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The Premier League has moved to close potential spending sanction loopholes for relegated or promoted clubs following legal battles with Leicester City.
A tightening in the wording of the rules now stipulates allowable losses for applicable years in which a team may have been in the Championship.
There is also a clarification that a relegated club will “remain bound” by the rules “until such time as it has complied with all of its obligations relating to its last season” in the top tier.
The tweak, which is confirmed in the new Premier League handbook published last week, is intended to clamp down on clubs attempting to avoid spending sanctions if they have not been a top tier club for an entire three-year reporting period.
Second-tier clubs have tighter spending limits, with a £41.5 million cap across three years. However, despite Premier League allowing £105 million, Leicester remain in arbitration with the league over the competition’s jurisdiction relating to the 2022-23 season.
The club had previously won a legal challenge on the basis that the league did not have jurisdiction after they had been relegated in 2023. The club said they had identified “flaws” in the Premier League rules.
With the assistance of sports lawyer Nick De Marco, Leicester’s claim that the Premier League did not have jurisdiction was backed by an independent commission. The Premier League appealed against the decision, which must now be settled before any further action is taken.
Leicester, now facing relegation again, were not charged for the 2023-24 season cycle. Despite reporting losses of £92.5 million and £89.7 million in the previous two years, Leicester raised over £90 million following relegation to the Championship.
Harvey Barnes (£38 million to Newcastle), Kiernan Dewsbury-Hall (£30 million to Chelsea) and Timothy Castagne (£13.5 million to Fulham) were major sales, while Chelsea paid £10 million in compensation to appoint manager Enzo Maresca and his coaching staff.
The handbook amendment was initially spotted by Stefan Borson, a lawyer and former financial adviser to Manchester City.
Why did the rule need tightening?
Essentially the Premier League wants to avoid any potential further legal disputes with recently relegated or promoted clubs who claim PSR sanctions are not applicable to them for seasons within a cycle in question that they spend outside the top flight. After Leicester’s promotion back from the Championship just a year after their initial relegation, they began this campaign under threat of a hefty points deduction, charged with exceeding the Premier League’s permitted £105m three-year loss limit.
That case was thrown out in September, with the Premier League saying the independent panel’s interpretation “failed to take into account the purpose of the rules”. Nick De Marco, who represented Leicester, told the BBC: “That wasn’t a loophole. It is a very simple point. The Premier League should never have brought the case in the first place.”
What has been added to the handbook?
In the league’s sanctions regime section of the new handbook, a new paragraph stipulates that “if a Club is relegated from the League, that Club shall, notwithstanding relegation, remain bound by” the rules “as if it were still a Club, until such time as it has complied with all of its obligations relating to its last Season as a Club”.
There is also an addition providing further clarity to the cap on losses for seasons in which a team may have been in the tier below.
The sum set out in loss calculations “shall be reduced by £22m per Season, for each of the three Seasons prior to the current Season during which a Club was in membership of The Football League, up to a maximum deduction of £66m”, the rules clarify.
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