[Author: Anisha Chatterjee, student of law at IFIM Law School]
Ever since American businessman Todd Boehly and a consortium of investors completed the record £4.25 billion takeover of Chelsea FC, he has left no stone unturned to bring the club back to winning ways. After letting go of key club figures like director Marina Granovskaia, technical advisor Petr Čech, and Champions League winning manager Thomas Tuchel, he has taken the transfer market by storm by signing almost 20 players in 2 transfer windows, with Argentine world cup winner Enzo Fernandez being the latest addition to an already star-studded squad. While Boehly has been mocked and insulted for his ideas and monopoly-like spending, fans and officials from all around the world have asked a very important question… ‘How are Chelsea making so many signings without breaking FFP regulations?”
WHAT IS FFP?
FFP, or Financial Fair Play is a set of rules and regulations that was first introduced in 2011 by the Union of European Football Association, better known as UEFA. They are a set of regulations that prevent football clubs from spending more money than they have earned in revenue. This is done to protect the clubs from not getting into financial problems in the future. UEFA permits clubs to spend a maximum €5 million more than what they have earned in each three-year assessment period. There is a new limit of €30 million if the owners of the club can make up for the losses. New rules were introduced last June, where the amount of losses allowed was increased from €30 million to €60 million, and clubs were permitted to spend upto 70% of their revenue on player wages transfers, over each three year period.
Non-compliance of these rules will lead to serious repercussions, including deduction of points, demotion to a lower league and in severe cases, a total exclusion from all tournaments organised by UEFA.
CHELSEA FC’S STRATEGY
Chelsea FC have spent a record €364 million in the January transfer window alone, which is more than all the transfers made in the Laliga, Serie A, Ligue 1 and Bundesliga combined for the same period of time. The Enzo Fernandez deal on the dying minutes of deadline day cost them a whooping €121 million and took Chelsea’s gross transfer spend to approximately €677 million in less than a year. However, according to the laws in force, it seems that they have done nothing illegal.
Chelsea FC are not only obligated to follow the rules laid down by UEFA, but also by the English Premier League which puts a cap on the maximum losses a club may suffer over a three year period. However, with an intelligent strategy, coupled with lengthy contracts and sale of highly rated players from their youth academy, Cobham, Chelsea FC have successfully splashed a huge amount of cash in the transfer window while ensuring that they cannot be penalised under the Financial Fair Play regulations.
According to the rules that came into force in June 2022, UEFA clubs are only allowed a loss of €60 million in each three year period. The wage cap limits spending on wages and agent fees to 90% of revenue earned in the first year, which decreases to 80% and then 70% in the following assessment years. By selling players and signing the new players on longer contracts, the club has been able to successfully minimise the impact of these transfers on each upcoming year. For example, the club completed the transfer of Ukrainian wonderkid Mykhailo Mudryk for a record fee of €100 million. Since the player signed an eight and a half year contract, this will cost Chelsea FC less than €12 million per season. Similarly Enzo Fernandes who signed a contract for €121 million till 2031 will cost the club only a little over €13 million per season. By amortising, or spreading the costs of these players throughout the length of their contracts, they have managed to significantly strengthen their squad with new signings, in addition to following the set regulations. This shall also give them higher protection and more bargaining power if a player succeeds and wishes to transfer to a different club. Since they will have many years left on their contract, Chelsea FC will be able to ask for a higher transfer fee, as there is no concept of release clauses in the Premier League. However, this also has a downside, because if the players are unable to live up to their potential, the club will have less options of sale, and will have to continue paying them their high wages.
Another question that has come to light is whether Chelsea are allowed to sign players for longer than 5 years. Many local leagues like Laliga, Ligue 1 and even UEFA have this rule that states that a player cannot be given a contract for longer than five seasons. However, no such rule exists in the Premier League. Chelsea FC found a loophole in the laws and intelligently exploited it for their own benefit.
IS THIS METHOD FEASIBLE?
This strategy looks good on paper but has a number of drawbacks, the most important one being the performance of the club. Chelsea FC are currently 10th on the EPL table, 21 points off of league leaders Arsenal and 10 points off a Champions League spot. They have only managed to score 22 goals in 20 games. In comparison, current Premier League top scorer Erling Haaland has alone scored 25 goals in the same number of games. If Chelsea are unable to secure a Champions league spot (within the top 4) by the end of the season, it will have a huge impact on their revenue. They will not receive the bonus they get for qualifying and for playing each game. They will lose out on prize money, bonuses from sponsors, ticket sales and so on. Keeping that in mind, Chelsea FC have only one goal till the end of the season, which is to finish top 4 of the Champions league, so that they don’t have to be plunged into debt for their extravagant expenses in the last two transfer windows.
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PREFERRED CITATION: Anisha Chatterjee, Chelsea’s Recent Transfer Window Controversy – an Eye Opener for FFP?, SLPRR, <sportslawandpolicyreviewreporter.com/?p=2569> February 8, 2023.
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