In this 3rd edition of Fútbol de Papel, we analyze the Greek tragedy experienced by CF Reus Deportiu in recent months and the economic concepts applied to Spanish professional football. Always with special attention to the application of Sports Law.
The Reus Deportiu SAD Football Club is a club located in the province of Tarragona (Catalonia), which has played last season and a half in the 2nd Division of Spanish professional football, which is known commercially as “Liga 1, 2, 3″.
In recent months, this club has gone through the most convulsed moments of its history, until confirming the worst possible outcome for their interests. Its financial situation and especially the debt that had been carrying over the last two years, has finally led to the purchase of 99.7% of its shares by an American investment group, with the intention of saving the entity in-extremis, has been in vain.
The Judge of Discipline of LaLiga, issued a resolution on January 28, 2019, of the file opened to the club, which decided the expulsion of C.F. Reus Deportiu for 3 years of professional competition, imposing a fine of 250,000 Euros. These facts are already the most unusual and strange case of Spanish professional football.
From these lines, it is intended to compress and analyze the whole case. In order to facilitate the understanding of the following study, the keys will be exposed in blocks, according to the nature to which they belong. We will indicate the applicable regulations, the different contingencies that have taken place up to the date of publication of this article, and the consequences suffered by the different groups, estates and bodies involved.
Finally, a series of conclusions will be presented, based on all the above and on current sports legislation.
The initial whistle sounds!
- THE ECONOMIC SIDE.
1.1 The Origin: the financial control exercised by LaLiga.
Article 41.4 b) of Spanish Law10/1990, on Sports, grants exclusive competence for the performance of the functions of guardianship, control and economic supervision of its members associated with the Professional Leagues.
This means that the National Professional Soccer League (hereinafter LFP)[1] is in charge of such functions with respect to Spanish professional football, through its governing bodies and administration in general, and by the Economic Control Committee in particular.
As a result, for the past six seasons, the body chaired by Mr. Javier Tebas, has been pursuing the achievement of this objective with the slogan: “For a fairer football.”
“Fair football” should be understood in its strictly economic sense, as it expresses the intransigence of the LFP in facing indebtedness of clubs and Sports Corporations (hereinafter, SAD). This regulation allows the clubs to spend only what they are qualified to, by virtue of what is reflected in the financial accounts of each entity. Simple and meridian.
1.2 The salary threshold.
In the same line, moves this concept that we proceed to expose.
The salary limit is based on principles, economic criteria and a determined structure, regulated by the LFP in the fulfillment of its competences. All of this is set out in the CLUB AND SADS BUDGET MANUFACTURING RULES (hereinafter NEP), as last amended in May 2018.
What does it consist of?
⚽ The total income of the Club or SAD must be taken as a starting point. Included in this list are all those obtained from competitions, advertising, sponsorships, television rights, subscriber and member fees, tickets, operation of facilities and shops…
⚽ Later the expenses that the club has generated in its sports plot are calculated. These must reflect:
A)The expenses made on players, first coach, second coach and physical trainer of the first team (defined as a template inscribed in art. 38 of the NEP).
B) The expenses on subsidiaries, quarry and other sections (defined as non-inscription in the same article). [2]
C) Salaries (both fixed and variable), including, if any, collective bonuses.
D) Social Security costs, acquisition or transfer costs (including commissions for agents, if any) and amortizations (player purchase amount imputed annually depending on the number of years of the player’s contract).
⚽ This operation will result in the salary limit. Notwithstanding the above, teams may declare it lower, if they believe they do not need as much as their accounts allow. There is also no obligation to use all the established limit if they so wish.
⚠️ YELLOW CARD: It is not an irremovable limit. The League allows clubs and SADs to request an extension of this spending ceiling if they wish:
E) Sales of players, obtaining new contracts, the increase in television income or by subscriptions.
F) In the strictly sporting area, if there is an injury of long duration, the renewal of players or the termination of contracts of the technical staff.
? RED CARD: Not directly related to the well-known “Financial Fair Play”. This concept refers to a system, launched in 2011 by UEFA, applicable to clubs classified to compete in EUROPEAN competitions. Quickly and superficially, we point out its main characteristics [3]:
· It does not allow teams participating in UEFA competitions to have outstanding debts with other clubs.
· It does not allow to have pending debts with the players of the participating teams in UEFA competition.
· It does not allow to have debts with the own tax authorities of the countries of the teams participating in UEFA competition.
1.3 Responsibility and procedure.
It is necessary to point out and emphasize that CLUBS ARE RESPONSIBLE FOR ELABORATING THEIR OWN BUDGETS, and that it is up to the LFP to verify or correct them if they are not precise.
Thus, there is no direct interference in the administration of the clubs, and the principle of freedom of enterprise enshrined in the Spanish Constitution is respected.
The process begins with the request processed by a club / SAD of its cost limit of the sports staff, which does not always correspond to its actual maximum limit. The club/SAD in question may request the limit it deems appropriate to meet its budget for sports expenses, provided that it does not exceed the actual limit mentioned.
Likewise, the limit on the cost of the sports staff may be increased under the conditions and with the procedure established in Title III of the NEP. The list drawn up and certified by the LFP for the 2018-2019 season is as follows [4]:
1.4 Facts related to the case.
As can be seen in the image, the budget held by C.F. Reus Deportiu, has been the lowest of Spanish professional football. And it is not by chance. The LFP, in compliance with its functions, intervened again in August of the present campaign, reducing the budget presented by the C.F. Reus Deportiu, as a consequence of a debt of 5 million euros that the entity was dragging. This was not indicated in the proposal presented by the club, but corrected by the LFP.
According to Mr. Javier Gómez, corporate director general of LaLiga, in statements to EFE News agency: “if they had not hired players worth an extra 1.3 million Euros, they would be up to date with the players until January and would have sent a message to the financial market that they were compliant (…). We immediately activate the disciplinary procedures when the players’ defaults begin.”[5]
As a result of this conduct, among others, the known negative by the LFP, to the registration of the former player of the FC Barcelona Isaac Cuenca took place, near the close of summer market this season.
According to data revealed by the website Palco23, the club concluded 2017-2018 with a loss of 983,000 euros, accumulating a loss of 5.6 million euros at the close of last year.
In these accounts, and always according to Palco23, the debt of the football team is short term, and a value of 3.1 million euros committed to the bank. In addition, there are another 863,000 euros in financial commitments with third parties, 500,000 euros with the Treasury and 323,000 euros with the footballers themselves [6].
2. THE MANAGEMENT.
2.1 The owners.
Joan Oliver, current ex-owner of the C.F. Reus Deportiu, has been the person in charge during almost the entire process, in addition to the main one pointed out by all those involved in this controversy.
In statements collected by the prestigious digital newspaper IUSPORT, Mr. Oliver pointed out as the main reason for the debt “the change in the policies of Chinese football, in terms of international football. This opinion is based on the frustration on the part of the ex-owner, when not taking place the financing that was expected on the part of the Asian giant, thanks to an agreement with the BIT FC, to confront his gait in the professional football. In this sense, Mr. Oliver admitted that his mistake “was not realizing this before”. [7]
As a result of the acknowledged error, and always according to his own estimate “Reus has lost one million euros each year to be able to compete decently in Second Division A”.
For his part, on December 21, 2018, the president of CF Reus Deportiu, Xavier Llastarri, submitted his resignation based on personal reasons and security. He always maintained from his position that despite the obvious need, there was no risk of imminent disappearance.
2.2 The investment group.
Already in the final phase of the case, the American investment group enters the scene.
On January 31, 2019, the club became fully owned by the American companies Clifton Onolfo and Rusell Platt. This required the approval of the Higher Sports Council, which transferred more than 25% of the club’s capital.
This ownership change, however, has not been without controversy.
The new owners, revealed alleged irregularities, which were discovered once the commitment with Mr. Joan Oliver was sealed, according to the Diari de Tarragona. [8]
In these statements they expressed that “Oliver hid from us the commitment to the players, it was an act of sabotage towards us. We have encountered many difficulties and I hope that LaLiga understands that everything that happened in the past has nothing to do with us (…). The League should punish the former owners.
However, on January 30, 2019, the Social Court No. 1 of Reus, through 13 cars, one for each of the 13 players who would leave the club, endorsed the cancellations of the respective contracts. [9]
3. THE MAIN PEOPLE AFFECTED BY NON-PAYMENT AND ITS CONSEQUENCES.
Leaving aside other equally important elements such as members, fans, club employees, businesses and shops in the area of influence of the Municipal Stadium of Reus that will surely suffer the consequences of the expulsion of the club from professional competition, we come to observe from the point of view of Sports Law, the elements directly affected.
3.1 The players.
The current regulations, through the Collective Bargaining Agreement for professional football activity, specifically in its ANNEX VII, regulate the ABREVIOUS PROCEDURE OF ANTICIPATED CONTRACTUAL RESOLUTION. [10]
By virtue of this, the right of any professional footballer to instigate this procedure is recognised, provided that his Club/SAD owes him:
“(A) Amounts resulting from non-payment of monthly salary payments of an amount equal to or greater than three of these amounts, whether or not they are consecutive, partial or total.“
In addition, in the same article:
“(…) so that, if he does not choose to avail himself of the same, he may exercise the judicial action in accordance with article 50 of the Workers’ Statute. In any case, the exercise by the Footballer of the judicial action, for the same causes or object to request, will be incompatible with the Abbreviated Procedure. In this case, the judicial procedure will prevail, and what has been instructed will be without effect, unless the Joint Commission has resolved the procedure by means of a final resolution, in which case the provisions of the latter must be complied with”.
This establishes the requirement of 3 months of salary non-compliance, and the procedures to which the affected party will be entitled to resort in his case, either through sports, or the ordinary jurisdiction itself, being mutually exclusive.
In this legal situation, and on the verge of meeting the deadline, the first action by the squad, took place in the first minute of the match against the A.D Alcorcón, on 9 December 2018. The Reus players protested without playing 60” from the initial whistle remaining embraced in the middle of the field while the rival footballers, in solidarity with their opponent, limited themselves to pass the ball between them without passing the medullar.
Subsequent to this fact, and exceeded the limit set for non-payment, there was the first exodus:
⚽ Edgar Badia, Shaq Moore, Mikel Villanueva, Tito Ortiz, Fran Carbia and Vitor Silva after terminating their contracts after not receiving the payrolls of September, October and November 2018, following the procedure set out in the agreement, and filed the complaint with the Mixed Commission Liga-AFE rescinded their contracts.
After this diaspora of players, the risk of not complying with the minimum possession of 12 professional cards and being able to compete in the Second Division was beginning to be contemplated. If this situation occurred, the club would be excluded from the competition with zero points being the last in Second Division and being relegated at the end of the season.
After the sale of the entity, dated January 24, 2019, seven other professional players of Reus proceeded to urge the termination of their contracts.2
3.2 The technical Staff.
And what legal consequence has this process generated on the trainer?
The RFEF, in its General Regulations, specifically in its art. 162, regarding the termination of the contractual relationship of the Professional Trainers, establishes
“If the contractual link between a club and a coach, second coach, goalkeeper coach or physical trainer is resolved, whatever the cause, the latter will not be able to act in another during the course of the same season, with any other kind of licence, whether as a professional or non-professional.”
However, its second paragraph;
“Notwithstanding the general rule set out above, if in the course of the season in question a club withdraws by its own decision or is withdrawn by a decision of the competent body, in either case involving its disappearance, the coaches exercising their function as such may contract their services for another (…).”
And it establishes the following as an indispensable requirement:
“(…) provided that he has not received in full, or has not been guaranteed, the emoluments agreed in the corresponding contract.“
Well, Xavier Bartolo, Reus technician since last July, after four years linked to the club, to meet the requirements required by current regulations, could be hired this same season by another club, either First or Second, as non-professional football.
3.3 The League as Employer:
In view of the situations described in the previous points, by virtue of the provisions of the Collective Bargaining Agreement, specifically its ANNEX III regarding the Wage Guarantee Fund is indicated:
“The LNFP guarantees the payment of the debts that the Clubs/SADs maintain with their professional footballers, corresponding to the seasons 2016/2017, 2017/2018, 2018/2019 and 2019/2020, through the constitution of a Salary Guarantee Fund, which will pay the amounts owed.”
For this reason, and in the exercise of its functions as guarantor, LaLiga proposed to make payment to the players of Reus, not only for the three months owed (about 700,000 euros), but for the rest of the season.
Surprisingly, the players who were still in Reus, knowing that the receipt of payment of the amounts due, would only receive the players and not the rest of those affected (club employees, utilleros, coaching staff …) decided to refuse.
Faced with the uncertainty of whether the matches would be played or not, the competition began to suffer from this situation, affecting its normal functioning and stability.
3.2 THE CONSEQUENCES.
In the light of the facts described, the disciplinary bodies acted immediately.
3.2.1 The intervention of the Disciplinary Judge of La Liga.
It was understood that the end of the first round of the 1,2,3 League was ideal as it was the moment that to a lesser extent produced an imbalance in competitive terms to resolve the pending situation. On January 18, the Disciplinary Judge of LaLiga suspended all rights of C.F Reus Deportiu, a decision that at the time was not taken by the RFEF, who did not agree to suspend the club’s matches.
In the same resolution it was stated:
· The suspension of the right of CF Reus Deportiu to participate in the professional competition until the resolution of the case.
· The notification addressed to the club with its right to lodge an appeal before the Administrative Sports Court within fifteen working days from the following notification, in accordance with the provisions of Article 90 of the Social Statutes of La Liga.
· Likewise, and in their capacity as interested parties, the notification was made to the Royal Spanish Football Federation, the Association of Spanish Footballers, the President of the UD Las Palmas, the Instructor of the file and the President of the National Professional Football League.
This resolution was based on the following reasons:
· The conclusion of the first round of the competition, reason that assured the purity of the competition, not only with CF Reus Deportiu, but with the rest of the participating teams.
· The correct opportunity due to the situation of apparent symmetry, equality and justice, since if the file ends without sanction or with a sanction other than relegation or expulsion from the competition, the CF Reus Deportiu would play the second round in its entirety, and if these sanctions ended, the second round would not be played, and the Federative regulations and the rules on the attribution of points would apply equally to the other participants.
· The restraint of that decision due to the presumable speed with which the case was to be resolved, which made it foreseeable that the damages caused by the provisional measure would be very small (affecting at most one match), whatever the meaning of the final resolution of this case. And in any case they would be easy to remedy, to be able to easily play a single game, at a later date to be determined. [11]
The match against C.D Numancia ended 1-1 on the scoreboard. And that match, at the Municipal Stadium in Reus on January 12, 2019, would become the last of C.F Reus Deportiu in the second division.
4. THE FINAL RESOLUTION AND ITS EFFECTS.
We come to the point of analysis of the final resolution issued by the Disciplinary Judge of the League [JDS 4/2018-19] that closed the file opened to C.F Reus Deportiu. It was issued on January 28, 2019, and in a particularly relevant way it is pointed out:
⚽ The undoubted evidence of CF’s non-compliance. Reus Deportiu, of the duties or commitments acquired -in the form of non-payment of monthly salary- with its players, with the very serious additional consequence that six of them had to leave the Club (Conduct typified in art. 69.2.b) of the Social Statutes of LaLiga).
⚽ That the commission of these facts was not denied by the C.F. Reus Deportiu at any time, not even in the brief of allegations to the proposed resolution of the Instructor.
⚽ The irrelevance of the subsequent purchase and sale of shares by the American investment group, an action which, although it is a circumstance constituting lawful purposes and conditions in themselves, has no link or influence with the infringement in question.
⚽ The special gravity of the acts committed (taking into account their importance and effects on the players themselves and the image of the professional competition) and the recidivism (that is, having been sanctioned by Reus, previously and within the legally established deadlines, in file 2/2017-2018 for the commission of the very serious infraction typified in art. 69.2.b, although in its aspect of non-compliance with the State; and through Resolution of 11 April 2018 of the Economic Control Committee of LaLiga, for the commission of the serious infraction of art. 78.bis.3..b) of the Social Statutes of La Liga).
This statement of motive is argued by the Judge in:
A) The non-payments, which have affected practically the entire Reus staff, as evidenced by the fact that 20 players have submitted applications for early termination of their employment relationship, through the processing of the abbreviated procedure that is regulated by the rules contained in Annex VII of the Collective Bargaining Agreement currently in force.
B) The number of players, since as a result of them, six Reus players have had to terminate their employment relationship with the Club in advance and abandon the discipline of the Club, as a result of the requests for an advance and the Club’s failure to enervate the action. Evidently, it represents a reasonably unexpected and destabilizing change in the highest degree for those affected.
C) The damage caused to the image of the national professional football competition organised by LaLiga, both nationally and internationally. Evidence of this is the importance and public repercussion that the incident has had on the rest of the competition.
D) Recidivism. In order to appreciate recidivism, it is not necessary that the offending club has previously been sanctioned for the commission of the same infraction for which it was being judged. By virtue of art. 11 of the Royal Decree on Sports Discipline and art. 78.15 of the Social Statutes of LaLiga:
“There will be recidivism when the Club/SAD has been previously sanctioned, by firm administrative resolution, for any infraction to the sports discipline of equal or greater gravity, or for two or more infractions of lesser gravity than the one in question in that case“.
Consequently, the Social Discipline Judge decides:
1 – Apply, taking into account the nature of the infraction committed and the objective circumstances concurrent with the offending conduct, the sanction consisting of temporary expulsion, in its minimum degree for this sanction, of 3 years.
2 – Add to this the accessory economic sanction of 250,000.00 euros, equally weighted between the two limit values of 180,303.64 and 300,506.00 euros.
And it concludes:
“In short, there is no doubt that Reus is a recidivist and, consequently and automatically (the regulations do not foresee any other alternative), the sanction is expulsion from professional competition (art. 78.B.3 of the Social Statutes of LaLiga and 23.4 of the Royal Decree on Sports Discipline – in connection with art. 79.3.d) of the Sports Law). [12]
4.2 Effects on competition.
For cases of expulsion from the category, art. 77 of the Disciplinary Code of the RFEF, states that all scores obtained by other clubs so far in matches against C.F Reus Deportiu will be respected and, in the rest of the matches to be held, opponents will be considered the winner by the result of the average of goals conceded, which amounts to 1 goal per game.
In addition to the foregoing, it is established that, once the Reus is relegated to Second Division B, he will not be entitled to promotion to Second Division until one more season has elapsed (or two seasons in the case of being in relegation positions at the time of being excluded from the competition).
5. CONCLUSIONS.
The final whistle is approaching. Last attack…
I.- A LEGALLY BRILLIANT PERFORMANCE WITH RESPECT TO SPORTS LAW AND ALMOST EXEMPLARY OF THE DISCIPLINARY BODIES.
The entire procedure initiated against the CF Reus Deportiu, has been from beginning to end, a confirmation of the good health and functioning of Sports Law, who cries out for greater recognition and protagonism.
And so we believe we can consider it due to:
– Respect for the principle of legality;
– The exemplary application of the normative precepts in force;
– Respect for the rights of all parties involved;
– The fulfillment and speed of the established deadlines;
– The balance and general stability that is extracted from this action.
In short, the LFP and its control bodies acted diligently throughout the process, by virtue of what is recognised in the regulations in force (the Sports Law, the Royal Decree on Sports Discipline, the Statutes of the National Professional Football League), while also respecting the independence of the disciplinary bodies of the LaLiga.
However, from our critical spirit, we can not throw two questions to the air, when we find a but, and a hypothesis still to clear.
We know of the remarkable success, that since the recognition and implementation of Financial Control and the Salary Limit have contributed [ the director general of LaLiga has assured that professional clubs continue to reduce their debt to the Tax Agency, which will remain at 70 million euros at the end of this season and should be reduced to 50 million in 2020] but we are invaded by doubts regarding the next two questions:
– Faced with recidivism and suspicions about the accounts of C.F Reus Deportiu, was it a good decision to allow them to start the competition?
– If there were similar irregularities on the part of Clubs with a larger budget, social heritage and pedigree in the competition, would the same line be followed?
Only time will tell.
II.- THE SOLE AND ABSOLUTE RESPONSIBILITY OF THE SHAREHOLDERS OF THE C.F. REUS DEPORTIU.
It is clear to point out that without the lousy management of the current ex-owners of the entity, the C.F. Reus Deportiu would not be in the current situation.
Firstly, and on the part of the former owner, Mr. Joan Oliver, it is legitimate to attribute his mistake to the lack of foresight of the variants of the Asian market and its volatility, a circumstance known to all of us who have had the opportunity to deal with it. Instability is a reality in today’s market. Its lack of foresight and the lack of a plan B and the inaction before the negative result on the entity, for 4 years in a row, have led to this tragedy.
Therefore, once these circumstances have been observed, we do not hesitate to identify those who were responsible for the C.F. Reus Deportiu as being mainly responsible for the sanction suffered, due to an inappropriate, illicit and irresponsible management.
III. THE PLAYERS ABOVE ALL.
If one thing is clear after this process, it is the special protection that has since been reinforced in favor of the most important elements of this game, its protagonists, MALE AND FEMALE PLAYERS.
Goal against the inequitable.
The League and its disciplinary bodies have made it clear: neither debtors nor cheats are accepted. Tolerance 0 with those who do not fulfill their obligations, nor respect the rights of others.
PS: Prompt return and long life to the C.F REUS DEPORTIU.
Until a next edition of Futbol de Paper.
Alejandro P. Cervantes.
International Sports Lawyer.