The judgment is public – at last. Almost three months after Saracens Rugby Club (“Saracens”) were punished for breaching the Premiership Rugby Salary Cap Regulations (the “Regulations”), Premiership Rugby (“PRL”) has released the full written decision (the “Decision”) of the Independent Disciplinary Panel (the “Panel”) that imposed the sanctions.

This was only after clamour from the rugby public and media, as well as one of the members of the Panel – Lord Dyson, a former Master of the Rolls. There was also the very public disagreement between PRL and Saracens about who had been keeping the Decision confidential in the first place. The answer? Neither of them – or both, depending how cynical you are.

Of course, under the Regulations, all proceedings are supposed to be confidential (Regulation 16.1). Yet the public interest and the importance of transparent sports governance (see here) mean that there was always a strong case for it to be published. In the end, Saracens and PRL agreed – but not before sensitive details were leaked to the media. The whole episode has been a mess from start to finish. Lest we forget, Saracens have also been relegated in the meantime, for reasons which remain unclear.

Until now, my analysis of this case (see Parts I-IV here) has been somewhat speculative, relying on media reports and the small amount of information given by PRL. Much of what I have written remains valid, but this article will aim to provide some clarity. It will examine the Decision in detail, considering each of the charges and analysing the sanction imposed, critiquing elements of the Decision where appropriate. It will also comment on the way in which the Regulations were interpreted and, briefly, on the Competition law issue raised.

Overall, the Decision appears legally accurate and well-reasoned. Nonetheless, it is possible to have some sympathy for Saracens. Much of the media reporting has been vilifying of the club and, though certain transactions do appear some way below board, there are others over which Saracens may well feel aggrieved.

The Charges

On 20 June 2019, Saracens were charged, pursuant to Regulation 12.1 of the Regulations, with breaches of Regulations 3 and 11.1 in two Salary Cap Years (“SCY”) – 2016/17 and 2018/19 – by Andrew Rogers, the Salary Cap Manager (“SCM”).

Regulation 3 prescribes the “Senior Ceiling”: the total amount of Salary Premiership clubs may pay their senior players in each SCY. Regulation 11.1 provides that, where the Senior Ceiling is exceeded by 350,000 (£325,000 in 2016/17) or more, the breach must be handled by a disciplinary panel. A breach of less than £350,000 is dealt with by way of the “overrun tax” (discussed in Part I), under Regulation 10.

SCYs run from 1 July to 30 June, while the SCM is the person nominated by PRL to be the principal point of contact for the Premiership clubs on the operation of the Regulations (Regulation 1.1).

In 2016/17, the Senior Ceiling was £6,000,000, and Saracens were charged with exceeding that amount by £1,134,968.60 (paragraph 4 of the Decision). In 2018/19, when the Senior Ceiling was £6,400,000, Saracens exceeded it by £906,505.57 (para 5).

In 2017/18, the SCM charged Saracens with exceeding the limit by £140,249.80 (para 6). This was dealt with as an “Overrun” (Regulation 10).

In addition, Saracens were charged with failing to co-operate with the SCM, in breach of Regulation 4.4, in four consecutive SCYs from 2015 to 2019 (para 7).

The Panel further noted that Saracens were previously charged with a failure to co-operate with an Investigatory Audit, and that those disciplinary proceedings were settled in September 2015, with Saracens accepting a sanction (para 9).

The Competition Law Challenge

Saracens primary line of defence was that the Regulations breach Competition law, are “illegal and thus void and unenforceable” (para 12). This argument was one they had also run in the 2015 proceedings. It was rejected by the Panel.

The club argued that the Regulations have (i) an “anti-competitive object” and/or (ii) an “appreciable anti-competitive effect” under Art.101(1) of the Treaty on the Functioning of the European Union (and the equivalent UK legislation). Given that the legality of salary caps has not previously been tested judicially – or even quasi-judicially – this is a significant point of law and demands a detailed article of its own. For current purposes, a summary of the Panel’s reasoning will suffice.

Object

On the first question, the Panel found the Regulations (which both parties agreed were a “decision by an association of undertakings” – Art.101(3)) did not have an “anti-competitive object” (para 51). Saracens cited no authority “in which a regulation akin to a salary cap was held to be an object infringement” (para 32) and none of the objectives of the Regulations “can reasonably be described as having the purpose of restricting competition” (para 34). Indeed, these objectives include “ensuring a competitive Gallagher Premiership competition” (Regulation 2.2(d)).

Thus, the Panel considered the Regulations’ objectives to be “consistent with EU law” (para 34). It referred frequently to the Queen’s Park Rangers v English Football League case, where financial stability was recognised as a legitimate objective of football’s Financial Fair Play rules (para 35), and the Bosman decision, which considered “competitive balance” a legitimate aim of football transfer rules (para 36). As such, the Panel rejected Saracens’ submission that the salary cap inherently restricts the ability of clubs to compete for players’ services.

Saracens further argued that the Regulations were void because they were not the product of collective bargaining. Again, the Panel dismissed this submission as, though collective bargaining agreements may fall outside the scope of Art.101(1) (Albany [1999]), it does not necessarily follow that other agreements on salaries must be restrictive by object (para 40). The Panel also considered the “margin of appreciation” given to the organisers of sports competitions in EU law (e.g. Meca-Medina [2006]) as a reason to find in favour of PRL on this point (paras 44-46).

However, the “final nail in the coffin of Saracens’ case on object” was the “candid acceptance” by Saracens’ owner and former CEO of the desirability of the salary cap (para 50). Though they disagreed with the way in which the current Regulations operate, both Nigel Wray and Mitesh Velani accepted that “there should be a salary cap” (para 49).

Effect

On the question of effect, the Panel held that the Regulations have operated and continue to operate “in a pro-competitive manner” (para 106) and, thus, do not have an “appreciable adverse effect on competition” (para 105).

Here, the Panel criticised Saracens’ approach, finding their evidence “decidedly limited” (para 60). It was particularly critical of the fact that Mr Velani’s witness statement had “largely been copied verbatim from a statement made by Mr Edward Griffiths, a former CEO of Saracens” during the 2015 proceedings (para 60).

First, the club had to establish what the “relevant market” was. Saracens purported to argue there was a market for the services of English qualified elite players or, in the alternative, a worldwide market for elite players. The Panel agreed with PRL’s expert that there was no empirical evidence to support the existence of such a market (paras 73-82), something it deemed “unsatisfactory”, given it was a “central plank” of the club’s argument.

Second, Saracens needed to show an appreciable anti-competitive effect. The club’s suggestion that the impact on competition could be seen in its reduced ability to compete on the pitch, particularly in European competition, was given short thrift, due to its “tremendous” recent success (para 86) – though perhaps this might have been more successful had Saracens admitted breaching the salary cap.

Moreover, to determine an anti-competitive effect, the club had to show what would otherwise have happened in the absence of the salary cap, in line with Mastercard [2014] and Racecourse Association v Office of Fair Trading [2005]. Saracens tried to argue that, without the salary cap, there would have been unfettered competition for players. However, the Panel found that there would still have been “some other form of financial self-discipline” (para 101). This was particularly so because:

“Clubs are principally motivated by a desire to win and retain PRL membership, not by a desire to make profits (as evidenced by their continuing loss-making). Absent a restriction on player salaries, there would be a rapid return to player costs spiralling out of control as clubs outbid each other to secure the best players, which would in turn lead to some clubs folding.” (para 99)

In light of this, the Panel held that, without the Regulations, clubs would “remain restricted as to the amount they could spend on salaries” and, therefore, the Regulations cannot be said to have an “appreciable adverse effect on competition” (para 104).

Hence, Saracens’ Competition law challenge failed.

Interpreting the Regulations

Before considering the individual breaches, it is important to address the way in which the Panel interpreted the Regulations – in particular, the role of the Panel, and the interpretation of paragraph 2(a) of Schedule 1.

Where a charge is contested by a club, the Panel’s role is to resolve the dispute – that is undisputed. However, Saracens’ interpretation of the Regulations was that the Panel is required to decide for itself (“de novo”) what should be considered Salary, while PRL considered that the Panel should simply exercise a “review function” (para 126) over the SCM’s decisions.

Under para 2(a), payments or benefits in kind to players from Connected Parties may be excluded for the purposes of determining total Salary where the SCM “reasonably concludes on the balance of probabilities” that these “arrangement[s]” should not be considered Salary. Para 2(a) then lists 16 factors which the SCM will take into account in arriving at his decision (see Part I). This provision was crucial to determining whether Saracens had breached the Regulations and, thus, was the primary battleground over which this point of interpretation was fought.

The Panel held in favour of PRL, placing emphasis on the SCM’s discretion under para 2(a). In contrast to the other provisions of Schedule 1 which are objectively ascertainable, para 2(a) requires “an exercise of judgment on the part of the SCM”, involving a “balancing” of the various relevant factors (para 132). Notably, para 2(a)(xvi) states that the SCM may consider:

any other matter that, in the opinion of the Salary Cap Manager in his absolute discretion, ought to be taken into account (Emphasis added)

The Panel accepted that the application of para 2(a) is something “on which opinions can reasonably differ” (para 134) and, therefore, held that:

The judgment of the SCM can only displaced [sic] by the Panel if it was one which was not reasonably open to him, even if the Panel might have reached a different conclusion if it were deciding the matter de novo for itself

This is an inherently deferential test, and one which preserves the authority of the SCM. It is a test akin to that which is applied in judicial review to decision-makers within the realm of public law, often predicated on the basis of “institutional competence” – i.e. the idea that the decision-maker is better placed than the judiciary to make the decision due to its expertise. It seems an appropriate approach to adopt here, given the relative expertise of SCM and, in any event, because of the Regulations’ wording.

The Breaches

Having established the validity of the Regulations and their proper interpretation, the substantive breaches shall now be examined in turn.

SCY 2016/17

The breaches in SCY 2016/17 concerned property co-investments with players by Connected Parties of Saracens, and payments for alleged promotional appearances. The alleged overspend was disputed in full by Saracens.

The Property Co-Investment Companies

According to the leaked information and the Decision, Mr Wray entered property co-investments with the Vunipola brothers, Maro Itoje and Richard Wigglesworth, by way of Joint Venture Companies (Vuniprop Limited, MN Property Solutions Ltd and Wiggy9 Investments Limited). These companies are owned jointly by the players and Wray, and each co-investment was established by way of a formalised Joint Venture Agreement.

In each case, the player provided 2/3 and Nigel Wray 1/3 of the finance required to purchase a property, as follows (paras 154-155). The company purchased a property as an investment (not to be lived in) and entered a mortgage for 2/3 of the purchase price. The mortgage was personally guaranteed by the players, and the mortgage instalments paid out of rent received.

Mr Wray then made an interest free loan to the company (the “Capital Contribution”), which the company used to pay the remainder of the purchase price. Funding was also loaned by Wray to the company for improvements (the “Capex Funding”) – to which the players did not contribute.

Upon sale of the property, the mortgage is repaid first, followed by the Capital Contribution loan and, lastly, the Capex Funding loan. Any residual proceeds of sale are then distributed to the shareholders of the company pro rata to their shareholdings.

As the Panel explained, “the effect of these arrangements is that, once the mortgage has been discharged, the Player’s risk ceases” (para 156). The player is only personally liable for the mortgage. It is the company that is liable to Wray in respect of the Capital Contribution and Capex Funding loans. Therefore, if the property dropped in value, the player would only be personally liable in respect of any amount outstanding on the mortgage. As the Panel noted, there would need to be a “significant drop in value” for this to happen (para 156). Realistically, it is Wray who bears the risk of suffering loss.

The Panel then considered whether these co-investments were, in fact, Salary under the Regulations and, therefore, had to count towards the Senior Ceiling.

Mr Rogers classed the Capital Contributions as Salary under Schedule 1 para 1(d):

[a] loan pursuant to which the Player…is not obliged to repay the full sum advance [sic] in the Salary Cap Year in which the loan is made

Saracens accepted this but contended that the co-investments were also “individual arrangement[s]” under para 2(a) that, on a proper application of the factors referenced above, should have been excluded.

The Panel referred to the SCM’s balancing of the para 2(a) factors (para 163) and the fact that, without para 1(d), clubs could loan money to players on the informal understanding that the club would never seek its repayment (para 164). It was particularly relevant that the arrangements were with Connected Parties of Saracens (factor (i)) and were not “negotiated at arm’s length from the Club” (factor (ii)). There was no evidence, however, of a “temporal connection” between the arrangements and the players’ playing contracts (para 167), but they were not on typical commercial terms, given the absence of risk for the players (factor (ix)), making them more likely to be Salary. The fact that there were similar arrangements for several players (factor (xii)) supported Mr Rogers’ conclusions (paras 172-173).

Under the broad discretion in para 2(a)(xvi), the other relevant considerations of the SCM were:

(i) The arrangements were concealed from him…[in breach of] Regulation 4.4;

(ii) In view of the difficulty of policing whether a loan has been repaid in the long term, there are clear and significant policy reasons for prohibiting loans in their full amounts;

(iii) The…arrangements have been entered into only with certain Players at Saracens. This selective approach is not consistent with Saracens’ stated rational that the arrangements concern…long term career support…

(iv) The timing of the incorporation of more than one [company] is not suggestive of an organic idea originating from a Player, but rather of a scheme entered into by Saracens with certain key Players.

The Panel concluded that Mr Rogers was “not only reasonably entitled, but right, to take [this] view” (para 183): the factors suggesting the Capital Contributions and Capex Funding were Salary heavily outweighed those suggesting they were not.

Saracens contended there was no “transfer of value” because the benefit of the loans was “off-set by the dis-benefit of the obligation to repay” (para 181) but the Panel disagreed, placing weight on the policy reasoning referred to above. This must be correct: if Saracens’ argument held true, no loan could ever be classed as Salary because there is always an obligation to repay. That does not change the fact that the player has benefit from having the money for a period of time, and that future repayment cannot effectively be policed by the SCM.

Analysis

That these co-investments are considered Salary seems entirely appropriate and the fact that they were concealed from the SCM makes it difficult to have any sympathy for the club. However, the fact Mr Wray has other similar co-investments with players “where the money is invested directly in the property”, which are “not treated as Salary by Mr Rogers”, does at least raise an eyebrow (para 169). The only material difference between the Capital Contributions and these other co-investments appears to be the reduced risk for the player of the joint venture structure. Indeed, some have suggested that this alternative mechanism may simply have been more tax efficient for Mr Wray.

The Panel considered it unnecessary to express a view on whether there was a “concerted and deliberate attempt to create structures that supposedly take that reward outside the ambit of Salary” (para 170) but, given the existence of similar and accepted co-investments, this suggestion seems doubtful. Nonetheless, the club was undoubtedly negligent in failing to disclose the arrangements or seek the SCM’s approval.

Option to Purchase

Further to the co-investments, the 2016/17 charge concerned an option to purchase granted by Mr Wray to a Saracens player.

Wray purchased a property for £655,000 and, at the time, granted an option to purchase 50% of the property to the player for £341,818.79 plus 50% of any money that was spent on the property going forward (para 189). This right could be exercised at this price at any time – even if the value of the property had increased.

Subsequently, Mr Wray granted a tenancy to the player, allowing him to live in the property with his partner for a monthly rent. The player spent £38,744.71 on improving the property before it was then sold for £770,000 in SCY 2017/18. At this point, the player exercised the option to purchase at the agreed price (paras 191-193). After deducting the costs of sale, the player received £32,994.52 from Wray which, accounting for the amount spent on improvements, meant the player made a loss of £5,780.19 (para 194).

In SCY 2016/17, Mr Rogers valued the option as £23,950 and considered that this should be considered Salary under Schedule 1, para 1(p):

any payment or benefit in kind which the Player would not have received if it were not for his involvement with a Club

He also considered that the £32,994.52 should be considered Salary in SCY 2017/18, albeit that this could be set off against the £23,950 – leaving a sum of £9,044.52 to be included as Salary that year (paras 199-200).

Saracens argued these sums ought not to be considered Salary because the player “did not profit” from the agreement (para 201). The club contended it was wrong to ignore the sums spent on improvements, and only to consider the property’s increase in value.

The Panel disagreed. It, again, emphasised the policy reasons which support the approach taken by the SCM – that Mr Rogers must determine Salary within each SCY and cannot therefore adopt a “‘wait and see’ approach” (para 203). The Regulations would be ineffective if the SCM had to wait until long after the end of the SCY before determining Salary – particularly in cases where players subsequently leave the club. Therefore, the Panel agreed with Mr Rogers’ interpretation, adding that it was, in any event, an approach he was “reasonably entitled to adopt”.

Nonetheless, the Panel showed some empathy to Saracens, accepting the club was right to say that the SCM’s approach is liable to produce results which are “commercially unreal” (para 204). This is a complex issue in respect of which Saracens ought not to be condemned too harshly. That said, there was clearly a lack of transparency (see para 195).

MBN Promotions

The third and final issue related to an agreement between Maro Itoje and MBN Promotions (“MBN”).

MBN is a hospitality business owed by Nigel Wray’s daughter, Lucy, and her husband. Lucy has been a director of Saracens since July 2018 and, as of March 2018, MBN assumed responsibility for all commercial aspects of Saracens (paras 206-207).

In SCYs 2016/17, 2017/18 and 2018/19 respectively, MBN paid sums of £30,000, £30,000 and £35,000 to Itoje under a purported agreement for the player to appear at corporate hospitality events (para 208).

However, no copy of the agreement said to have been entered into was disclosed by the club, and no evidence was provided to show that the player had, in fact, attended any MBN events (para 209). (For what it’s worth, a quick google search showed that Itoje had attended an MBN pre-World Cup event on 22 May 2019).

The club accepted that, as MBN was a Connected Party of Saracens, the payment should have been disclosed to Mr Roger – it was an “oversight”, for which the Mr Wray and Mr Velani apologised (para 209).

The club further accepted that the payments all fell to be considered as Salary under para 1(j) of Schedule 1 – “any payment in connection with promotional, media, or endorsement work”. However, Saracens argued these ought to have been excluded under para 2(a) because they were “arm’s length commercial transactions made by an independent party” (para 211).

Mr Rogers disagreed and explained in his evidence how he had considered the para 2(a) factors and found the payments to properly be Salary (para 213). He placed particular weight on the fact that MBN is a Connected Party of Saracens and has “extremely close connections” with the club (factor (i)) – indeed, MBN has its main premises at Saracens’ Allianz Park. Moreover, the absence of a written contract was “most unusual” and ran counter to the suggestion that the arrangement was negotiated at arm’s length (factor (ii)).

The SCM also noted there was a temporal connection between the first payment and Itoje’s new playing contract (factor (iii)), and that the remuneration was paid as a lump sum, rather than upon performance of services for MBN (factor (viii)) – which was “unusual”. Lastly, Mr Rogers took the view that the sums paid by MBN exceeded the market value for the services provided by Itoje to the company – a conclusion reached by making comparisons with sums paid to other players by MBN (factor (xv)). The foregoing all makes the payments more likely to be Salary.

Under his discretion in para 2(a)(xvi), the SCM added that the arrangement was concealed and that, given the closeness of the relationship between MBN and Saracens, one would expect Saracens to be able to show how this was a genuine agreement (para 214). They were entirely unable to do so.

The Panel held that Mr Rogers’ conclusion “fell within the range of reasonable decisions” and that, in any event, they would have reached the same conclusion themselves (para 219). It is impossible to disagree on the facts as they have been presented. Indeed, this appears to have been a deliberate attempt to circumvent the salary cap – though the Panel did not say as much.

As such, the MBN payments in 2016/17, 2017/18 and 2018/19 all counted towards the Senior Ceiling in their respective SCYs.

SCY 2017/18

In respect of SCY 2017/18, there were three transactions in issue. The first was the exercise of the option to purchase already discussed; the second was a further £19,000 of Capex Funding held to be Salary in line with the earlier discussion; and the third related to a 20% stake held by Mr Wray and another Saracens director in England winger Chris Ashton’s home.

In 2015, Ashton jointly purchased a property with Mr Wray and Mr Silvester (a director of Saracens) in which he was to live with his partner. Mr Wray and Mr Silvester each provided 10% of the purchase price and 10% of the costs of purchase. The remaining 80% was provided for by Ashton by way of a mortgage, and some cash (paras 226-227).

In SCY 2015/16, the arrangement was disclosed to Mr Rogers and it was determined that the player had been provided with a benefit to be classed as Salary under Schedule 1 para 1(g) (accommodation) and para 1(p). The benefit was calculated as 3% per annum of the 20% of the price not paid by Ashton – a sum of £8,100. Saracens did not challenge this (para 229).

In 2017, when Ashton left Saracens to play for Toulon, the player agreed to buy out Mr Wray and Mr Silvester’s shares (paras 233-234). According to the terms of a Supplemental Deed, the buy-out was to be structured in monthly payments of £13,500, with the interest in the property passing upon the payment of the final instalment. The first instalment was paid in accordance with the agreement, but Ashton then ran into problems – reportedly due to difficulties in being paid by Toulon (paras 235-236).

Wray and Silvester agreed to a short delay in the repayments, before Ashton paid the outstanding amount in 2018 (para 236) – reportedly with the help of Sale Sharks (his new club).

As a result of this delay, Mr Rogers considered that there had been a payment of Salary of £319,600.76 (the amount owing to Wray and Silvester) in SCY 2017/18 (para 237) because a benefit in kind was provided to an Ex-Player (under Schedule 1 para 1(s)). The reasoning was that Chris Ashton benefited from receiving property worth £319,600.76 “without having to pay for it during the period of deferment of payment of the price” (para 246). Saracens tried to argue that this had been a commercial arm’s length transaction with interest, but it was clear from the Supplemental Deed that this was not the case.

The Panel concluded that, although it “may seem unrealistic and even unfair” to class the whole £319,600.76 as Salary in SCY 2017/18, Mr Rogers was right to do so. Again, it was important that the SCM must determine Salary within a particular SCY “without reference to future events” (paras 247-248) – the subsequent repayment by Ashton once he was at Sale Sharks was irrelevant.

Analysis

This approach is consistent with the rest of the Decision but does feel somewhat harsh, given that Saracens in no way benefited from the delayed repayment. It is worth noting, though, that without the deferment, the repayments were structured over a period of 24 months, so half of the amount owed would, on the SCM’s reasoning, have been classed as Salary for SCY 2017/18 in any event.

However, there seems to be a further inconsistency. In SCY 2015/16, the 20% contribution by Wray and Silvester was deemed Salary. However, it was valued at a rate of 3% per annum – it was not dealt with as a single lump sum. Future events must have been taken into account in valuing the benefit given to Ashton in that SCY. Yet, when the time came for Ashton to buy out the 20% stake, it was treated as a single lump sum of Salary. The actual benefit to the player from the initial purchase and throughout the period of deferred repayment remained the same – i.e. he received property without having to pay for it – albeit that he started to buy some of it back.

It is suggested that this is inconsistent. Either the whole initial 20% contribution should have been considered Salary in 2015, or the benefit received under the Supplemental Deed should have been apportioned pro rata. This was not a point raised by Saracens’ lawyers, but it may well give the club grounds for dissatisfaction.

SCY 2018/19

With regards to SCY 2018/19, Saracens admitted an “overrun” of £48,636.89 which, under Regulation 10.3, allows them to voluntarily pay the “overrun tax” (para 249). However, the overspend alleged by PRL was mainly attributable to overpayment of £800,000 by Mr Wray, Mr Silvester and Mr Leslau (all Connected Parties of Saracens) for 30% of the shares in Maro Itoje’s image rights company (para 250).

The idea for the investment came from Itoje’s accountant and, in negotiating the purchase price, the investors used an independent valuation from accounting firm PwC (para 252). This led the investors to pay £1.6 million for the 30% stake.

Mr Rogers considered the purchase to be a genuine transaction but determined that there had been an overpayment of £800,000 – which therefore fell to be treated as Salary, as it was a payment to a player by a Connected Parties for which they effectively received no commercial benefit. The SCM determined this overpayment by obtaining a valuation of his own, which valued the 30% stake at £800,000 (paras 253-254).

Mr Wray gave evidence that they considered £1.6 million to be a good price – albeit that there were risks involved (para 255), and Saracens argued that the payment should not have been considered Salary, on a proper application of the Schedule 1 para 2(a) factors.

Mr Rogers gave weight to the fact that the arrangement was with Connected Parties and not at arm’s length from the club, while it was also negotiated at about the same time as Itoje signed a new playing contract (factors (i)-(iii)). These suggested the arrangement was Salary. He also considered it was not on typical commercial terms due to the overvaluing (factor (ix)), although there were no similar arrangements with other players (factor (xii)). The concealment of the arrangement was also relevant (factor (xvi)).

The Panel considered the key question to be whether “it was reasonably open to Mr Rogers to decide that the shares were overvalued” by £800,000. It considered it was “not for the Panel to substitute its [own] valuation”.

The SCM disputed the PwC valuation, stating that the basis for it was incorrect, particularly as it did not quantify the risk of injury or loss of form (paras 258 and 265), though Mr Wray suggested he had not truly relied on it. Yet the valuation obtained by PRL was not challenged by Saracens – PwC was not called to give evidence in support of its valuation, nor criticise that of PRL. As such, the Panel concluded that Mr Rogers was “reasonably entitled” to rely on the valuation he obtained (para 266).

It was also insinuated by PRL that the investors “knowingly and fraudulently” (para 267) overpaid for the shares to compensate for the fact that Itoje was being underpaid in his ordinary Salary. Saracens contested this allegation strongly, as it was not put squarely to the investors in cross-examination, and there was no other evidential foundation for it (para 268). The Panel thought there was “force” in Saracens’ defence and, ultimately, found it unnecessary to determine the point because the SCM was in any event entitled to treat the £800,000 overpayment as Salary on the basis of the valuations discussed above (para 269).

The Panel held that Mr Rogers was reasonably entitled to conclude that there was an overpayment of £800,000 and that this should be treated as Salary. They emphasised that they did not “find that the market value of the shares was in fact £800,000”, but that it was a reasonable conclusion in the circumstances, given the SCM’s “margin of appreciation” (para 270).

Analysis

It is here that the Panel’s interpretation of the SCM’s discretion comes into focus most clearly. On one hand, it seems appropriate to give a broad discretion, as “valuation is not a science” (para 262). Yet, as will be seen below, the exact amount of Salary overspend goes to the amount of the fine that is payable. Thus, on the question of valuation, there is arguably a need for greater scrutiny. A wide margin of appreciation may not be appropriate.

However, blame for this position ought not be placed on the Panel. It seems extraordinary that Saracens’ legal team would not seek to challenge the valuation obtained by PRL in any way. Had they presented cogent evidence explaining why PRL’s valuation was wrong, and why their own valuation was reasonable, they might have been able to persuade the Panel that the SCM had acted unreasonably. Yet they did not.

This is most surprising – particularly given that £1.6 million for 30% of Maro Itoje’s image rights does not seem disproportionate. Itoje is 25 years old and probably the single most marketable English rugby player of his generation. Barring injury or tragedy, he will inevitably grow in stature as one of the finest players in the world and, in all probability, still has his best rugby ahead of him. He has the chance to compete in two more World Cups and may well play professionally for another 8 to 10 years, given his good injury record to date. If 30% of his image rights are worth £1.6 million, 100% of his image rights are worth £5.3 million. On a superficial analysis, that does not seem at all unreasonable.

Given the lack of evidence suggesting Itoje was otherwise underpaid, it may be that Saracens have been unduly punished in this regard; though it is their legal strategy which would be to blame.

The Sanction

Having determined that Saracens exceeded the Senior Ceiling in each SCY between 2016 and 2019, the Panel then turned to consider the sanction.

The Fine

The financial penalties for breach of the Senior Ceiling are set out in Regulations 10.3 (overrun tax) and 14.3(b) (overspend penalty).

In SCY 2016/17, the total overspend by Saracens was £1,134,968.60, taking account of the Capital Contributions, Capex Funding, the first MBN payment and the option to purchase, set off against the £206,334 of headroom available to Saracens (i.e. the amount by which they had otherwise been under the salary cap that year).

The overrun tax for that year was calculated at £550,000, according to the formula in Regulation 10.3. The overspend penalty – calculated at a rate of £3 for every £1 exceeding £325,000 – was £2,429,905.80. The total fine was £2,979,905.80.

In SCY 2017/18, the total overspend was £98,249.80 – the sum of Chris Ashton’s payment, the second MBN payment, Capex Contributions, and the further option to purchase sum – again accounting for headroom. Only the overrun tax was applicable here, at a total of £73,249.80.

SCY 2018/19 concerned only payments to Maro Itoje: the image rights purchase and the final MBN payment. An additional £71,505.57 was also admitted by Saracens (para 291). There was no headroom that year, so the total overspend was £906,505.57. The total fine (including overrun tax on the first £350,000) was therefore £2,294,516.71.

Further to these penalties, a fine of £12,600 was imposed for 23 counts of failing to co-operate under Regulation 4.4, determined in accordance with Regulation 11.3(c).

The total financial penalty – or at least the “starting point” (para 284) – was therefore £5,360,272.31.

The Points Deduction

Regulation 14.3(c) sets out that, for breaches of the Senior Ceiling of over £650,000, a 35-point deduction shall be imposed. There is no points deduction for breaches of under £350,000.

As such, a points sanction of 35 points was applicable for both SCY 2016/17 and 2018/19. A total points deduction of 70 points was therefore the “starting point” for the Panel (para 284).

However, under Regulation 14.3(d), there is a discretion for the Panel to increase or decrease a points sanction, on the basis of (i) whether the club admitted the breach, (ii) whether the breach was deliberate, reckless, negligent or non-negligent, (iii) whether the club had been found to have breached the Regulations before, and (iv) whether the club has deliberately or recklessly failed to co-operate during the disciplinary process.

The Panel considered that, once a variation under 14.3(d) had been considered, it then had the discretion to impose a penalty less severe than mandated by the Regulations where the club would be “unfairly punished” or where the result would not be “within the spirit and underlying purpose of the Regulations” (Regulation 14.2).

As to Regulation 14.3(d), the Panel stressed that Saracens had strongly contested the charges and that those breaches were reckless, though not deliberate (para 300). It said:

Saracens must have known that there was a risk that at least some of the transactions that it and its Connected Parties entered into with Players might be included in Salary by the SCM. In our opinion, it acted recklessly in entering into these transactions without consulting him and seeking to elicit his views. (para 302)

Furthermore, the Panel considered the 2015 charge, that Saracens settled and accepted sanctions for. The Panel described this as a “clear ‘Yellow Card’”, placing the onus on the club to seek clarification if it was in any doubt as to its compliance with the Regulations (para 304). The Panel went on to describe Saracens’ failure to engage with the SCM as “egregious” and a risk for which they were now paying the price (para 315).

The Panel thought it was “arguable” that the points deduction could have been increased – but PRL did not argue for such an increase and, as such, it was not deemed appropriate.

Turning to Regulation 14.2, PRL considered this discretion ought only to be exercised in “extraordinary circumstances not contemplated when the specified sanctions were agreed”. The Panel disagreed, particularly due to the frequency with which the Regulations are reviewed (para 307). However, it held that the discretion cannot be considered “in a vacuum”, but must be considered against the carefully considered scheme of Regulation and penalties (para 312).

Saracens argued that because some of the breaches were “technical” and did not involve transfers for value simply for playing rugby, a points deduction would be unfair. The Panel disagreed. Though it accepted some of the breaches could be described as “technical” and “complex”, it added that this is “not surprising”. The underlying purpose of the Regulations requires a wide definition of Salary that may capture many forms of benefit. If it did not, the Regulations could easily be frustrated (paras 308-309).

There was nothing unfair about the scheme of penalties in Regulation 14.3, but the Panel recognised that, in this case, it would “almost certainly” result in relegation to the Championship (para 318). Though the breaches were “very serious”, it held that a 70-point deduction in a single SCY would be “disproportionate” and unnecessary to “satisfy the underlying purpose of the Regulations”, having regard to “totality” and the fact Saracens’ breaches were not deliberate. It therefore imposed the two 35-point deductions concurrently (para 319).

Analysis

That Saracens were not handed a 70-point deduction has perhaps been the most controversial aspect of the Decision. Indeed, the very fact that the other Premiership clubs have since procured their relegation suggests there was a feeling that Saracens had not been punished strongly enough.

However, it is clear the Panel was conscious of the principles of “totality” and “proportionality” – i.e. that the total sanction should reflect all the offending behaviour, and that the severity of the sanction should reflect the severity of the breach. This is entirely appropriate, as proportionality is a “widely accepted general principle of sports law” (CAS 1999/A/246 WADA v FEI) and totality should arguably be so considered (see ‘Why sport needs a unified approach to sanctions for corruption offences’ by White and Weston, LawInSport, 2017).

It appeared to weigh particularly heavily on the Panel that the breaches could not be shown to be deliberate. Indeed, as I have pointed out, there are some transactions which appear far less flagrant than others (e.g. Itoje’s image rights, Chris Ashton’s house and the option to purchase, as compared to the MBN arrangement). To impose the most severe punishment available – i.e. relegation – would arguably be disproportionate to the level of wrongdoing, given it is not the most severe type of breach possible. A finding of recklessness seems appropriate.

Imposing the points sanctions concurrently was, therefore, entirely appropriate.

Conclusion

In all, the Decision – though complex – is thorough and well-reasoned. The interpretation of the Regulations, and the Competition law question is legally sound, as is the remainder of the Decision, insofar as it reviews the SCM’s exercise of discretion.

The Decision shows the Regulations to be well-drafted and comprehensive, particularly as regards the definition of Salary – something reinforced by the Panel’s use of policy reasoning to justify classifying payments irrespective of any future developments. The sanctioning regime also appears sufficiently strong to deal with breaches in a proportionate yet effective manner. The only questions that might be asked of the Regulations relate to compliance and investigation: why did it take a Daily Mail investigation for the breaches to come to light, and why were Saracens able to continue failing to co-operate so readily?

There are also be issues stemming from the Decision itself, in relation to the image rights valuation and the inconsistency regarding the 20% stake in Chris Ashton’s home. However, Saracens might rue not advancing a stronger case against PRL’s valuation of Maro Itoje’s image rights, as they might regret the weakness of their Competition law arguments. Finally, the reference to certain direct property co-investments not being treated as Salary by the SCM (see para 169) also raises questions about when exactly co-investments will fall foul of the Regulations. Further clarity on this latter point is needed.