Leicester City’s bid to avoid any potential punishment for an alleged breach of the Premier League’s profitability and sustainability (PSR) rules has been dismissed by an independent commission.
In March, Leicester were referred to an independent commission by the Premier League for an alleged breach of PSR rules for the three-year reporting period ending in 2022-23, which saw the club relegated to the Championship after a nine-year stay in the top flight. Leicester subsequently questioned the commission’s authority to hear the case.
An official challenge was made “on the basis that it is no longer subject to or bound by the PSRs because it was relegated to the EFL at the end of the 2022-23 season and the alleged breaches of PSR occurred after it was relegated”.
The club argued “the Premier League has no power to bring the complaint and the commission has no jurisdiction to adjudicate it”.
A Premier League statement on Thursday said the independent commission had “dismissed” the challenge. Leicester said they would be appealing the decision.
A statement from the east Midlands club said: “LCFC notes the publication today of the decision of the Premier League Commission. The Club is disappointed with the decision, which does not appear to reflect the wording of the Premier League’s Rules, and has lodged an appeal.”
Leicester recorded a pre-tax loss of £89.7million ($113m) in their 2022-23 accounts, and this came off the back of a record £92.5m loss for the financial year ending May 31 2022 and a £31.2m loss for the previous year.
The club had said following their referral to an independent commission that they were “extremely disappointed” at the decision, adding that they have “repeatedly demonstrated its commitment to the P&S rules through its operating model over a considerable period”.
Had Leicester avoided relegation, the 2016 Premier League champions would almost certainly have been in the same situation as Everton and Nottingham Forest last season, both of whom were deducted points for PSR breaches during the reporting period ending in 2022-23.
Everton had a 10-point deduction reduced to six points relating to a PSR breach from the reporting period ending in 2021-22 before being handed a further two-point deduction over breaches during the reporting period ending in 2022-23. Forest were given a four-point deduction for breaches during the latter reporting period.
PSR assessments are usually based on a rolling three-year basis, with Premier League clubs allowed to lose a maximum of £105million ($134m) over the period.
Earlier in March, it was confirmed Leicester remained at risk of a PSR breach during the 2023-24 despite an independent panel ruling the club did not have to submit a business plan to the English Football League (EFL).
The club said in March they had issued legal proceedings against the Premier League and the EFL amid their alleged PSR breach.
The then Championship side had been placed under a player registration embargo by the EFL, which they said was “both restrictive and premature, with more than a quarter of the club’s 2023-24 reporting period remaining”.
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How did we get here?
Leicester recorded record losses of £92.5m for the financial year ending May 31 2022. This came on the back of a £31.2m loss for the previous year and £67.3m for the year ending May 31 2020, but as PSR work in a three-year cycle, that is removed.
Leicester did not secure any income from European football in 2022-23 and dropped from eighth in the Premier League table in 2022 to 18th in 2023, which equates to a loss in merit payments of about £30m.
They did bank two large transfer fees in the 2022-23 financial year with the sales of Wesley Fofana to Chelsea and James Maddison to Tottenham Hotspur.
Leicester then sold Harvey Barnes, Timothy Castagne and George Hirst after the 2022-23 PSR deadline last summer, bringing in more than £50m, but they also spent over £20m on new signings and held onto several high earners.
What are profit and sustainability rules?
All Premier League clubs are assessed for their adherence to the competition’s profitability and sustainability rules each year.
Their compliance with said rules is assessed by reference to the club’s PSR calculation, which is the aggregate of its adjusted earnings before tax for the relevant assessment period.
Under the PSR, clubs are allowed to lose a maximum of £105m over three seasons (or £35m a season) but certain costs can be deducted, such as investment in youth development, infrastructure, community and women’s football.
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There were also specific allowances relating to COVID and, to help clubs, the league combined the two pandemic-hit seasons into one, turning the three-year accounting period into four years.
Championship clubs are permitted to record losses of £13m per season.
Have there been any other cases like this?
Leicester are just the fourth club to face action like this, following Everton’s two separate breaches and subsequent points deduction this season, while Manchester City were hit with more than 100 charges last February.
The outcome of City’s case has not yet been communicated, with The Athletic reporting that a verdict — which would be subject to appeal — likely to take considerable time to be reached.
Last year, Chelsea’s new owners self-reported incomplete financial information related to transactions that took place during the stewardship of the previous owner, Roman Abramovich, between 2012 and 2019.
European governing body UEFA fined them €10m for the historical breach in July while the Premier League and English FA are continuing to investigate.
There have been several precedents in the English Football League in recent years, but a punishment relating to breaches of PSR in the top tier of English football was unprecedented before Everton.
In fact, on only two other occasions has a club been handed a points penalty in Premier League history.
Middlesbrough were docked three points for failing to fulfil a fixture in the 1996-97 season while Portsmouth were hit with a nine-point penalty in January of the 2009-10 campaign after going into administration.
(Plumb Images/Leicester City FC via Getty Images)
