Independent regulation of football can be blueprint for sports sector

Out-Law News | 30 Nov 2021 | 10:22 am | 4 min. read

The introduction of an independent regulator for English football is a “pioneering” idea that could provide the blueprint for the governance of other sports in future, and further free the Premier League to focus on maximising its commercial income, according to experts in sports law.

Trevor Watkins and Julian Diaz-Rainey of Pinsent Masons were commenting following publication of the fan-led review of football governance in England.

The establishment of an independent regulator for football is the central recommendation of the review, which was chaired by former sports minister Tracey Crouch.

The review said: “This regulator should be independent from football clubs and government, and have a clear statutory objective with strong investigatory and enforcement powers. The new Independent Regulator for English Football (IREF) will not operate in areas of traditional sports regulation which will be left to the existing authorities.”

Watkins Trevor

Trevor Watkins

Partner, Head of Sports

If football gets this right, the model of independent regulation is something that other sports are likely to take note of and potentially look to implement

A shift to independent regulation of football has been recommended in the context of ever-more-complex issues arising in relation to football governance as the business of football has grown over the past 25 years.

The Premier League has developed into one of the most marketable brands in sport, attracting significant commercial revenues – including from broadcasting partners around the world. This has in turn attracted fresh investors, including from North America, the Middle East and Asia Pacific, into existing Premier League sides and other aspirational clubs in England throughout the football pyramid.

This significant economic growth within the game has, at times, caused tension within football administration over issues such as the redistribution of wealth – with the Premier League, Football Association and English Football League, government and fan groups all representing different interests.

While many clubs have thrived from the investment into English football, others that have pursued on-the-pitch success have been mismanaged and encountered financial difficulty. Many clubs operating at both the Premier League and English Football League levels have suffered significant financial losses Some clubs have gone out of business completely, including Bury which had been operating since 1885.

Under the Crouch proposals, a new system of financial regulation for English football would be developed and overseen by the IREF. The regulator would also assess who should be allowed to be the owner or directors of a football club, with reference to consolidated tests that prospective owners and prospective directors would need to meet.

Diaz-Rainey Julian

Julian Diaz-Rainey

Partner

The proposals, to take the governance and regulation of certain elements of football out of the hands of multiple stakeholders into one body, should be welcomed, as it will allow those organisations to concentrate on developing the commercial operation

Watkins said: “There are diverse interests across football, but there is growing consensus that change to the way some specific areas of the game are governed is needed. We are aware of active discussions between different stakeholders within the game on implementing aspects of the Crouch review already. For existing administrators, creating an independent regulator to deal with a specific, limited range of complex and difficult issues is likely to be attractive. It enables them to be one step removed and, as long as there is confidence in the process, to be able to rely on an independent and well-regarded body to oversee those difficult issues and independently take into account divergent views. If football gets this right, the model of independent regulation is something that other sports are likely to take note of and potentially look to implement.”

Diaz-Rainey said: “Calls for a change to the regulatory structure of football have been discussed for some time, such as Lord Burns’ 2005 proposed reforms to the Football Association. The most recent proposals, to take the governance and regulation of certain elements of football out of the hands of multiple stakeholders into one body should be welcomed, as it will allow those organisations to concentrate on developing the commercial operation and offering of those leagues both nationally and internationally, and will avoid the potential friction that can arise from a regulatory role.”

Watkins said that an independent regulator in football needs the confidence of all stakeholders in the game to be considered “credible”. He said issues such as the regulator’s terms of reference, the make-up of its board and ensuring it is well funded, with the ability to deliver against its terms of reference are important and relevant factors that need to be clarified to ensure that the regulator will be successful and not simply wither.

Among the other proposals outlined in the review was a recommendation that fan consent be needed for club owners to be able to change matters concerning a club’s heritage – such as its name, logo, playing colours, joining an unaffiliated competition, selling the stadium or permanently relocating the club to another area.

The review also recommended that the so-called ‘parachute payment’ given to teams relegated from the Premier League to the Championship be phased out and that a more generous system of wealth distribution from the Premier League be implemented instead as means of providing for financial sustainability in the lower leagues and better support for grassroots football.

To further limit financial risks for clubs, the review also recommends mandating fixed promotion and relegation clauses in player contracts, so as to provide certainty to clubs over how much salary costs with go up or down in the event the club moves between divisions.

"Football is increasingly being viewed as a long-term investment by private equity funds and high net worth individuals,” Watkins said. “The introduction of measures that will make the game more sustainable and responsive to fans will only make the game more attractive to investors. The phasing out of parachute payments will also arguably improve competition within the Championship. Economic investors will not be deterred by measures that will give fans more control over their clubs’ heritage. It should be a common interest for both. Some measures such as the introduction of mandatory promotion and relegation clauses will, however, need to be carefully thought through if they are not to be successfully challenged legally – and to also ensure that they are viable.”