How Leicester City's landmark legal victory vs Premier League affects Leeds United in bid to avoid future points deduction — YEP 4/9/24

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By Joe Donnohue

Leeds United's promotion rivals last season Leicester City have succeeded with an appeal against the Premier League's allegation that the club breached Profitability and Sustainability Rules (PSR) during the three-year accounting period ending June 30, 2023.

The Foxes were initially charged by the Premier League for exceeding the maximum loss threshold of £105 million over a three-year period, which the club challenged. Their case was referred to an independent commission which ruled in favour of the league, however Leicester appealed this decision.

Subsequently, an independent appeals board upheld Leicester's appeal on the grounds that by the end of the relevant accounting period, the club had already been relegated and were no longer under the Premier League's jurisdiction, therefore could not be charged.

"The Appeal Board’s decision effectively means that, despite the club being a member of the League from Seasons 2019/20 to 2022/23, the League cannot take action against the club for exceeding the relevant PSR threshold in respect of the associated accounting periods," a Premier League statement read.

"If the Appeal Board is correct, its decision will have created a situation where any club exceeding the PSR threshold could avoid accountability in these specific circumstances. This is clearly not the intention of the rules."

Leicester were alleged to have breached PSR for the accounting period ending June 2023, by £24.4 million, but will now avoid a sporting sanction in the form of a points deduction following the appeals board's decision.

Had Leicester submitted their audited accounts for the financial year ending June 2023 a month earlier at the end of May, as had been the case a year prior, the outcome of their PSR dispute may have proven different. The club were within their rights to amend the submission date of their accounts, per section 392 of the Companies Act 2006, whilst complying with the requirement in the Premier League's Rule A.1.8 that the accounting reference date should be between 31 May and 31 July.

The Foxes' argument was that at the time the Premier League brought their complaint, nine months after relegation, the club were no longer under the league's jurisdiction and therefore not subject to their financial controls, because clubs are not bound to such rules 'in perpetuity.'

So, what does this mean for Leeds, who this summer are suspected to have sold Archie Gray for £40 million in order to abide by financial controls and stay within the bounds of PSR?

In short, Leicester's landmark victory has exposed a sizeable loophole in the Premier League's Profitability and Sustainability regulations. The Foxes have escaped a points deduction which, due to the scale of the breach and previous sanctions handed down to Everton and Nottingham Forest, would almost certainly have been the case, because they were technically no longer a member of the league bringing the charges by the end of the relevant accounting period.

It means if Leeds were to have breached PSR for the accounting period which ended this past summer, the Premier League could not have successfully brought a charge against the club, if the legal counsel hypothetically representing Leeds argued the organisation no longer had jurisdiction over the club, which is currently an EFL entity.

Of course, this does not mean the EFL could not bring a separate charge, however the issue of jurisdiction does muddy the waters somewhat for clubs yo-yoing between the top two divisions of English football. Given the Premier League's maximum loss threshold is calculated over a three-year period, should a team find themselves relegated or promoted midway through an accounting period, to whom are they answerable on matters of financial fair play: the Premier League or EFL?

The YEP understands Leeds are said to be surprised at the ruling.

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