DATE: 10th of September 2014
THE ECONOMIC CONTROL OF “LA LIGA” (LFP)
HOW IT WORKS? SPECIAL REFERENCE TO THE “PEDRO
LEON CASE”
The idea of
this financial control comes of the aim to adopt the famous “Financial Fair
Play UEFA” in Spain. It is born to create a due diligence handling the football
clubs by their executives. Creating the need to an economic viability and in
this way they can be economically viable. Most of their methods to manage the
clubs were not the most appropriate. Even though we can find a great number of
teams in bankruptcy.
The keys of
this Economic Control appear in the ‘Economic Control of the Clubs and Sports
Companies affiliated to La Liga Regulation’.
First of
all, it should be noted that this Regulation is based on the Sport Law 10/1990,
15th October. In its article 41.4.b) grants LFP exclusive
jurisdiction about the protection functions, control and financial supervision
for the associates of the LFP, as it is explicitly written in the preamble to
that regulation.
The
articles 12 and following deal about the documentation duty on the economic
area. The football clubs should submit the required documents by these
dispositions to the Committee of Control of the LFP. The documents shall be
drawn up between the 15th and the 31st of March of each
financial year. Among those documents are: the list of debts transfer
activities and acquisition of players, list of debts and loans to employees,
listing debts to government (and the certificates issued by them), calculation
of the break-even, among others…
Another
point in the Regulation is referred to economic-financial requirements that on
31st of December the teams ought to comply. The first of them, it
should not have outstanding debts (arts.
16 to 18) in relation to any transfer with other club of any league or
federation. Secondly, it should not exist debts with the employees. And finally
it shall be prove that there are not outstanding debts with the public
administration (Social Security or Tax Agency). In the “Annex II” of the
Regulation delimits the concept “outstanding debts”, these debts will be
“payable and required amount”.
Another
important aspect of this Regulation appears in the articles 20 and following,
it makes reference to indicators of possible future financial situation of economic imbalance. This is the
break-even requirement and it is exactly the same as the UEFA Regulations on
Financial Fair Play. This break-even is established by the difference between
‘relevant incomes’ and ‘relevant expenditures’. The Regulation allows an
acceptable deviation of 5m€ in the First Division and 2m€ in the Second
Division. This amount could be exceeded until 45m€ (this season) it is covered
by shareholders or related parties. And the amount could exceed in 30m€ until
the season 2017/18.
Another
indication of possible future financial situation of economic imbalance occurs
when the amount of the annual economic costs associated with the first team
(for all concepts, players and coaches) exceeds 70% of the relevant income. Which
means that clubs and SADs, cannot allocate more than 70% of their income to the
cost of the first team (Pedro Leon case, discussed below).
And
finally, it must also comply with a ratio of net debt at 30th of
June in relation to the relevant income if the net debt exceeds 100% of the
relevant income of the season in question. It is important, in relation to
these indicators represent how much "expenditures", "as"
relevant income "and" net debt ". These definitions appear in
the Annexes to the Regulation.
How could
it be otherwise, and all the dispositions with the vocation of penalize, there
is a disciplinary regime to apply when some football club breach the previous
commitments. This Regulation does not specify bans for these breaches and
refers to the LFP Statutes, more specifically to the art. 78.bis. The same
article 78.bis provides that violations of economic control may be classified as
very serious, serious or minor. We are going to talk only about the very
serious for reasons of space and interest in the theme of the post (Pedro León
case).
The rule
regards as very serious offenses: altering or include incorrect information on
the documents required by the Control Committee or the Head of Department of
Economic Control, in order to verify the obligations laid down in Articles 12
to 18, 20 and 22 to 24 of the Economic Control Regulation. Another is the breach
to pay debts that are laid down in Articles 16 to 18 of Regulation and the
breach of the break-even in a percentage higher than 1% (Article 20). Nothing
says about the breach of the ‘70% rule’ of relevant revenues destined for the
first team or 100% of relevant incomes that exceed the net debt.
The ban
that this article stipulates to such breaches is a fine between 10.000 and
300.506’05 euros in the case to failure the documentation duty and secondly can
be added the prohibition of registration of players during a season of any entity
that fails on its obligations listed above.
Once explained
the functioning of the Economic Control of the LFP, we should mention the case
has brought up this post: the case of the license of Pedro Leon.
Pedro Leon,
who has seen how the LFP has forbidden his right to play football as a result
of a breach of the 70% rule by Getafe FC, which sets maximum spending in the
first team at 17 million euros. He has been deprived of his right to practice
their profession effectively considering such a situation, a substantial change
in working conditions (article. 41 Workers’ Statute). And this has been
upholding the Supreme Court in its judgment of 28th of April of 2010
(2492/2010 STS –Aquino Case-). The legal support to this point is found in
Article 4.2.a) of the Workers' Statute, where is recognized the right to the effective
occupation and more specifically in Article 7.4 of the RD 1006/85, which states
that "professional athletes are entitled to the effective occupation, being
impossible, except in suspension or injury, be excluded from training and other
preparatory activities for the exercise of the sport". This is understood,
by analogy, that it is applied to the competition, and this is the reason due
to an athlete trains or perform other preparatory or instrumental activities to
be in a good physical condition to carry out his job. Not being a technical
decision, but being a legal impossibility for the exercise of his profession.
Attempting to his right to train, dignity and professional future due to the
specificity of sport. Which provides the unilateral termination of the contract
for just cause by Pedro Leon and a compensation for the damages caused to the
worker.
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