Saracens Salary Cap Breach

This week should have been one of celebration with England as world champions and everyone rejoicing what an amazing sport Rugby Union is. They say a week in politics is a long time but certainly one can apply the same philosophy in sport. Whilst England performed well in the World Cup, there was an overwhelming feeling of disappointment in not lifting the Webb Ellis trophy. Sadly the news went from bad to worse with the announcement on 5 November of Saracens being heavily punished for breaching salary cap regulations with a 35 point deduction and fine in excess of £5 million. The image of the sport has taken a heavy beating and many questions are now being asked what happened and what the impact going forward. Trying to keep this blog relatively short, we know that the prosecution against Saracens for breaching salary cap regulations over the last 3 seasons has been going on for several months but clearly a decision was made by Premiership Rugby to suppress the news whilst England were participating in Japan. Procedurally the tribunal who decided the fate of Saracens is created at Sports Resolutions by way of a quasi-arbitration. It’s unlikely we will ever see the intimate details of the breaches of salary cap but it is well documented that Saracens appear to have circumvented their salary cap spend by one of its owners investing in joint ventures with some of the Saracens players. Given the level of fine it would appear the overspend is some in the region of £1.7 million which is clearly way above the £7 million salary cap limit. The 35 point deduction is the absolute maximum but Saracens have the comfort of knowing that whilst they might be in a relegation fight for this current season, there are enough points to be gained in order to keep their status in the Premiership for next season. One of the key questions is why if this has been going on for 3 seasons it took so long for the prosecution to develop. On paper there should be a heavy policing policy but these breaches appear to have studiously slipped through the net. The regulations themselves which can be found here  are far from easy to understand that what is clear is that all of the clubs will know that there is a limit of £7 million for its senior players. The reaction has been quite interesting in that many of the club’s owners are questioning why there should not be a heavier punishment against Saracens but it’s difficult to criticise the Tribunal that sat as they were only able to punish in accordance with the salary cap regulations. In the meantime there is talk of Saracens challenging the decision. They will have an uphill struggle as any appeal process is not a fresh hearing but a challenge as to the validity of the decision under English law on the grounds of ultra vires (including error of law), irrationality or procedural unfairness. The Chairman of the Tribunal John Dyson has recently retired as Master of the Rolls at the Court of Appeal and the issues which were the subject of discussion at the Tribunal would have been well within the capabilities of the members including another Barrister who is a specialist in Competition law. Yesterday was interesting as I did a number of interviews including talkSPORT, BT Sport and the Daily Telegraph. Lots of questions were posed as to what happened with Saracens and what the prospects are of a successful challenge. With the dust starting to settle, we now have a number of other questions that will be the subject of debate. Is it feasible for some kind of retrospective punishment? Possibly that further charges would have to be brought against Saracens probably based on bringing the game into disrepute where there may be a wider level of discretion in terms of punishment. What happens to the Saracens players especially the ones that are caught up with the co-investment projects? Not easy for those players and family members as there appears to be a level of remuneration enjoyed by players which forms part and parcel of their overall contract. That will create worry and anxiety with many of the players desperate to seek independent legal advice. On a wider aspect , what has this done for the game? The failure of winning the World Cup is something that we can come to terms with and England can move on hopefully with a successful 6 Nations championship early next year. However this unsavoury episode with Saracens will have a lasting impact on the game and in particular the premiership brand. Its main sponsors Gallagher will be deeply upset and clearly will want to see full eradication of the sorts of circumvention of the rules. Premiership Rugby’s new investor CVC, will also be raising questions as to how this is allowed to happen. These are pure money men who want to see the game grow with an exciting brand and with more money in the game and a greater return. All in all some significant damage has been caused which could take several years to repair. The problem here is that it might not just be the end of the story. The challenge which is being brought will drag the matter out over the next few weeks and months and there is a distinct possibility that if matters remain as they are, Saracens may look towards the High Court to challenge the salary cap rules and regulations both in terms of the concept itself but also the likelihood of arguing that a £7 million limit is a restraint of trade, anti-competitive and provides an unsafe environment for players who need the health and welfare protecting. Will the other clubs in the Premiership look to Premiership Rugby to impose further punishment or even consider claims themselves.? My own take is that this decision has opened up the Pandora’s Box. It could lead to a number of Lawyers being involved both from a club and player perspective with a distinct danger that complete control may be lost in terms of how all of this can be nipped in the bud. It’s almost inevitable that the salary cap rules and regulations will have to be revisited, as clearly based on the reaction from some club chairmen, the punishment does not fit the crime. One can even ask the impact of the points picked up for this current 2019-20 season by Saracens when for all we know the same co-investment scheme could be in operation. They say there is never a dull moment in sport but sadly this has cast a huge dark cloud over the sport, it feels like there has just been a tremor but with an earthquake potentially on the horizon. __________________________________________________ Front Row Legal are a boutique law firm that specialises in Sport, Media and Business Law in England and Wales. They have specialist knowledge in these areas of law, which means they can help where many law firms won’t have the experience. They are based in Leeds with a national client base.

Published November 6, 2019

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