The Court of Arbitration for Sport has released the motivations for granting Milan’s appeal against a Europa League ban, as well as the reasons for the initial ban.
The Rossoneri were barred from the competition by UEFA after Financial Fair Play breaches, having been denied both a voluntary agreement and a settlement agreement.
Much of that was due to doubts about owner Yonghong Li, but the CAS document lays out the scale of the mismanagement under the Chinese ownership.
On December 1 2016, the club first applied for a voluntary agreement, “projecting significant income to be generated from new commercial activities in China”.
On May 11 2017 a hearing was held in front of the adjudicatory chamber, where they were advised that the plan was unrealistic.
The following month Milan withdrew their request for a voluntary agreement, submitting a new one with a new business plan.
That new plan projected lower revenues from China to the tune of €100m, though still above the actual total for 2017-18 of €606,000.
On November 17 2017, the FFP committee requested that Li provide €165m of funding, as projected in the business plan, either by payment to an escrow account or in the form of bank guarantees.
That would ensure that at least that part of the business plan was met.
A letter sent to the Rossoneri is re-published in the motivations, noting that CEO Marco Fassone instead “provided a corporate guarantee letter from the entity Guangdong Lion Asset Management Co Ltd, a company based in China”.
Not only that, but the CFCB Investigatory Chamber didn’t receive any documents to prove that company had the necessary financial capacity or was even solvent.
As a result the second voluntary agreement was rejected, and the Diavolo were invited to a meeting to discuss a settlement agreement.
They were asked to provide: financial information for 2018, an updated business plan for 2019-2021, proof of refinancing of the loans from Elliott Management, and “recent development in respect of the Chinese and Asian markets”.
Milan submitted the necessary documents, which showed no revenue at all from China, and projections of €42m from that market by 2021.
The initial worst case scenario was €188m, while the second business plan projected €77m.
ON April 27 the Investigatory Chamber advised that it had “serious concerns” about the refinancing and the club’s ability to continue as a going concern until 2021.
In rejecting the settlement agreement, the Chamber noted losses of €121m and concluded “the size of the Club’s break-even breach is so high, that it is unrealistic to expect AC Milan to come into compliance”, as well as expressing doubts about refinancing and Chinese revenues.
The loans from Elliott also provided the ability to take over the club in October 2018 if they weren’t repaid “thus creating great uncertainty in respect of what would happen to the Club should its ownership change”.
While it was in Elliott’s interest to keep the club in operation, there was no guarantee it wouldn’t be sold immediately, or that any new owner would follow a business plan to break even with FFP.
UEFA also concluded that Li and his board had “ignored recommendations of the CFCB Investigatory Chamber to obtain new revenues before engaging in new transfers and making new investments”.
There were “major inconsistencies” in the business plans, of which there had been three in a year.
Under Li’s ownership there were “very serious doubts about the ability of the Club to continue as a going concern”, as he “refused to give own guarantees” and the shares were pledged to Elliott as collateral.
As a result, Milan were barred from the Europa League.
The hedge fund then forced Li out and appealed to CAS, also requesting the details of settlement agreements granted to Inter, Paris Saint-Germain and Manchester City, and the business plans submitted by those clubs.
Fiorentina asked to be involved in the case as an interested party, as they’d have replaced the Rossoneri in the Europa League, but that was rejected.
Milan submitted that they had informed the Adjudicatory Chamber that the club would be in a “materially improved financial position” if Elliott seized control, with a letter from the fund, and therefore that barring them from the Europa League based on the possibility of that was unfair.
They also pointed out that Inter, Paris Saint-Germain and Manchester City had been in “a worse break-even situation” when offered settlement agreements.
The club therefore asked that UEFA be forced to grant a settlement agreement, that their Europa League ban be reversed and that the governing body pay the costs.
UEFA countered that Milan’s case was “not comparable” to the other clubs, and that as well as break-even requirements they also looked at “the business plan presented by a club, the trend in the club’s annual break-even results, the going concern chances and all other evidence available”.
In its judgement, CAS described the Diavolo’s contention that settlement agreements are designed to help a club break even, and thus denying one harmed Milan as “simply not convincing”.
The contention Milan had been discriminated against was “not persuasive” despite the accounts from the other clubs, but UEFA “did not completely comply” with an order to produce said accounts.
It therefore could “not be excluded” that other evidence may have shown unequal treatment though if there had “this would not render the decision illicit”.
The reason Milan won their appeal is that UEFA’s decision to disregard the third business plan was “rather questionable”, despite legitimate doubts from expert witnesses.
The decision from the Club Financial Control body didn’t “sufficiently challenge” the assumptions made in the plan.
The mere fact of Milan submitting three plans in a year was not viewed to be sufficient to reject the latest plan “without analysing its substance”.
Furthermore, the status of the ownership had “significantly changed” since Elliott took over, so the club’s “situation with respect of the refinancing of the debts has significantly improved”.
The decision of the CFCB Adjudicatory Chamber was found to be correct in terms of Milan’s breach of FFP, but the sanction had to be revised in light of the new facts.
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