On 15 March 2022, Premiership Rugby announced that it had concluded its investigation into alleged breaches of the Salary Cap Regulations (the “Regulations”) by Leicester Tigers (the “Club”) between 2016 and 2021.

The investigation, first announced in December 2021, found that the Club had failed to disclose certain commercial arrangements and exceeded the salary cap in each of the seasons from 2016-17 to 2019-20. The club also failed to disclose relevant information in 2020-21 (together, the “Breaches”).

As a result, the Club was required to pay £309,841.06 in fines and taxes.

This article will seek to explain the investigation and will consider how the case might have differed had the Breaches all occurred under the latest version of the Regulations.

1. Applicable Regulations

The Breaches spanned a period of five years. During that period, there was significant regulatory reform, following a review by Lord Myners in 2020 (the “Myners Review”). There is thus a question as to which version of the Regulations was applicable to this investigation; the pre-Myners version (the “Old Regulations”) or the post-Myners version (the “New Regulations”)?

As Premiership Rugby’s statement makes clear, the answer is that the version of the regulations in force at the time of the Breaches applies.[1] That is consistent with the principle of non-retroactivity (tempus regit actum), which has consistently been applied in sports disciplinary cases,[2] and is logical, not least because the level of the cap has varied.

Thus, in respect of the Breaches between the 2016-17 and 2019-20 seasons, the Old Regulations would have applied, while the Breach(es) in the 2020-21 season would have been governed by the New Regulations.

Nonetheless, it appears that the investigation was carried out in exercise of the (enhanced) powers given to the Salary Cap Director under the New Regulations.[3]

Lastly (and crucially), both the Old and New Regulations make clear that there is a limitation period of five years.[4] Thus, any potential breaches by the Club prior to the 2016-17 season fell outside of Premiership Rugby’s investigation and could not be sanctioned.

2. Undisclosed Arrangements

As had previously been reported, the investigation found that the Club, and one or more of its commercial partners, had entered into arrangements whereby a third-party company made payments to the image rights companies of the Club’s players (the “Undisclosed Arrangements”).

Whilst the precise details of the Undisclosed Arrangements have not been made public, such arrangements seemingly fall squarely within the definition of “Salary” of both the Old and New Regulations[5] and, therefore, should have been disclosed by the Club.

It is not clear how the Undisclosed Arrangements first came to light but, once they had been discovered by Premiership Rugby, they were then added to the Club’s previously disclosed salary cap spend in each of the relevant seasons.

3. Overrun

As a result of the additional sums discovered, the Club was found to have exceeded the salary cap in each of the four seasons between 2016-17 and 2019-20, by the following amounts:

2016-17: £147,750.00

2017-18: £89,718.05

2018-19: £55,886.69

2019-20: £98,586.32

Both the Old and New Regulations provide that breaches below a certain level will not be treated as a disciplinary issue but as an “Overrun”. Any Overrun is then subject to a tax but is not sanctioned further. In 2016-17, the Overrun threshold was £325,000; from 2017-18 to 2019-20, it was £350,000; and since 2020-21, it has been £200,000. Therefore, in each relevant year, the Club exceeded the salary cap by less than the Overrun threshold.

As such, the Club’s salary excess was subject to the Overrun Tax, but not further disciplinary charges.

As Premiership Rugby’s statement explained:

During the relevant period, the Salary Cap Regulations stated that for the first £50,000 of Overrun, a club would pay a tax of £0.50 for every £1 of overspend. Beyond the first £50,000 and up to £200,000 of Overrun, the tax is £1 for every £1 of additional overspend.

Thus, the Club was taxed a total of £291,941.06.

Upon receiving an Overrun Tax Notice, clubs may accept the tax calculated or reject it and elect for the matter to be deal with by a disciplinary panel.[6] Here, the Club accepted the Overrun Tax Notice.

4. Failure to Disclose

Perhaps the most interesting element of the case relates to the Club’s failure to disclose the Undisclosed Arrangements.

The Club’s non-disclosure was treated as a breach of the Regulations in its own right, and the Club was fined £17,900 as a result.

Regulation 4.4(a) of the Old Regulations,[7] provides (as is relevant) that:

Within twenty-eight days of the date when they are entered into (for Contracts) or otherwise created (for all other documents), each Club will provide to the Salary Cap Manager:

(i) full copies of all Contracts and arrangements which the Club enters into with any Player. For avoidance of doubt, this shall include (but not be limited to) any written confirmation (including email) of an agreement, heads of terms, termination agreements, or written guarantees from the Club (and/or any of its Connected Parties) to the Player (and/or any of its Connected Parties);

(ii) full copies of all Contracts and arrangements it enters into with any companies or other entities which agree to provide or procure the provision of non-playing services by a Player (and/or any of its Connected Parties) to the Club (e.g. image rights and promotional services contracts); […]

Clearly, the Club’s non-disclosure of the Undisclosed Arrangements will have breached this provision.

Regulation 11.3 of the Old Regulations then provides that:

(a) If the Salary Cap Manager concludes that a Club has breached the Regulations other than in relation to exceeding the Senior and/or Academy Ceiling, or a Failure to Cooperate then…a Penalty will be levied on and be payable by the Club to PRL within 21 days of the Club being informed of the breach in writing by the Salary Cap Manager.

[…]

(c) Penalties levied on a Club pursuant to Regulation 11.3(a) will escalate according to the number of breaches committed by the Club. For each additional breach over and above the first breach in any Salary Cap Year the Penalty for that additional breach will be doubled, as set out below:

1st breach £100

2nd breach £200

3rd breach £400

4th breach £800

For each breach over and above the 4th breach the applicable Penalty for such breach will be £800 per breach. The applicable Penalty will be determined by the number of breaches and there is no maximum limit on the Penalties payable by a Club.

Therefore, it seems that each relevant document or arrangement not disclosed by the Club would have constituted a separate breach and that each breach within the same season would have escalated the fine. That said, it is not clear how exactly the number of breaches would be determined if, for example, multiple documents were not disclosed relating to a single commercial arrangement for an individual player. Thus, it is not possible to work out exactly how many breaches there were, though it would seem to be a significant number.

However, under the New Regulations (which applied to the Club’s non-disclosure in 2020-21), the sanctions are considerably higher:[8]

1^st offence: £1,000

2^nd offence: £2,000

3^rd and each subsequent offence: £3,000

Thus, had all the Club’s Breaches occurred under the New Regulations, the fine would have been much greater.

5. Comment

The outcome of the investigation represents a victory for Premiership Rugby, insofar as it has been able to unearth and sanction breaches of the Regulations. It is also a victory for transparency, with the Myners Review’s recommendations on publication giving effect to a marked change in the salary cap’s governance. However, questions will persist about why the Breaches were not discovered sooner and, thus, whether the league’s monitoring powers are sufficient to identify all such violations – even under the strengthened, New Regulations.

Some fans have also questioned whether the repeated and seemingly blatant nature of the Breaches is adequately reflected in the sanction. As some have pointed out, though Saracens’ breaches in 2016-17 and 2018-19 saw them exceed the cap more significantly, some of the arrangements in that case fell less obviously within the Regulations (as this author discussed here) and yet Saracens were punished far more severely.

As explained above, under the Old Regulations, the Club’s Breaches were not subjected to disciplinary proceedings (given their relatively low value). Thus, no findings were made (nor could be made) regarding the Club’s degree of fault. The Overrun Tax system ensures that the enforcement process remains proportionate (in terms of cost and sanction) to the harm done to the primary objective of the Regulations – i.e. creating a level playing field.

However, under the New Regulations, non-disclosure of documents may also be charged as a “Failure to Co-operate”, which is classed as a “Major Offence”.[9] Notably, under the Old Regulations, this offence only applied in respect of Investigatory Audits (i.e. when a club was being investigated for a potential breach and failed to co-operate with that investigation), but its scope was expanded following the Myners Review. Such charges are subject to proceedings before a disciplinary panel and may result in further financial penalties, points deductions, and the like, depending on the seriousness of the offending.[10] Therefore, whilst the Club was not so charged in this instance,[11] similar breaches of the New Regulations will likely see a substantially different outcome.

This case thus demonstrates the shortcomings of the Old Regulations and the significance of the Myners Review. Of course, had the Club’s Breaches all occurred under the New Regulations, there would likely also have been questions of individual responsibility for any implicated club officials and players (if not also their agents).[12]

Some have queried whether, in these circumstances, the RFU might intervene (under its broad disciplinary jurisdiction in RFU Rule 5.12) and seek to sanction the Club further for “conduct which is prejudicial to the interests of the Union or the Game”. However, this author does not consider that it could.

First, such proceedings would arguably violate the general principle of ne bis in idem (double jeopardy).[13] Second, they would violate the principle of lex specialis derogate generali (i.e. that the more specific rule prevails over the more general rule).[14] In this context, the Regulations are a lex specialis (and RFU Rule 5.12 the lex generalis), which make specific provision for the sanctioning of clubs’ non-compliance with the salary cap and thus must be presumed to deal with the issue exhaustively.

Nevertheless, given the complex regulatory landscape in this area and the potential for significant sanctions, the Leicester Tigers case underlines the importance of obtaining specialist legal advice on salary cap matters.

Article by Ben Cisneros. Ben is a Trainee Solicitor at Morgan Sports Law, though this article reflects only the author’s personal views. Please email ben.cisneros@morgansl.com for any legal or media enquiries.

References

[1] At least insofar as the substantive issues are concerned (see footnote 2, below).

[2] See, for example, CAS 2005/C/841 CONI; CAS 2017/A/5086 Mong Joon Chung v. FIFA; CAS 2014/A/3813 RFEF v. FIFA

[3] See Regulation 7 of the New Regulations. Whilst Regulation 7.3 refers only to “these Regulations” (i.e. for the current season), it seems appropriate for the current procedural provisions to apply to historic investigations (not least because the role of Salary Cap Manager under the Old Regulations no longer formally exists). That is also consistent with sports jurisprudence (see, for example, CAS 2016/A/4501 Blatter v. FIFA).

[4] See, for example, Regulation 15.11 of the New Regulations and Regulation 2.3(d)-(e) of the Old Regulations.

[5] See Schedule 1 of the Old Regulations, and Regulation 3 of the New Regulations.

[6] See Regulation 9.5 of the New Regulations

[7] An equivalent provision exists in the New Regulations (see Regulation 4.14).

[8] See Schedule 1 of the New Regulations

[9] See Regulation 1.1 and Schedule 1 of the New Regulations

[10] See Regulation 12.5 of the New Regulations

[11] The Club’s Breach in 2020-21 was, presumably, deemed insufficiently serious to warrant a Failure to Co-operate charge.

[12] See Regulations 4.18-4.21, 5 and 6 of the New Regulations. Under the Old Regulations, any Chairman, CEO or Finance Director of a Club who signed a false Certification could be removed from office and banned from being a director of a Premiership club, where the club recklessly or deliberately breached the salary cap (see Regulation 14.7). However, this provision applies only in respect of proceedings before a disciplinary panel which, as noted above, there were none here.

[13] This principle has been applied to sports disciplinary matters. See, for example, CAS 2011/O/2422 USOC v. IOC at para 60.

[14] This principle rests on the presumption that the lex specialis was drafted with particular purposes and circumstances in mind, and thus overrides the lex generalis. See, for example, CAS 2015/O/4128 IAAF v. Jeptoo; CAS 2013/A/3274 Glasner v. FINA; Vinus v. Marks & Spencer plc [2000] EWCA Civ B526.