Demonising Justin Gatlin
13th September 2015
Javier Tebas, President of Spain’s professional football league (LFP), has said that a petition will be submitted to UEFA, the European Union and the Swiss Courts in opposition to Neymar’s transfer from FC Barcelona to Paris Saint Germain (PSG). In a statement released yesterday, FC Barcelona said that for Neymar to leave the club, he will have to pay a €222 million ‘buyout’ clause in full.
“LaLiga will denounce the unfairness of competing against state-backed clubs; the teams that receive economic investment from countries that gift players to their fans at the cost of taking them from other clubs”, Tebas told AS. “In terms of PSG, it is a clear case of ‘financial doping’, with the club and the state […] If UEFA don’t react, we will present the claim immediately. We haven’t done it yet because we thought that UEFA were going to take measures to ensure that Financial Fair Play (FFP) is respected, and this ‘financial doping’ is avoided.”
UEFA’s Club Licensing and FFP Regulations (PDF below) are designed to ensure that clubs cannot spend more than they earn over a three-season period. However, there are caveats. If a club reports an aggregate deficit during a three year period, they must demonstrate that it is covered by a surplus from the two years prior to the three-year monitoring period.
In addition, UEFA allows an ‘acceptable deviation’ of €5 million. It also allows this ‘acceptable deviation’ to be exceeded by €30 million ‘if such excess is entirely covered by contributions from equity participants and/or related parties’. In other words, clubs can report a €35 million loss over the three year monitoring period.
The problem for PSG is that the club has not been spectacularly profitable (click here for Forbes’ analysis), yet it now appears to have a huge financial liability on its books. As well as the €222 million buyout clause, Neymar’s wages are understood to be €30 million per year over his five-year contract, after tax. In addition, his agent Pini Zahavi and others involved in arranging the transfer are understood to be due €38 million. At a conservative estimate, the entire deal could cost PSG €410 million.
UEFA has reportedly asked PSG how it will pay for Neymar’s transfer. Oryx Qatar Sports Investments took control of PSG in 2011, when it also agreed a sponsorship deal with FC Barcelona for the 2013/14 season. A year later, PSG agreed a four-year deal with the Qatar Tourism Authority (QTA), a government body, which it said was worth €200 million per year.
In 2014, UEFA agreed a Settlement Agreement (PDF below) which placed certain spending limitations on the French club. It is also understood that UEFA assessed the value of the QTA deal to be half that stated by the club (in other words, €100 million per year). In other words, UEFA found that PSG and QTA – which is a state-owned organisation – had artificially inflated the value of the deal.
The club’s deal with QTA expired in 2016. A new deal was agreed and, in October, PSG submitted to UEFA that it was worth €175 million per season – €75 million more per season than the value UEFA had given the previous deal. PSG’s Settlement Agreement with UEFA also expired at the end of the 2016/17 football season. UEFA’s Club Financial Control Body (CFCB) has yet to indicate whether it accepts PSG’s valuation of the new QTA deal.
The new QTA deal combined with the conclusion of the UEFA Settlement Agreement have combined to give PSG a sizeable war chest to spend this summer. Key to the Settlement Agreement is the following passage (emphasis added):
‘PSG agrees to pay a total amount of EUR 60 Mio. which will be withheld from the revenues it earns from participating in UEFA competitions commencing in season 2013/14. Of this EUR 60 Mio. an amount of EUR 40 Mio. will be withheld conditionally and will be returned to PSG if the club fulfills the operational and financial measures agreed with the UEFA CFCB.’
UEFA confirmed that PSG had complied with the terms of the settlement agreement on 21 April this year, adding a €40 million boost to the €175 million per year it receives from the QTA deal.
As previously mentioned, UEFA has asked PSG to clarify how it will pay for Neymar. As indicated above, the French club will have at least €215 million coming in this summer from the QTA deal and the conclusion of its Settlement Agreement with UEFA.
The main problem appears to be the €222 million buyout clause (which in more innocent times, was called a transfer fee). However, there may be a way around PSG paying it.
Neymar will travel to Doha to sign a €300 million deal with Oryx Qatar Sports Investments to become an ambassador for the 2022 FIFA World Cup Qatar, reports Mundo Deportivo. If that analysis is correct, that would allow Neymar to pay the buyout clause, leaving the not inconsiderable issue of his wages.
Helpfully for PSG, UEFA’s FFP Regulations allow transfer fees to be paid over the length of a contract. In the case of Neymar’s five-year deal, PSG would need to find €30 million each year to cover Neymar’s wages. However, as previously mentioned, it can fall €35 million short in paying these over the three-year monitoring period.
Although Tebas’s comments indicate that he believes state involvement in financing the transfer of Neymar, it would appear that PSG – having been burned once – is playing by the rules. UEFA has even indicated that it is happy with the new valuation of PSG’s QTA deal at €175 million per season.
The ‘ambassador’ situation would be unprecedented, but would be difficult for UEFA to sanction the deal. PSG is not involved and UEFA has no jurisdiction over Oryx Qatar Sports Investments or the 2022 FIFA World Cup.
Yet there could still be an issue. Such an arrangement could seriously undermine the credibility of the FFP Regulations in the eyes of both the public and the football world.
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