On 14 May 2020, Premiership Rugby published the report of the independent review of the Premiership Rugby Salary Cap Regulations (the “Regulations”), conducted by Lord Myners. Publication of the report, commissioned by Premiership Rugby in December 2019, followed an open public consultation to which approximately 450 individuals and organisations responded. I submitted my own proposals (here) and was pleased to see a number of my suggestions adopted; though I am sure I was not alone in making them.

The Myners Review followed the disciplinary case against Saracens in 2019 for breaches of the Salary Cap in three consecutive seasons – discussed in detail here – and their subsequent relegation from the Premiership (discussed here). It made 52 recommendations on how the Regulations should be reformed, spanning independence and transparency to player and agent accountability. This article will review Lord Myners’ report, analysing his recommendations and highlighting areas which will require further thought.

Overall, it is very well written and, certainly, well-intentioned. The report represents a positive step for Premiership Rugby towards improving its governance and the Regulations and makes many welcome recommendations. However, it is my view that, in some respects the recommendations do not far enough while, in others, they go too far – to the detriment of the players. Players should be particularly concerned by the recommendations on the definition “Salary” and player accountability.

Due to the length of the report, this article will be divided into two parts. The first shall deal with the recommendations on independence, transparency and the definition of “Salary”, while the second will address the recommendations on sanctions, the accountability of individuals (including players) and the powers of the Salary Cap Manager (“SCM”), before arriving at some general conclusions.

1. Context

The first part of the report set out the context of both the Regulations and the review itself. Much of this does not need rehearsing, but a few points are worth making.

Lord Myners was asked to conduct the review to “ensure a continued level playing field for all clubs in the future”. It is clear that this is the primary objective of any salary cap – a form of absolute financial regulation (see page 9 of the report) – and that this ought to improve the competitive element of sport, improving fan engagement and creating a more marketable ‘product’. However, as Deloitte pointed out in their 1998 report on the financial crisis in facing English club rugby, a salary cap can only work if there is a “genuine desire and consensus on the part of the interested parties to make it work – and a firm resolve…to enforce it” (page 10). It is quite clear from recent events and from the historic application of the cap (see page 10), that this has not been the case amongst the Premiership clubs.

Lord Myners was keen that his recommendations are used to restore trust in the system. He notes that the salary cap breaches by Saracens have “severely affected trust and co-operation” between the clubs and PRL stakeholders and hopes that restoring trust will improve the workability of the Regulations (page 3). Similarly, he hopes that his report can be used to repair public confidence in the administration of the Premiership.

Nonetheless, he was mindful of the fact that any costs required to implement the recommendations should be kept “modest” and be set against the benefits of trust and confidence (page 4). He notes that “PRL is not as wealthy an organisation as one might find in other sports” and that Covid-19 has “considerably worsened” its financial situation, so would not “impose a bureaucratic and expensive structure for the sake of it” (page 4).

A further guiding principle was that of protecting player welfare, and Lord Myners recognised the importance of “protecting the interests of players” (page 6). However, these were not necessarily guarded in the fullest sense. When speaking about player welfare, it is important not only to focus on the physical and mental well-being of players, but also their financial interests. A professional rugby career is a short one and ensuring that players can set themselves up for a life after rugby is a crucial part of protecting their welfare. As discussed further, below, this aspect of player welfare was clearly not given such thorough consideration, which is disappointing given that it was always going to be the aspect most affected by the report.

It was also disappointing that Lord Myners focused so narrowly on the Salary Cap. The terms of reference stated that he would (page 2):

Consider tools and powers from other sports and financial regulatory sectors around the world specifically tailored to the challenges faced by PRL and its clubs

Yet he stated that (page 3):

I was not asked to consider other forms of financial control, e.g., a rugby version of Financial Fair Play, or study systems used by other unions such as central contracting of international players.

While I appreciate that studying such financial systems thoroughly would have been a significant undertaking, this would have made the review more complete. More realistically, the review ought to have considered other equalisation measures that would be complementary to the Salary Cap, such as a salary collar, fixed squad sizes, ring-fencing (or a properly funded second tier competition), and prize money. That it did not feels like a missed opportunity and is a limit on the review’s effectiveness – they were surely within its remit.

2. Independence

The first set of recommendations relate to the separation of investigation, the decision to prosecute and enforcement under the Regulations. Lord Myners accepts that it is important for clubs to retain control of the setting of the regulations – it is ultimately their league – but is emphatic that they “should not be involved in their application or enforcement” (page 23). Of course, this is exactly what has happened periodically throughout the history of the Premiership Rugby Salary Cap.

Lord Myners pointed to the relegation of Saracens (discussed here) as a prime example of the way that clubs have acted as “judge and jury” for their fellow competitors (page 23). Two paragraphs of the report are worth citing in full, to demonstrate the true extent of the clubs’ involvement, after the Salary Cap Manager sought to audit Saracens to determine their continuing compliance after being sanctioned in November 2019 (page 14):

Saracens declined to co-operate with the audit, suggesting, at least in the minds of some, that there were things that they did not want found. Saracens instead struck a deal with the fellow clubs whereby they would accept relegation. After an amendment to the regulations agreed by the clubs, a 70-point deduction was added to their total, which was intended to ensure relegation at the end of the season.

Since this arrangement was outside of the existing salary cap regulations, the clubs negotiated between themselves and agreed a mid-season change to the regulations that allowed the SCM to impose this sanction. They effectively stepped in to the independent disciplinary panel process and made retrospective changes to the regulations, introducing a large-scale point deduction, a decision in which several of the clubs could be said to have had material interest.

The way in which breaches were settled without disciplinary proceedings in 2015 was another example given of the lack of independence (page 23):

the clubs also stepped in in this instance and struck a private deal, thus heading off a formal charge and disciplinary process

Indeed, the Regulations give the clubs an express power to remove an individual from their post as chair, CEO or finance director of a club (Regulation 14.7), explicitly allowing them to perform a disciplinary role. Lord Myners found that such interference has clearly “undermined [the] effectiveness” of the Regulations (page 23). Indeed, it undermines their integrity, too. The report thus recommends the following:

Recommendation 1.1 – Enshrine a commitment by the clubs to respect the independence of the regulations.

Recommendation 1.2 – The current discretion for clubs to choose to remove a director of a club pursuant to Regulation 14.7 should be removed.

Both are sensible suggestions, though any commitment by clubs to refrain from interference must be supervised and enforceable to be truly effective. Lord Myners thus goes further:

Recommendation 1.3 – Appoint an independent cap governance monitor, with reserved powers in relation to the enforcement of the regulations.

Currently, there is no separation between the investigatory powers and the decision to prosecute. This is the equivalent of there being no separation between the police and the Criminal Prosecution Service. It means that there is a “large amount of decision-making power in the hands of a single individual” and, though Lord Myners praised the current SCM, such a system is open to “intimidation or manipulation” (page 24).

As I explained in my proposals, separating the investigatory and prosecutorial functions will strengthen the impartiality of decision-making and “give the appearance of a robust, reliable and thorough regulatory process – which is just as important as the actual process itself”.

On the role of the independent cap governance monitor (“CGM“), Lord Myners suggests that they are someone with a “background in law at a senior level and, ideally, an interest in sport in general” (page 24). His powers would include making decisions on whether to initiate a disciplinary process, and to approve the costs involved, and would have sole responsibility for approving any divergence from the disciplinary process set out in the Regulations, including settlement agreements. He would also act as a “sounding board” for the SCM and would advise on the resources and remuneration of the SCM (page 25).

To enshrine their independence, Lord Myners recommends that they publish their own report on the conduct of PRL and the SCM in an annual report, and that they are present at all meetings relating to the Salary Cap. The hope is that this new structure would take the clubs “out of the equation” when considering regulatory breaches (page 25).

This is a positive step, but I am not convinced that it goes far enough. Any CGM would still be paid by PRL and, thus, susceptible to manipulation. Though it would be hoped that a senior lawyer (perhaps a judge) would be strongly independent, further guarantees may be necessary. A fully independent governance structure would be one way to achieve this (see here) but another could be to create disciplinary sanctions for any interference by the clubs in SCM/CGM process. This would give the CGM a weapon with which to defend the independence of the Regulations.

3. Transparency

PRL’s lack of transparency also gave Lord Myners cause for concern (page 25):

it is accepted in the business world that trust within organisations and between them and the people they rely on for their reputations and business models – customers, shareholders, employees, the media, policymakers, regulators, local communities – is a fundamental need. Secrecy and obfuscation are the enemies of trust.

Over the years in the top tier of English club rugby, a variety of dramas involving salary cap infringements, negotiations and awarding of sanctions has played out against an unhelpful backdrop of secrecy. Inevitably, there has been a corresponding culture of unauthorised leaks.

The relegation of Saracens is simply the latest example of this. Lord Myners emphasised the importance of “open justice” and, in line with my own proposals, identified UK Sport’s “A Code for Sports Governance” as encouraging transparency; stating that a “sport’s governing body should be as transparent and open as reasonably possible” (pages 25-26). I could not agree more.

Farcically, this lack of transparency was demonstrated in the report itself. Lord Myners appeared to take his financial data from Financial Times reports and from Companies House (page 17). It appears that PRL did not open its books to the review. Further, he noted that, in 2014, an investigatory audit was launched “against Saracens and another club, which has never been formally identified” (page 11). Even during an independent review into its operation, PRL has failed to be transparent. In this regard, I would wholly endorse Lord Myners’ quiet recommendation that (page 3):

it might be a good idea to review corporate governance against generally established principles of good governance

More specifically, he recommends a series of changes:

Recommendation 2.1 – Announce the fact that a charge has been brought as soon as is reasonably practical and within seven days, with a brief summary of the substance and details, and proposed dates for a hearing.

Recommendation 2.2 – Publish disciplinary decisions in full, with the redaction of confidential information or personal data.

This is in line with standard practice for sports disciplinary and anti-doping cases, so seems entirely appropriate. Indeed, Lord Dyson – the chair of the independent panel which heard the Saracens case – recommended the publication of the decision.

Recommendation 2.3 – Include details of all breaches and sanctions in a comprehensive SCM annual report, which is made public.

Recommendation 2.5 – Publish general information to share details about the operation of the cap and how it is achieving its objectives.

These recommendations will further public confidence in the Salary Cap processes, improving the accountability of PRL. Lord Myners referred to a similar report published by the World Anti-Doping Agency (“WADA”) and suggests that publishing data on how the clubs manage their salary cap obligations will significantly enhance transparency (pages 27-28). It might also lead to a more consistent wage structure in clubs across the league.

Recommendation 2.4 – Publish guidance from the SCM regularly and make this publicly available.

Recommendation 2.6 – Publish any changes to the regulations, along with a rationale for how it is consistent with the five regulatory objectives.

These are also welcome suggestions – they will encourage co-operation between the clubs and the SCM and will further the “open justice” approach. They will ensure accountability and should also improve the quality of decision-making on all sides.

Lord Myners recognised that there is “a balance to be struck between confidentiality and transparency”, given the financial information central to the Regulations, but prioritising transparency must be the right approach, by accepting “openness as a facilitator of trust” (page 26).

4. Definition of Salary

(a) Drafting the Regulations

A preliminary issue of drafting was whether the Regulations ought to remain a set of detailed rules, or whether it would be better to simply use a set of principles to guide conduct. Rightly, in my view, Lord Myners recommends retaining a rule-based approach, noting that bare principles would not be sufficiently clear.

However, he also pointed out the “emergence of grey areas which have provided opportunities for misunderstanding and manipulation” (page 28). Comprehensive drafting can still be open to exploitation and, thus, Lord Myners recommended that the rules be backed up by principles, to guide their interpretation, such as a “duty to act honestly, with integrity and in accordance with the spirit of the regulations”:

Recommendation 3.1 – The regulations should remain as a set of detailed rules, backed up by principles.

(b) Defining “Salary”

As regards the definition of “Salary” (i.e. what counts towards the cap), Lord Myners recommends a radical overhaul. Commenting on the existing Regulations, the report notes (page 29):

…if the regulations are silent about a type of arrangement, then there is an assumption that a payment will be allowed and will not be included in the cap, no matter how closely it might resemble salary. This provides opportunities for the creation of new and complex vehicles for value-transfer. If challenged, clubs can claim that the arrangement was not covered by the regulations and so need not be included in their cap. This approach is akin to putting candy in front a baby. The presumption needs to be reversed.

Though I do not agree with his suggestion that clubs can easily claim something need no be included in their cap – see the PRL v Saracens case – it is true that the current drafting allows for inventive methods to circumvent the cap, and reversing the presumption was something I put forward in my submissions to the review.

Recommendation 3.2 – All permitted payments to players should be automatically included within the salary cap, except for a few clearly communicated exceptions.

Lord Myners suggests that the exceptions should be determined by the SCM but are likely to include “types of sponsorship and ambassadorial and promotional work, education fees and testimonial year income” (page 30). He further recommends:

Recommendation 3.3 – All exceptional items to be pre-approved by the SCM, otherwise they will be automatically treated as salary.

A pre-approval system seems sensible – and would have avoided many of the breaches by Saracens, had it existed then – though further detail is required. I shall return to this issue below.

Of course, there might be arrangements in place that are not counted as salary but would become salary under the revised Regulations. Lord Myners recognises this and suggests that they be counted as salary from next season (page 30). This could see certain players’ salaries fall immediately – though this may happen anyway due to Covid-19 (see here).

(c) Prohibited Payments

Of greater concern, however, is Lord Myners’ classification of “permitted payments”:

Recommendation 3.4 – Prohibit payments which are subjective, extend beyond a player’s playing career or come from connected parties (including sponsorship by connected parties). Any prohibited payment should result in a sanction.

Not only does this fall into the drafting trap he was keen to avoid, but it means that the only permissible payments will be those made by the club itself during a player’s career, and that those will all be considered salary, unless they fall within a narrow exception.

Prohibiting co-investments between clubs and players and prohibiting post-career payments from the clubs is not necessarily problematic. I agree with Lord Myners that both are potential mechanisms for avoiding the cap. Indeed, as I identified in my submissions to the review, prohibiting co-investments is one way of avoiding the difficulties of valuing them.

However, extending such prohibitions to transactions with connected parties is nothing short of outrageous. This is particularly so because Lord Myners recommends extending the definition of a “Connected Party” (Recommendation 3.5) to include (page 32):

ex-directors or an individual who attends every match and sits in the directors’ box, although I am reminded of the quotation referencing deductive reasoning – “if it looks like a duck, swims like a duck and quacks like a duck, it probably is a duck” (James Whitcomb Riley, 1849-1916). We all know a connected party when we see one.

Under Lord Myners’ approach, a player would be prohibited from going into business with, for example, a friend of their club’s owner. Further, it appears that they would be prohibited from doing so not only during their playing career but also post-retirement, given the prohibition of post-career transactions. Imposing such restrictions would amount to a severe restraint of trade, and one which would be impossible to justify – certainly in the absence of a collective bargaining agreement. If this is not what the recommendations intend, clarification is needed.

This element of the report severely neglects player welfare. If a player has an idea for a business, why should they be prevented from pursuing it with someone they are able to meet after a match? I understand that Lord Myners is trying to close potential loopholes in the Regulations, and that club owners could use their friends to bypass the Regulations but, if the transaction is genuine and can be approved by the SCM, why should players not be able to take advantage of their position?

Recommendations 3.4 and 3.5 severely limit the commercial freedom of players and, in my view, go far too far. Players should be able to enter commercial arrangements with connected parties where they are genuine and not designed to evade the Salary Cap.

(d) Co-Investments and Subjective Payments

Lord Myners finds that co-investments are problematic because it is “very difficult” to determine whether they are genuine arm’s length transactions (as opposed to mechanisms for avoiding the cap) and because there is “no bulletproof way of valuing these investments” (page 31). He also suggests that though there is an argument that co-investments can be good for player welfare, they are “usually used for those players who are least in need of welfare support” (page 31). Respectfully, I disagree with his approach here.

If “we all know a connected party when we see one”, then I am sure we would all know an illegitimate transaction when we see one. A simple way of determining this would be to ask for a detailed business plan on any co-investment and to compare the player’s actual wages with his market value. If the player is being under-paid and if there is no real business plan, it is less likely to be genuine. The existing Regulations set out 16 factors that can be considered in making such a decision (Schedule 1 para 2(s)). Though it is not necessarily formulaic, it is perhaps not as difficult as Lord Myners suggests. Indeed, such an approval system is explicitly recommended for dealing with sponsorship deals. If ‘dodgy looking’ deals can be rejected at the approval stage, there should be less cause for concern.

Secondly, if co-investments are prohibited with clubs and are subject to approval by the SCM, there should be little need to value them. Only when transactions go ahead in breach of the Regulations will a valuation be necessary – i.e. in, hopefully, rare cases.

Thirdly, why should it matter that players least in need of welfare support are those making the most of co-investments? Professional rugby players have a short career and those who are most marketable should be able to make the most of their profile. Further, the Saracens case study, to which Lord Myners is clearly referring, is a small one and does not necessarily reflect on how co-investments could be used by players generally as a tool for commercial growth.

The report does recommend allowing loans to be made to players in narrow circumstances, by requiring that (page 31):

(i) the SCM is informed of the arrangement in advance, (ii) that the loan is repaid in the same salary cap year and (iii) it is repaid by way of a deduction from a player’s wages, so the SCM can easily check that it has been repaid. If these requirements are not met, the full amount of the loan should be treated as salary in the salary cap year in which the player received the money.

Given the difficulties of keeping track of funds over multiple years (see Chris Ashton’s involvement in the Saracens case), this seems a sensible position, though the consequences of failing to comply with the stringent conditions are severe. To get around such consequences, clubs could always offer players in financial need loans in successive seasons, so that they would not need to repay it until they are able. Nonetheless, this stringent regime is far less justifiable in relation to Connected Parties, who may have legitimate reasons for offering loans to players – as with any commercial transaction. A pre-approval system should instead apply.

(e) Sponsorship

Of most immediate concern for players are the recommendations on sponsorship. Lord Myners recognises that “Sponsorship and endorsement deals are a common and important part of many players’ income” (page 32). However, he is clearly concerned about the potential for exploitation by clubs of a relationship they have with a sponsor, whereby the sponsor will pay the player and the club can avoid the cap. He states (page 32):

I have already recommended that any transfer of value via a connected party should be prohibited. I wish to stress that this prohibition should continue to apply to any sponsor of a club.

The report thus recommends that no club sponsor may sponsor a player. Under the existing Regulations, although club sponsors are “Connected Parties”, genuine commercial sponsorship deals are still allowed. They would be prohibited under the revised Regulations.

This could create particular issues with regards to kit sponsors. For example, Owen Farrell, the England captain, currently has a sponsorship deal with Nike, who also sponsor his club Saracens. Alex Goode is in the same boat, while Harlequins players including Kyle Sinckler, Mike Brown, Marcus Smith, Joe Marchant, Jack Clifford and Gabriel Ibitoye would have a similar problem with Adidas.

This is damaging for players, and also sponsors. The report recommends that “any such bona fide arrangements which do not finish before the next season should be allowed to continue but count as salary until they expire” (page 33). Thus, clubs with players in these positions will be in danger of breaching the salary cap, so their wages will have to be reduced, or players will have to terminate their sponsorship contracts (which could cause them to incur losses, too). Players earnings will be supressed by this measure – significantly so for the most marketable players, such as Owen Farrell, whose deal with Nike is probably sizeable. Again, this arguably amounts to a restraint of trade and is ignorant of player welfare.

Brands, too, are likely to be put off. It makes sense for sponsors to make deals with players who will not only where their kit off the pitch, but also on it. At a time when rugby could use all the coverage it can get, this would seem detrimental to the interests of the game.

Cognisant of the chance that a sponsor may have a relationship with a club despite not being a “Connected Party”, Lord Myners also recommends that the SCM approves all permitted sponsorship arrangements in advance (Recommendation 3.6), to ensure that they are genuine. This is not in theory objectionable, and was something I also recommended, but certain requirements should be put in place to ensure that approval is given within a commercial timeframe. Commercial opportunities may arise at any time and players may need to respond quickly in order to secure a deal. Maximum approval periods should be put in place which are dependant on the size of the transaction, to avoid disproportionately stifling players’ business.

(f) Credits, Exemptions & Marquee Players

The existing Regulations provide for clubs to be given credits on various grounds – such as for EPS Players, International Players and Home Grown Senior Players (Regulation 3.2) – and the system is thus “highly complex”. Lord Myners recommends simplifying them, though he does not say how.

He also draws attention to the exemption for players who go on loan to another club and recommends tightening these provisions to ensure that loans are bona fide (Recommendation 3.7) and not just used to get around the cap. He suggests that loaned players must sign a loan agreement, that the player must be used, the loan should be for a defined period and there must be a reasonable exchange of value (page 33). I would have gone further and required more information to be notified to the SCM, such as the selection of the loaned player for competitive matches, and the location at which the loaned player is training.

His next recommendation is to review the marquee player rule (Recommendation 3.8). He suggests that the system has been manipulated by rotating players, paying them an extremely high salary in one season to boost their earnings over the course of a multiple-year deal. Regulation 3.3(e) purports to prevent this, but Lord Myners found them “complex to understand and apply” (page 35).

Elsewhere in the report, he put forward the argument for removing the marquee player rules due to the “inflationary pressures they bring” (page 35). He observed that, in 2013-14, a year after the first marquee player was introduced, there were just five players earning at least £300,000 a year whereas in 2019-20 there were 99 (page 9). However, correlation does not necessarily imply causation. In 2015, the Premiership’s broadcasting rights deal was renewed, with an increase in value of approximately £50m. This extra cash may also have played a large part in wage inflation.

Indeed, Lord Myners notes that seven of the 24 highest-paid players in the league in 2019-20 are not “marquee” players (page 9). This suggests that the “marquee” rule has not necessarily seen wage inflation across the whole league. The reports states that these 24 players are paid a total of £14m (page 9). This works out at approximately 13% of the total maximum spend (assuming that the actual salary cap is approximately £9m when accounting for credits and marquee players). If each squad has approximately 40 players, this means that the top 5% of players are earning 13% of all wages. That does not seem wholly disproportionate.

Though I agree with Lord Myners when he says that the marquee player rule cuts across the objective of competitive equality, as clubs can pay these players whatever they like, the report’s data does not prove their effect is detrimental. Removing the marquee players would be a legal nightmare (see here), would suppress player earnings and would diminish the Premiership product significantly. If the marquee rule is to be reviewed, a further independent investigation should be carried out, analysing the financial information in far greater detail.

(g) Clarifications from the SCM

The Saracens case highlighted the perils of failing to consult the SCM on transactions in ‘grey areas’. Thus, Lord Myners suggests the following:

Recommendation 3.10 – Strengthen emphasis on clubs seeking clarification from the SCM in relation to any uncertainty in the interpretation of the regulations. Failure by a club to do so should be treated by the disciplinary panel as an aggravating factor leading to an increased sanction.

This seems an appropriate and effective way to encourage a greater dialogue, promoting transparency.

 

Part 2 on sanctions, the accountability of individuals (including players) and the powers of the Salary Cap Manager is available here.