PSR points deductions – a guide to the lack of guidance

This was the season of the points deduction. Specifically, the first season of points deductions resulting from clubs breaching the Premier League Profit and Sustainability Rules (‘the PSRs’). Many more such seasons lie ahead. Notably, both Manchester City (infamously) and Leicester City face similar charges in the not-to-distant future.

The PSRs provide that a club’s aggregate Adjusted Earnings Before Tax over the relevant Assessment Period must not exceed a specified level of loss. That threshold is generally £105m.

This season, Everton were handed a 10 point deduction by a Premier League Disciplinary Commission in December 2023 (‘Everton FY22’), which was reduced to 6 on appeal in February 2024 (‘the Everton Appeal’). Then, in March, the club had another 2 points deducted in respect of similar PSR breaches (‘Everton FY23’). It was quite the rollercoaster.

Nottingham Forest received a 4 point deduction in March 2024. On 6 May 2024, a Premier League Appeal Board chaired by ex-Supreme Court Justice the Rt Hon Lord Dyson, upheld that decision, refusing the club’s appeal against the sanction (‘the Nottingham Forest Appeal’).

The Nottingham Forest Appeal decision represents the most recent development in the rapid evolution of the sanctioning principles for PSR breaches. However, while the decision reaffirmed the general principles set out in the Everton appeal, it did not engage with the increasingly pressing issue of (the absence of) sanction guidelines, despite the tentative efforts to develop sanction “bands” – i.e. something approaching a guideline – at first instance.

Critics – albeit normally partisan ones – have often suggested the points deductions arrived at are somewhat arbitrary, a “finger in the air” exercise. While such criticism clearly does the tribunals a disservice, there is a kernel of truth in it, which is that the tribunals have been offered very little assistance from the Premier League. From the very first PSR case the failure to provide sanction guidelines has troubled tribunals, and their desire for guidelines is thinly veiled in the decisions.

In the first Everton case – the very first PSR case – the original Disciplinary Commission recognised “the attraction of a regulator imposing a structured formula that was required to be applied in breaches of a particular regulation. Such a structured formula would fully inform clubs of the consequences of PSR breaches…”[1]

On appeal, the Appeal Board noted:

“The assessment of how many points would be appropriate is neither a mathematical exercise nor, indeed, an exercise in which the PL has given any guidelines. Had the PL clubs wished to have had a structured approach, which would have given them more predictability and transparency, then they could have agreed such an approach either in the Rules themselves or in published Guidelines: they have not done so. Similarly, if the PL Board had wished to give guidelines on the approach to sanction, as the EFL Board has done in the EFL Guidelines, then it could in principle have done so, with the level of consultation with the PL Clubs which it considered appropriate: it has not done so. Instead, both the PL and the PL Board have left this important matter, which not only affects the position of a club subject to sanctions but also (actually or potentially) the relative position of other clubs in the PL, to a Commission or on appeal to an Appeal Board, taking into account matters it considers relevant and giving those factors the weight the Commission/Board considers appropriate.”[2]

The Appeal Board then went on to set out matters of general application in PSR breach cases. As a result, that decision – already well discussed – became something of a guideline case. In summary, the case made it tolerably clear that where a club has breached the PSR threshold, an immediate points deduction for a club will be almost inevitable; that the EFL Guidelines are a relevant touchstone or benchmark to be considered (recognising perhaps the utility of guidelines in general); and that the starting point for a PSR breach is a 3 points deduction, before aggravating and mitigating features are considered.

However, there has remained significant uncertainty as to establishing the quantum of any deduction, with different approaches being taken by different tribunals.

For example, the Disciplinary Commission in the first instance Nottingham Forest decision made a tentative proposal for a gradation of PSR breaches into three “bands” of seriousness, with attendant sanctions:

“it would assist to band breaches [of the PSR] into “minor”, “significant” or “major” breaches, to remove the focus on the absolute number, especially when different PSR Thresholds can apply. However, that approach can be adopted/disregarded as other Commissions see fit – what is clear to the Commission here is, just like Everton, that Forest’s losses are “significant”, as are its excesses over its PSR Threshold, so that it should face a points sanction.”[3]

Warming to its theme, the Commission continued:

“Rather than solely focusing on the quantum of the breach, it may assist to consider those in categories or bands. The example of the £1 over breach must be a “minor” breach, for which a points deduction may not be appropriate. There will be “significant” breaches that will more than likely result in a starting point of a points deduction; these could be in the tens of millions. Then there may also be “major” breaches which will undoubtedly result in a starting point of points off and may even stray above the Event of Insolvency “cap” that has been advanced by Forest.”[4]

This was a nascent effort, it seems, to develop the sorts of categorisations that might be seen in a sanction guideline.

In Everton FY23, the club relied on those categorisations, as developed in the Nottingham Forest case, in mitigation. However, the categorisations were rejected almost immediately by the Disciplinary Commission in Everton FY23, on the basis that the proposal seemed to roll back the findings in the Everton Appeal regarding the seriousness of any PSR breach:

“…we respectfully disagree … that breaches … should be categorised or banded into “minor”, “significant” and “major”, and we reject Everton’s submission to the same effect. For us, that fails to give due regard to the fact that any breach of the PSR necessarily means that the club has spent over and above the £105m threshold of accumulated losses over an extended three-year period… In our view, the Everton FY22 Appeal Board stated in clear terms that: (a) any breach of the Upper Loss Threshold is serious, given the extensive leeway afforded to clubs before they reach that threshold and the length of the assessment period; and (b) accordingly, a deduction of points is appropriate in all cases. We consider that to be the correct approach to a sanction for a breach of the PSR.”[5]

That seems a fair and reasonable analysis. However, the Regulatory Commission went further, and effectively rejected the principle of banding altogether:

“We have declined the invitation to adopt the use of bands… We also consider that the adoption of bands would lead to arguments based upon comparison which detract from the overall purpose of a sanction in these circumstances: the integrity of the PSR and public confidence in the PL.”[6]

This analysis is somewhat weaker. What does it mean? What are “arguments based on comparison”? Comparison to other sanctions handed to other clubs, or comparison to the bands themselves, which is surely the point? If the former, then why would banding lead to arguments based upon comparison above and beyond the current approach? And how does it detract from the overall purpose of a sanction?

Indeed, the Appeal Board in Nottingham Forest suggested that arguments based upon comparison are already here:

“a … practice that adds to complexity and cost is the citation of other decisions on sanctions imposed for breach of the PSR… But reference to individual cases on particular facts is generally unhelpful and should be avoided.

…It is understandable that clubs wishing to appeal against sanction will search for other cases to compare the seriousness of the breach in the instant case with that in other cases. As the numbers of these cases increases, there will be growing temptation to examine them in detail and burden Commissions and Appeal Boards with minute examination of the similarities with and differences from the instant case. Such an approach will rarely be helpful.”[7]

That request to argue on the principles followed on from a succinct precis of those principles underpinning the sanctioning exercise:

“The critical question in each of these cases is how serious a breach of the PSR Rules has been committed. This requires a nuanced evaluative judgment to be made having regard to all relevant circumstances. One obvious relevant circumstance is the extent of the breach in monetary terms. Exceeding the Threshold by a small sum is less serious than exceeding it by a large sum. Another relevant circumstance is how long the breach continued beyond the end of the FY. If it is remedied within a short time after the end of the FY, then, leaving other considerations out of account, the breach is likely to be considered to be less serious than if the breach is not remedied for a longer period (if at all). Ultimately, the Commission has to make a judgment of what is fair and reasonable in all the circumstances.”[8]

However, as helpful as the restatement is – and it is admirably concise compared to the paragraphs dedicated to those principles in other decisions – the plea to clubs to simply apply the general principles and not compare themselves to their peers is a triumph of hope over expectation in circumstances where absence of guidelines necessarily encourages clubs to do just that. While the Appeal Board was not expressly asked to consider the banding proposal suggested in the lower tribunal (and rejected in Everton FY23), the failure to pass any comment on it at all feels like a missed opportunity for the Appeal Board to help fill the vacuum created by the absence of guidelines.

As any criminal practitioner can attest, the use of sentencing guidelines for specific offences is precisely the tool that prevents minute examination of other cases. The Court of Appeal has stated, again and again, that as part of a sentencing exercise or appeal, where sentencing guidelines exist, it will be very rare that reference to case law will be required.

That said, the problem is easily fixed. The failure to fix is perplexing. Assuming that the Premier League knows its own mind as to what sort of sanctions are appropriate in these cases, then it can – and should – include the sanction guidelines for PSR breaches in its Rules.

Next month’s Premier League AGM provides the opportunity for the necessary consultation. It is an opportunity that ought not to be missed.

Will Martin

[1] Para 88

[2] Para 207

[3] Para 9.18

[4] Para 13.3

[5] Paras 175 and 176

[6] Para 182

[7] Paras 85 and 86

[8] Para 36