Written evidence submitted by Dave Boyle
SUMMARY
— Debates
about poor governance in football, and concern over clubs poor
performance have proven intractable for almost 20 years.
— In
response to that intractability, government has been consistently
prevailed upon to intervene, sometimes to resolve the impasse
within football, sometimes to bypass the game altogether through
creating an independent regulatory authority.
— Sport
in the UK had developed in such a way as to leave Ministers or
Parliament without any specific powers to guide their response.
As a result, they would first have to create the means by which
they would then act.
— Much
of the criticism of the FA fails to account for the lack of legal
power for its actions, especially when set against the legal basis
of clubs as sovereign enterprises.
— By
following the example of other countries - and more recently the
EU - Parliament could legislate to finally provide a framework
for football (and indeed all sports) to better navigate their
way in the 21st Century with tools designed for the task, rather
the 19th century structures they currently have.
— Parliament
could pass a Sports Act which:
— Recognised
that sport was a specific and discrete sector of cultural life
which was in crucial areas free to be treated differently than
other commercial sectors.
— Provided
legal certainty to governing bodies for their regulatory role,
whilst providing the means to ensure those governing bodies were
acting properly, proportionately and in the wider public interest.
— Created
specific legal vehicles for sports clubs that enable them to better
balance their commercial activities with their sporting and social
purposes.
— By
doing so, they would unjam the debate in football by ending a
shadow debate about whether the FA can act, freeing it
to debate the more relevant issue of whether and how it should.
— Individual
clubs and communities would be able to - over time - transform
their clubs into enterprises with asset protection, transparency
of operations and stakeholder involvement as they saw fit.
— Parliament
and Government would have the means in future to act in limited
and proportionate way to resolve issues when called upon by stakeholders,
with clear understanding of their powers to act.
PERSONAL SUBMISSION
1. In my professional capacity
I am Chief Executive of Supporters Direct, where I have worked
for 10 years. This is a personal submission covering issues beyond
the immediate purview of the evidence submitted by Supporters
Direct.
2. Discussion about what to do about football
must eventually become discussion about how to do it. Identifying
things the FA should do presupposes that it has the ability to
do that, so matters of policy inevitably become governance issues.
3. Over the past 15 years or so, the issue of
governance—and by extension, ownership and financial management—has
been a perennial issue. In 1997, the incoming Government formed
a Football Task Force, responding to public concern. The outcome
of that process on these key issues was unsatisfactory, notwithstanding
the creation of Supporters Direct and the Football Foundation
and their excellent work.
4. In the same period, the FA has had six Chief
Executives, as is now on its 4th Chair. The issues present in
1997 are essentially the same in structure and cause as those
we face today.
5. Throughout the period, advocates for change
in football have looked to Government for assistance because the
closed governance of the structures of football leave no avenue
for change. It is impossible to attend, place items onto the agenda
of or lobby, at any of the governance fora of the authorities,
which are private limited companies in law.
6. However, the demand for government action
was often ill-matched to the policy apparatus investigating its
achievement. In short, government has been unclear as to what
it might want to achieve, and therefore unclear as to how to do
it.
7. Sitting behind this has been a wider view
in politics and economics disinclined to interfere in the conduct
of legally-private enterprises, a view overlaid with the not unreasonable
hope that football could and should be able to resolve these issues
of its own accord.
8. It is clear that as much a factor as the political
will within Government and Parliament to act is the need to identify
an action that either can or should take.
9. As a legislature, Parliament can enact provisions
governing the conduct of life in this country, within a framework
managed by the various treaties the UK has acceded to.
10. It is in this area that action is needed,
and only Parliament can take it.
11. Whilst there are a number of lawyers specialising
in sports law, there is no such thing as Sports Law in the way
we might speak of Charity Law, or Corporate Law.
12. Parliament has created a legal framework
for enterprises under the company law framework, and updates it
every 20 years or so. Charity law has a similar body of statute.
To a lesser extent, statues also recognise the special status
of educational institutions, railways, co-operatives, hospitals
and pubic bodies and others.
13. These statutes provide a framework for registration
and operation of the entities so registered, committing them to
running their affairs in a way consistent with the wider good
conduct and performance of those sectors.
14. In return, all provide certain boundaries
of law, and means that other statutes that operate more widely
might operate differently, if at all, in that area, recognising
their special circumstances.
15. For example, those on the governing council
of a Charity cannot be paid for their time, even if though the
charity might be a company allowed to pay Directors under company
law.
16. No such provisions exist for sport. Sport
operates according to its own internal framework, which is in
turn managed by the statutes governing whatever corporate vehicle
the entity in question happens to be.
17. Governing bodies are private companies, mostly
limited by guarantee with members, rather than shareholders. Aside
from basic provisions, their role as institutions which can set
criteria that members must comply with is backed up by their legitimacy
as a governing body (and thus the willingness of the community
of the governed to assent). There are some precedents that give
comfort to governing bodies, but these are vulnerable to new case
law.
18. For example, the Meca-Medina case sent shockwaves
through European sport. Prior to this case, precedent held that
as long as sports bodies pronounced regulations to achieve sporting
goals, the economic consequences of those rules on participants
was secondary and not normally actionable. In finding against
two swimmers banned for substance abuse, the European Court of
Justice nevertheless conceded that the sporting cause was not
sufficient in itself to override Treaty provisions relating to
economic matters.
19. As football has become increasingly commercial,
the potential threats clubs have seen to those revenues from regulation
has grown, as have their resources to fight such rules. The impact
on regulators has been to make them fearful of regulating in certain
ways lest they invite a legal challenge which if lost would undermine
their entire basis of authority.
20. For example, when Wimbledon FC wished to
move its stadium from South-West London to Milton Keynes, the
Football League refused to sanction this as it deemed football
clubs to be traditionally associated with particular geographic
communities, links that would be threatened by such relocations.
They were also mindful of the possibly of clubs being destabilised
(and gaining unfair advantage) if areas incentivised teams to
relocate using tax advantages, new facilities and so on. The rules
were designed for purely sporting reasons.
21. However, Wimbledon FC lobbied fellow clubs
that the league was unfairly prohibiting their right as a sovereign
business to trade wherever it best saw market opportunities and
that they were prepared challenge the League in the courts on
this point.
22. The League's funds were already in jeopardy
following the collapse of their TV partner, ITV Digital, and nervous
clubs worried about the potential costs they would be asked to
pay should the case be fought and lost. As a result, they lobbied
the Football League to revise their position, and the result was
that the matter was referred to a FA Commission who ruled in the
club's favour.
23. The key point here is that the League had
a long-standing sporting tradition, underpinned by their authority
as competition regulator, but they were unwilling to take the
risk of losing, unsure as to how a given judge might proceed on
so fundamental a matter.
24. Whilst the idea that unhappy clubs could
use law to overturn regulation is probably more rhetorically invoked
than real, it acts as a serious disinhibitor to action.
25. Another threat often levied at regulators
is the threat of a breakaway, where disgruntled clubs form new
leagues without those rules causing the unhappiness. As regulatory
bodies derive their power from membership, rather than Parliament,
this is a serious threat.
26. The net effect of this is to emphasise the
commercial operation of a club over its sporting and social roles,
as the former has a body of law in its favour, whilst the latter
must be enforced by unconfident and often comparatively poorer
regulatory bodies.
27. The situation elsewhere is instructive. Many
countries legislate to enshrine their governing bodies as the
legally-binding authority on sporting matters. They are not exempt
from legislation governing employee rights, or health and safety
and such like, but the designation allows the special character
of sport to be protected and regulated for. The new Lisbon Treaty
recognises the specificity of sport for the first time, building
on previous declarations by the Member States in Helsinki and
Nice.
28. As an example the Bundesliga has exemption
from German anti-trust law (similar to exemptions given Major
League Baseball in the USA). In Spain, the national governing
bodies are licensed by the Higher Sports Council, which is an
agency responsible to the Government but at arms length from it.
29. In other countries, specific legal vehicles
are provided for clubs; again, in Spain, a Limited Sporting Company
(SAD - Sociedad Anonima Deportivo) which is built on standard
Spanish corporate vehicles but enshrines certain provisions to
reflect the specific nature of sport.
30. This form was created in 1992, when chronic
debts of Spanish clubs meant that all hitherto-member-owned clubs
with debts to branches of the state had to raise equity through
these bodies in lieu of those debts being waived. However, as
the clubs had traditions built on representation and accountability,
specific clauses giving small shareholder powers to require independent
audit were added.
31. The sport law was recently reviewed by the
Spanish Parliament and changes proposed included allowing the
clubs to choose to revert back to member-associations if they
wished.
32. There are provisions in Norwegian and French
law to provide specific legal personality for sports clubs.
33. By contrast English clubs are overwhelmingly
private companies. This is essentially an accident of both the
professional understanding of its earliest directors, who were
familiar with joint-stock companies, and their urgent need to
raise capital for constructing stadia for the enjoyment of the
burgeoning crowds for those clubs.
34. They are unable to become charities due to
the nature of charitable objects, and whilst some have lately
converted to Community Interest Company status, this is a small
handful set amongst hundreds of senior clubs.
35. As detailed in Supporters Direct's evidence,
the private limited company route is easily bought and sold, and
has facilitated the acquisition of many clubs by individuals who
have had personal interests to serve rather than the clubs.
36. In some case, those interests might be temporarily
aligned, such as in achieving greater playing success, but unless
the issue of the subsidy (and later debt) is resolved, at some
point interests will diverge, and the legal position allows for
that tension to be only resolved in the cause of the owner, not
the stakeholders.
37. Clubs structured as companies increasingly
have boards of Directors who are the shareholders (or their agents)
and if Annual meetings and accounts are a part of governance arrangements
(and increasingly, they are not), are often cursory and ill-suited
to holding the board to account.
38. The other mechanism supporters can employ
is to withdraw their custom to the extent that it acts as a check
on the executive of the club, who relent and change tack.
39. This is flawed in football, because before
the shareholders are damaged, the club will be damaged (eg players
will be sold or not acquired, the facilities used by fans will
not be maintained) but before that point is reached, withdrawing
custom is simply antithetical to most fans' self-identity as a
supporter.
40. Indeed, there is a masochistic streak which
is often even more tolerant of poor management as to continue
to attend and pay money over is a sign of even greater fidelity
to the club.
41. As a result, club directors are to all intents
and purposes unaccountable, except when the mass base of supporters
becomes mobilised (as witnessed late last year at Liverpool FC).
Even when this happens, the damage is often already done to a
club, and the process of such confrontations is usually costly,
unproductive, unedifying and time consuming.
42. Ensuring that the public character of clubs
is recognised is not concern for company law designed to facilitate
efficient operations of private concerns.
43. The only stakeholder group to whom clubs
must respect are their regulators, but this is not a real power
those regulators have proven able to deploy in reality.
44. These are issues Parliament can remedy. It
need not do so by compulsion as in the Spanish case. It could
first legislate to provide a specific legal status.
45. That legal status could enshrine obligations
upon clubs registered to be owned in the UK, with full disclosure
of controlling entities. They would be required to hold open annual
meetings and publish full accounts and have stakeholder representation
on their boards. They would also be required to demonstrate their
activities each year which supported the community in their localities,
and called upon to account for those.
46. In return, they could be given special privileges
to provide protection from statutes relating to commercial activity,
such as allowing collective sale of pooled media rights, as they
would now be legally required to provide wider benefit as opposed
to this being a matter for voluntary consideration).
47. They could be exempted from VAT on ticket
sales, or perhaps investment in them attracted reliefs not available
to clubs registered as normal private companies. They could also
be given special rights in planning law to enable local authorities
to treat development issues differently, as well as being eligible
for rate reliefs, or stamp duty on asset transfers.
48. At a governing body level, authorities could
be invited to register to receive legal backing for their efforts.
If they were registered, they would be protected from challenge
on economic grounds as long as they could demonstrate the motivation
was sporting or social in purpose. This is essentially a codification
of the current precedent position in UK law, but once legislated
for would lead to greater confidence.
49. Registration would require the authority
to be subject to regular review to ensure its processes were sound
and its decision-making was fit-for-purpose, including ensuring
all stakeholders were represented fairly in its deliberations.
Government could link support for any governing body—such
as financial support or assistance with bidding and hosting tournaments—with
being a registered body, in order that the public interest can
be satisfied.
50. Having passed such a Sports Act, Parliament
would have given governing bodies the ability to act with greater
legal certainty (or to run the risk of not doing so at their own
choice) as well as ensuring that public support in given to institutions
in whom the public can have confidence.
51. Similarly, clubs can choose to acquire a
corporate form more suited to their status and so move away from
vehicles which have proven to ill-serve the responsibility of
clubs to take the needs of their stakeholders into account and
act as a sustainable enterprises within their communities and
within their sports.
January 2011
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