Leicester are alleged to have failed to submit their audited financial accounts to the Premier League for the 2022/23 season; Nottingham Forest were handed a four-point deduction for PSR breach earlier this week; Leicester release strong response to PL charge
Friday 22 March 2024 20:39, UK
Leicester City are taking "urgent" legal action against the Premier League and EFL after being charged with alleged breaches of Profitability and Sustainability rules.
It is understood Leicester could be hit with a stiffer punishment than the four-point penalty handed out to Nottingham Forest if an independent commission sees their failure to submit their accounts on time as a lack of co-operation.
The Premier League charged Leicester over an alleged breach of the league's Profitability and Sustainability Rules (PSR) and the EFL has subsequently placed the club under a transfer embargo.
Leicester - currently second in the Sky Bet Championship on goal difference, but with a game in hand on leaders Leeds - could face a bigger points deduction than Forest, but not this season, if found to have broken the financial regulations.
However, Leicester could argue that - as a Championship club - the Premier League doesn't have any jurisdiction to require prior sight of those club accounts.
On Friday, the club announced they had taken "urgent" legal action against the Premier League and EFL.
A statement read: "LCFC will be seeking that each of these proceedings is determined by an appropriate and fully independent legal panel.
"The club is committed to ensure that any charges against it are properly and proportionately determined, in accordance with the applicable rules, by the right bodies, and at the right time."
On their transfer embargo, Leicester added: "The EFL is aware that LCFC has disputed the EFL's entitlement to impose this constraint, which is both restrictive and premature, with more than a quarter of the club's 2023/24 reporting period remaining."
Forest were originally facing a six-point deduction for breaching profit and sustainability rules, but that was reduced by two points as a result of what the independent commission said was Forest "admitting the breach at the first opportunity" and co-operating in its full provision of documents.
The Premier League charge levelled at Leicester on Thursday included mention of the club's "failure to submit their audited accounts to the League", and whilst that in itself is not enough to warrant a separate charge, it could be seen as an aggravating factor when the commission decides what, if any, punishment is due.
Unlike the recent points-deduction cases involving Forest and Everton, where an independent commission hearing was required to hear the case within 12 weeks of a charge being levelled, there is no set timescale for Leicester's hearing to happen.
The administrator who organises the independent commission hearing will now contact both Leicester and the Premier League to find a mutually convenient date - one which gives adequate time for both sides to prepare their case.
It is also at the discretion of the independent commission to decide when a penalty should be served - although, as we have previously reported, it is highly unlikely that Leicester will be given a points deduction this season, as they look to win promotion from the Championship, because of the time it takes to follow due process.
Forest and Everton were punished under new "fast-track" rules that were voted through by Premier League clubs last summer - after Leicester were relegated. Those new rules do not apply to them, and as a result, the timescales involved in the commission hearing are not set in stone.
After assessing the case, both the club and the Premier League will be asked by the commission what they think is an appropriate reaction, and it's clear that the Premier League feels any PSR breach should be met with sporting sanctions - as was the case with the points deductions given to both Forest and Everton.
In those cases, the League also made it clear they didn't think a suspended sentence was appropriate for a PSR breach, and they are likely to take the same view with Leicester.
Another key factor in deciding Leicester's punishment is the scale of their breach, which will not be known until the club publishes its accounts at Companies House later this month.
There is no set tariff for alleged PSR breaches - that option was discussed but rejected by Premier League clubs at an earlier shareholders meeting.
However, it's thought the penalties given to Forest and Everton may well have set a precedent in the minds of future independent commissions, as they try to assess the severity of a breach.
That means the starting point for any Leicester penalty is likely to be a standard 3-point deduction, with further points penalties added on if the breach is well in excess of the £105m losses permitted over a rolling three-year period.
Leicester's mitigation - which we understand will focus on the complicated matter of which competition has jurisdiction over an EFL club recently relegated from the Premier League - could well see any penalty reduced, if the commission accepts their evidence on that matter.
The Premier League has no part in the punishment, which is wholly at the discretion of the independent commission.
Leicester say they are "willing and eager" to engage with the Premier League and EFL for a resolution, but expressed their shock at the timing of the charge.
"Leicester City is surprised at the actions the Premier League has taken today," said the Championship side. "The club is extremely disappointed that the Premier League has chosen to charge LCFC now, despite the club's efforts to engage constructively with the Premier League in relation to the matters that are the subject of this charge, even though LCFC is not currently a Premier League club.
"LCFC remains willing and eager to engage constructively with the Premier League and the EFL to seek the proper resolution of any potential charges, by the right bodies, and at the right time.
"The club continues to take careful advice about its position and, if necessary, will continue to defend itself from any unlawful acts by the football authorities, should they seek to exercise jurisdiction where they cannot do so, as occurred earlier this year."
Sky Sports News chief reporter Kaveh Solhekol:
"We've been through this with Everton and Nottingham Forest. What happens now is a three-person panel will hear the case and in front of this panel the Premier League will make their case and explain why they believe Leicester have broken their rules and then the club, with their lawyers, will be able to make their case and defend themselves against this alleged breach.
"All these cases have been controversial and divisive already but what will be really controversial here is Leicester are in the Championship at the moment. They're fighting for promotion, they've got nine games to go. If they are found guilty, we know what happens in these cases - teams are hit with a points deduction.
"We have the very real prospect that if they're promoted they could start next season in the Premier League on -4, -6, -8, -9 points. We've even had the Premier League asking for a 12-point deduction in a PSR case as well."
Sky Sports News chief reporter Kaveh Solhekol:
"The simple answer to that is this alleged breach has happened over a three-year period when Leicester were in the Premier League. So it's alleged they broke Premier League rules, it isn't to do with the EFL but I can understand why some of their competitors in the EFL would be saying they had an unfair advantage because of this.
"It puts into sharp focus how controversial these rules have turned out to be. It's no surprise there's so much debate and discussion within clubs about changing these rules as soon as possible.
"Leicester are a club who provided the Premier League with one of, if not the most memorable moment, winning the title under Claudio Ranieri. After that, they actually had to balance the books, sell players and some of their managers have not been happy with operating with one hand tied behind their back.
"I don't think you could accuse them of going out and spending crazy money to gain an unfair advantage over their competitors in the Premier League.
"The clubs voted to bring in these rules and this fast-track system. But Leicester were relegated before this fast-track system was introduced so we'll have to wait and see exactly what the timetable is going to be for this case to be heard."
Sky Sports News senior reporter Rob Dorsett:
"Leicester's statement criticises the Premier League for not understanding the situation at the club, it says they will talk to their lawyers and 'if necessary continue to defend itself from any unlawful acts by the football authorities'. That's inflammatory language.
"It shows how strongly they feel about this, how angry they are about this. I wonder how that will be received by the EFL and Premier League who will argue, as the Premier League always have, that all they do is enforce the rules of PSR - rules that are voted on by the clubs themselves.
"This is going to be a long-running dispute, a long-running issue for Leicester and the Premier League. It's going to go beyond the summer. That's been made clear to me."
Sky Sports' Ron Walker:
In the simplest terms, when every Premier League team tots up their annual accounts, they are permitted to have made a loss no greater than £105m across the previous three seasons.
But there are a fair few caveats and sub-clauses to get through before any club can find itself in the clear. For a start, not all losses are created equal.
Clubs can only lose £15m of their own money across those three years. So, that's no more than £15m extra on outgoings like transfer fees, player wages and, in a lot of clubs' cases, paying off former managers compared to their income from TV payments, season tickets, selling players and so on.
Anything above that, up to the £105m barrier, must be guaranteed by their owners buying shares, known as 'secure funding', and essentially means bankrolling the club.
In those circumstances, the Premier League require clubs to submit plans to explain their financial forecast for the next two seasons.
If any club owner is not feeling particularly generous or cannot find the best part of £100m, that does not leave much wiggle room.
Of teams still in the top flight, only Chelsea and Everton utilised that full amount in the most recent published accounts (for the 2021/22 season) - with nine clubs, including Arsenal, Liverpool and Manchester United receiving no equity injection at all.
For sides who have spent any of the last three seasons in the EFL, owners can only put in £8m of secure funding for those years, leaving an overall maximum annual loss of £13m for the campaigns in question.
