Player contracts: FFPR and loan deals: assessing ‘fair value’

By Will Deller


Eyebrows were raised when it emerged that Major League Soccer club New York City would be loaning Frank Lampard to Manchester City, as the two clubs share a common owner. William Deller, an Associate with Bird & Bird, examines how the ‘fair value’ of such deals between clubs that share a common owner are assessed under UEFA’s Financial Fair Play Regulations.

UEFA’s Financial Fair Play Regulations (FFPRs) have come under significant criticism in recent weeks and months, with those within the game arguing that the FFPRs, or the sanctions arising from breaches thereof, are either too severe1 or not severe enough2. In any event, and despite the unprecedented levels of spending seen in the most recent Premier League transfer window, it seems that the FFPRs do weigh heavily on the minds of Premier League managers and board members when planning a club’s transfer dealings. Take, for instance, the recent comments of Chelsea chief executive Ron Gourlay in the Evening Standard:

“This transfer window we have financed purchases from sales. This is definitely the first time. Now Chelsea have to chase the penny and work much harder across the business as a result of Financial Fair Play3.”

This means that whereas a decade ago perhaps David Luiz, Romelu Lukaku and/or Fernando Torres might have stayed on Chelsea’s books despite a big summer outlay, now it is the case that in order to bring in the likes of Diego Costa and Cesc Fabregas, sacrifices had to be made. Clubs are having to be clever about how they structure their transfer dealings, which constitute a significant proportion of most clubs’ expenditure and therefore form a crucial element of financial fair play. One way of doing this, outside the UK, is to use third party ownership structures: these are now becoming common (Portugal’s FC Porto were sole owners of the registrations to only seven members of their entire first team squad at the end of the 2012/2013 season4), although they could face a FIFA ban5. Another is to avoid selling or purchasing players: this summer has seen the rise of high-profile loan deals, such as those that took Fernando Torres to AC Milan, Radamel Falcao to Manchester United and Alvaro Negredo to Valencia6.

What about the loaning of players between ‘related parties,’ though? Take the loan of Frank Lampard from New York City (NYC) to Manchester City, which are related parties by virtue of having the same owner - City Football Group. This deal provoked criticism from a number of sources as being a means of side-stepping the FFPRs, most notably from Arsenal manager, Arsene Wenger7. So, was that loan legitimate under financial fair play? Let’s look first at some of the fundamentals of the FFPRs.

The FFPRs and the concept of breaking-even

First introduced in 2010, the FFPRs were brought in as a means of increasing financial responsibility across clubs competing in the UEFA Champions League and Europa League, amid concerns over soaring club spending and spiralling debts. The current 2012 edition of the FFPRs sets out a series of requirements that clubs must fulfil in order to avoid being sanctioned by UEFA, such sanctions ranging from a warning to disqualification from UEFA competition and/or removal of a title8.

Central to the FFPRs is the concept of the ‘break-even result’ (BER). In simple terms, a club’s BER is its ‘relevant income’ (which includes revenue from gate receipts, sponsorship deals, broadcasting and profits from player sales, among other things) less its ‘relevant expenses’ (including, for example, operating expenses, employee benefits, dividends, and amortisation or costs of acquiring player registrations, but excluding certain activities such as expansion of youth facilities and community projects) over the three-year period prior to the start of each season (a ‘monitoring period’). The aim is that income equals (or ideally exceeds) expenses (i.e. breaks even). However, an aggregate loss of €5 million is in fact permissible over the course of a monitoring period, and this can currently be extended to €30 million if club owners are willing to take further equity in the club to make up any shortfall. A failure to achieve an acceptable BER might be considered a breach of the FFPRs.

During the 2013/14 season, UEFA’s Club Financial Control Board (UCFCB) considered the first monitoring period to be assessed under the concept of the BER, which was an abbreviated monitoring period covering just the 2011/12 and 2012/13 seasons. In May 2014, it was announced that the UCFCB would impose sanctions on Manchester City and Paris St Germain (PSG), after discovering that they had failed to achieve an acceptable BER. Following settlement discussions with UEFA, Manchester City accepted a sanctions package including (among other things): a reduction in squad size for the 2014/15 Champions League down to 21 players, five of which have to be ‘home-grown’; a cap on wages and transfer spending; and a reduction in the club’s permitted losses to €20 million for the 2013/14 season and €10 million for the 2014/15 season9.

Related party transactions

Income and expense from ‘related party transactions’ are included in the calculation of a club’s BER and, broadly speaking, occur when two connected entities do business with one another. In the Lampard example, as NYC and Manchester City are both within the same group of companies and therefore constitute related parties, their loan deal for Frank Lampard is classed as a ‘related party transaction,’ and Manchester City must therefore account for it in calculating their BER. 

Annex X of the FFPRs (which contains the most important information regarding related party transactions) grants the UCFCB the power to adjust a club’s BER where that club has either overstated its income or understated its expenses from related party transactions. This is so as to prevent clubs from creating artificial transactions with their related parties at above or below ‘fair value’ as a means of circumventing the FFPRs. In the case of PSG, the UCFCB imposed sanctions on the French club because they felt that its £167 million sponsorship agreement with the Qatar Tourism Authority - which, like the club, is under the control of the Qatari state - had been agreed for a sum significantly greater than ‘fair value,’ thereby artificially inflating the club’s BER. Concerns were also raised about Etihad Airways’ £350 million sponsorship agreement with Manchester City for similar reasons10

The key question in assessing whether the loan of Frank Lampard from NYC to Manchester City could give rise to a breach of the FFPRs is, therefore, whether the deal was completed at ‘fair value.’ If not, then UEFA may adjust Manchester City’s relevant expenses upward, which will in turn negatively impact upon the club’s BER. Given that the aforementioned sanctions imposed on Manchester City for breaching the FFPRs included a reduction of its permitted losses, an undervaluation of the Lampard deal could leave Manchester City in a precarious position.

For example, if Manchester City was to hypothetically declare a loss of €9 million for the 2014/15 season, but was found by the UCFCB to have undervalued the Lampard loan deal by €2 million, then the UCFCB could adjust the €9 million loss down to €11 million to account for the undervalue, with the result that Manchester City would now have an unacceptable BER (having crossed the €10 million threshold in place for that season) and would be in breach of the FFPRs.

What is ‘fair value’?

Annex X(E) of the FFPRs defines ‘fair value’ as:

‘the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. An arrangement or a transaction is deemed to be “not transacted on an arm’s length basis” if it has been entered into on terms more favourable to either party to the arrangement than would have been obtained if there had been no related party relationship.’

If the UFCCB were to consider the Lampard loan deal, it would undertake a qualitative analysis of the deal in order to assess whether it was agreed at a fair value.

From Manchester City’s perspective, the club is securing the services of a player of Lampard’s ability and experience, and a ‘home-grown’ player (contributing to Manchester City’s minimum quota of five imposed by UEFA) for no fee and with no option or obligation to buy at the end of the deal. On the face of it, this may raise some concerns. However, given Lampard’s age (36) and consequent lack of resale value, he would be unlikely to command a significant fee in any event, and Manchester City will be covering his full wages whilst he is with the club, rumoured to be around £90,000 per week11.

In addition, the deal is a short one, from August through to January, and with NYC not joining Major League Soccer (MLS) until March next year, Lampard will miss no competitive games for them and will be able to maintain his fitness and match-sharpness ready for the new MLS season. Neither will Lampard be the first MLS player to be loaned out to a European club during the off-season. David Beckham famously enjoyed stints at AC Milan and PSG, whilst Landon Donovan went on loan twice to Everton in 2010 and 2012 and Thierry Henry returned to Arsenal for a brief spell in 2012, the London side reportedly covering his £70,000 weekly wage12. With this in mind, the Lampard deal is not breaking new ground and as his wages are being completely covered by Manchester City, it appears in many ways similar to the deal which brought Henry back to Arsenal.

Ultimately, without knowing all of the terms we cannot fully assess whether the Lampard loan deal was conducted at ‘fair value.’ However, the fact that Manchester City are covering all of Lampard’s wages, particularly given his age and that he will only be in England during the MLS off-season, makes it significantly more likely that the UCFCB would see this as a deal agreed on an arm’s length basis for fair value. Certainly, Manchester City would have greater difficulty in establishing that the deal was conducted at fair value if either it were only covering 50% of Lampard’s wages, he was 26 years old as opposed to 36, or he was loaned out half way through the MLS season. In any of those circumstances, the absence of a fee would raise concerns that the deal had been done on terms advantageous to Manchester City due to their ‘related party’ status, and the UCFCB may be more inclined to adjust the club’s BER accordingly.

The wider issue of feeder-club loans and the FFPRs

It is arguably inappropriate to describe the relationship between Manchester City and NYC as one between parent club and feeder club, as there is potentially a more obvious commercial than football rationale behind City Football Group’s foray into the MLS. One would imagine that increased brand presence on the ground in the US is more of a motive for investing in NYC than a desire to recruit from them. 

It is interesting, though, to consider how the FFPRs might impact on deals within more traditional feeder/parent club arrangements, if such deals can be classed as ‘related party transactions.’ Take for example Manchester City’s tie-up with Sporting Lisbon. In such a scenario, where the partnership between the clubs is more obviously intended to give Manchester City an advantage in recruiting talented players, it is possible that the UCFCB would be more ready to perceive an imbalance of power in the dealings between the clubs and judge that transactions resulting from the feeder club arrangement have been conducted below ‘fair value.’ As financial pressures increase and clubs continue to look for cheap sources of top talent, it will be interesting to see whether transactions between feeder and parent clubs increase, and the interplay between those transactions and the FFPRs.

William Deller 
Bird & Bird, London


This article was originally published in World Sports Law Report Volume 12 Issue 10, October 2014. You can access the original by clicking here.

1. ‘Harry Redknapp hits out at £40m financial fair play sanction,’ The Guardian, 12 September 2014. Available at:

2. ‘Jose Mourinho: Chelsea boss says FFP sanctions should change,’ BBC Sport website, 20 September 2014. Available at:

3. ‘The whole world respects Chelsea now, says chief executive Ron Gourlay,’ The Evening Standard, 16 September 2014. Available at:

4. FC Porto’s Annual Report 2012 - 2013, 26 November 2013. Available at:


6. For example ‘How Manchester United and Chelsea showed loaning is the new buying for Premier League clubs,’ City AM, 10 September 2014. Available at: ‘Manuel Pellegrini: Manchester City moved on Álvaro Negredo due to FFP,’ The Guardian, 12 September 2014. Available at:

7. ‘Arsene Wenger questions Manchester City’s motives for signing Frank Lampard on loan,’ The Telegraph, 3 August 2014. Available at:

8. UEFA Club Licensing and Financial Fair Play Regulations, Edition 2012. Available at:

9. ‘MCFC Financial Fair Play Statement,’ Manchester City official website, 16 May 2014. Available at:

10. ‘Manchester City and PSG at risk of sanctions over financial fair play,’ The Guardian, 2 May 2014. Available at:

11. ‘Manchester City midfielder Frank Lampard is no traitor - Chelsea didn’t want him any more, says Manuel Pellegrini,’ The Telegraph, 8 August 2014. Available at:

12. ‘Henry on verge of shock Arsenal return,’ ESPN website, 29 December 2011. Available at: