions they take. A number of key decisions made by the Regulator, including those mentioned above, would have the right to be appealed to the Competition Appeal Tribunal.
What happens next?
In light of the cross-party support for the Bill, we could see the Bill move through Parliament approval processes quickly. The next stage will be a second reading of the Bill in the House of Commons, where a debate on the main principles of the Bill will take place, before being subject to scrutiny by the Committee of the Whole House (a specially assembled group of MPs that reflects the composition of the chamber as a whole).
To the extent that the Bill runs out of time during this Parliamentary session due to a general election, it could be passed in a “wash-up” period. This is when Parliament sits in the days after a general election has been announced and provides the ability for Parliament to close outstanding business. The Bill will only pass under this procedure if it has received sufficient prior support. This means that we could see the Bill passed and the Regulator in play (with an as yet unknown Chair and CEO at its helm) by early 2025.
It is undeniable that the new Regulator will hold an influential role in the operation and administration of the beautiful game. Now there is more clarity on the scope and powers of the Regulator, clubs, owners and the public will be eyeing the Bill’s progress through Parliament to see its final form. Our Sports Sector Group – together with the entire football community – is watching with interest and will keep you posted.
