Everton’s deduction is a tremor – City and Chelsea may face the earthquake

Geologists know that sometimes what appears to be an earthquake is only a prelude to an even greater seismic event. That is worth remembering amid the tremors of the decision to dock Everton 10 points for breaching the Premier League’s profit and sustainability rules (PSR). Because for Manchester City and Chelsea a quake of a far larger magnitude is potentially looming.

City, after all, have been charged with more than 100 breaches of Premier League rules over multiple years. Chelsea are under investigation for alleged financial wrongdoing between 2012 and 2019 – and, as the Guardian revealed this week, secret payments worth tens of millions of pounds appear to have been made by companies owned by Roman Abramovich.

Everton are the first club to be punished by the league for breaking profitability and sustainability rules, and the leading sports lawyer Catherine Forshaw believes that City and Chelsea will be fearing much more severe punishments – including potential relegation.

“If you are a lawyer at these clubs, you will be more nervous after this verdict,” says Forshaw, who works at the sports law firm Brabners and has significant experience in advising national governing bodies and football clubs. “There’s precedent in place now. And compared to Chelsea and Manchester City, Everton are likely to be at the lower end of the spectrum in terms of severity. So I think relegation is certainly not out of the question.”

Another prominent sports lawyer, Nii Anteson, points to section 107 and 108 of the 41-page Everton verdict as potentially being relevant to future cases.

It was not just that the commission stressed to Everton that the “obligation to act in utmost good faith is high”, and told the club that the information supplied was “materially inaccurate” and “less than frank”.

No. Notably, they also dismissed a claim by Everton’s representative that “in the same way that a tax accountant’s job was to reduce a client’s tax exposure, an element of his job was to protect or interpret PSR rules to the benefit of his employer”.

According to Anteson, a partner and solicitor advocate at the law firm Sheridans, that is potentially quite significant in other cases. “That representative said his job is to creatively interpret the profitability and sustainability rules to benefit his employer – Everton,” he says. “But the commission in this case found that the general duty of good faith that clubs owe to the Premier League is a very high standard and trumps that.

Last season’s treble winners Manchester City have been charged with over 100 breaches of the Premier Leagues financial rules. Photograph: Marvin Ibo Guengoer/GES Sportfoto/Getty Images

“And frankly, because the Premier League is generally unsighted into the goings-on at a club, aside from these financial reports, which need to be submitted, it’s important that the clubs exercise the utmost care in providing those reports. So the commission found that while Everton didn’t consciously intend to circumvent the rules it failed to discharge that duty of good faith and that was one of the aggravating factors.”

That said, there were also mitigating circumstances in the Everton case. The commission, for instance, agreed that the club had “behaved openly and responsibly in its dealings with the Premier League in relation to its PSR challenges, and that behaviour should stand to its credit”.

It also noted the effects of Covid, and the other difficulties Everton had faced over the period where it went over the maximum permitted losses of £105m over three years. Even so, it decided to inflict a 10-point penalty.

All that is worth noting in City’s case. Especially as the seven-times Premier League winners are facing far more charges – including failing to give “a true and fair view of the club’s financial position”, failing to “include full details” of player and manager remuneration, failing to comply with fair play rules, and failing to cooperate in the Premier League’s investigation. They have denied wrongdoing and say that a “comprehensive body of irrefutable evidence” exists in support of their position.

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Chelsea’s case is different again, with a new regime having come forward to the Premier League to highlight the discrepancies it found after it took over the club.

Anteson says there is a common thread between all three cases: “The Premier League is now keen to have the deterrent effect of their rules and regulations felt.”

So is the Premier League finally baring its teeth? Yes and no, says Forshaw. “They have more than one eye on the independent regulator that is due to come in,” she says. “Basically, the Premier League are saying that they want to retain some of their regulatory powers to govern their own league. This is a way of showcasing that they’re able to do that – and they will take breaches of the regulation seriously.”

So what will happen next? Everton have said they will appeal against the sanction and the finding that they failed to act with the utmost good faith. But neither Anteson or Forshaw believes they have a strong chance of completely overturning the verdict.

“It may be a case that the sanction is reduced, but they’d have to prove that there had been an unjust finding or evidence had been ignored,” says Forshaw. “And given the scrutiny of the case, and how long this has gone on for, I think it’s unlikely.”

Meanwhile, the commission chair, David Phillips KC, has given Leeds, Leicester, Burnley and Southampton – who have previously written to Everton’s prospective new owners, 777 Partners, warning they intend to pursue damages in the event of a guilty verdict – 28 days to inform the commission they want compensation. The clubs are not allowed to take separate legal action through the courts.

Chelsea and Manchester City can only wait to see what the Premier League will do next. But after Friday’s verdict one thing is clear: collars in both boardrooms will be a little more sweaty.