Leicester City have become the next team to be embroiled in the eye of a financial fair play storm.
The Foxes are currently second in the Championship having been relegated from the Premier League last season, but the top flight have now formally charged Enzo Maresca’s side with breaching their Profit and Sustainability Rules (PSR).
They have also been charged with failing to submit their audited financial accounts.
Leicester, who won the Premier League in 2015-16 in one of the great sporting shocks, have incurred heavy losses in recent years as part of a steady decline that took them from champions to relegation in seven seasons.
Why are Leicester facing punishment?
Leicester were relegated having suffered two significant losses in the seasons prior. In 2021-22 they lost £92.5m – more than Chelsea did in the 22-23 season, when they spent nearly £800m on transfers.
The Foxes also lost £31.2m in 2020-21 and £67.3m in 2019-20, although these two seasons have been annexed together due to Covid-19, meaning they count as an average £49.25m loss.
And so they have been charged with a PSR breach in the period 2019-2023, something they have said they are “extremely disappointed” about.
The EFL has also asked Leicester to submit a business plan to demonstrate how they would comply with their loss cap, which would be £83m between 2021-2024.
Leicester argued they did not have to do so are they were a Premier League club last season, which is when any current breach would relate to – the period 2019-2023. An independent club financial reporting panel (CFRP) ruled in Leicester’s favour, but the league are reportedly still intent on pursuing the Midlands side for potential punishment.
What are the possible outcomes?
Leicester may eventually end up being punished from both sides.
In the Premier League case they will almost certainly face a points deduction, which will likely be enforced ahead of their return to the top flight next season.
Given the scale of their current losses and the expected figures to follow, there is every chance their penalty could be even greater than Everton’s six-point deduction, which was for a breach of £19.5m over the £105m limit.
Both the Everton and Nottingham Forest cases have set the new benchmark for future PSR punishments, and if Leicester have lost more than £124.5m between 2019-2023, they may well face a harsher deduction.
The Forest report outlined that the Premier League believe a points deduction is the only reasonable penalty for breaching FFP, although harsher punishments like expulsion from the league are available for “major” breaches.
Nick De Marco KC, dubbed the “Lionel Messi of sports law”, has defended Leicester so far, as he did with Forest.
And relegation is hugely expensive for any side, although the club did sell both Wesley Fofana and James Maddison in the 2022-23 financial year.
While the EFL may not be able to punish Leicester this season, they may still be able to for the period 2021-2024.
However, as the Foxes are near the top of the Championship, any penalty would likely be financial, as the EFL will not have the power to enforce a points deduction in the Premier League – unless Leicester ended up being relegated again next season.
But Leicester are still in a position to avoid punishment from the EFL, as this financial year does not end until 30 June.
They can bring in further sponsorship and sell players. Kiernan Dewsbury-Hall has been the subject of Premier League interest, and would count as pure profit in accounting terms as he is an academy graduate.
When will Leicester’s PSR case be heard?
Unlike Forest and Everton’s cases this season, Leicester’s does not have to be resolved within three months, meaning there is currently no clear timeline.
In a statement, the Premier League said: “Leicester City were relegated to the EFL Championship prior to the introduction of the Premier League’s new Standard Directions, which prescribe a timeline within which PSR cases should be heard.
“Therefore, the proceedings will be conducted in accordance with a timetable to be set by the independent Commission, and its final decision will be published on the Premier League’s website.”
Why Leicester are threatening to sue the Premier League
While Leicester have argued they should not be punished by the EFL as they were not in the Championship for the relevant period, they also appear to believe they should not be punished by the Premier League as they are not currently in the division.
They have even gone so far as to threaten legal action in order to defend themselves.
In a statement, the club said: “Leicester City is surprised at the actions the Premier League has taken today.
“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.”
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