Bavarian Legal Works: I got a case of the ManCity blues

The recent decision of the Court of Arbitration for Sport in the Manchester City v. UEFA case has been lauded as a vindication by some and as a disaster by others. While Bayern CEO Karl-Heinz Rummenigge placed the blame squarely at the feet of the UEFA legal team, a closer examination shows that it was in fact the unethical behaviour of the ManCity organization, structural flaws at the Court of Arbitration for Sport (CAS), and two timid, perhaps even cowardly, arbitrators that allowed Manchester City FC to escape without punishment.

There was clear evidence that ManCity planned and executed a scheme to funnel equity funds into their club disguised as sponsorship money, and they walked away with a slap on the wrist. We hope this article will help fans understand why the system failed to deliver justice to Manchester City.

Background

The latest chapter of the ManCity v. UEFA conflict erupted in late 2018 with the publication of the Football Leaks e-mails. UEFA kicked their financial investigative body into gear and, despite evidentiary stonewalling by City at every turn, uncovered evidence that between 2012 and 2016 City, through its owners, sponsors, and unrelated third parties, channelled over £200,000,000 of equity into the club disguised as sponsorship income.

UEFA went forward with charges, and finally the UEFA Adjudicatory Chamber heard the case, ruling that City had intentionally falsely reported “at least” £204,000,000 of equity as income to cheat the Financial Fair Play system. City appealed that decision to the CAS.

Legal system v. justice system

People outside a legal system often view it as overly technical and doctrinaire, more concerned with complex arguments than fundamental justice. This can be true, but every first-rate legal system around the world, including Switzerland’s, is designed with that risk in mind. Judges (in this case arbitrators) are equipped with tools that allow them to work around rigid technicalities that could lead to injustices.

But for the system to work those judges need the courage to pick up those tools and employ them. The system fails when technicalities drive an unjust result and simple, perfectly equitable tools are ignored. ManCity v. UEFA. is just such a case. Two of the three panel members took an obscenely byzantine approach to key evidentiary and legal issues in the case, producing an indefensible result.

Two kicks at the can

Man City unethically took advantage of the flawed structure of the CAS to ambush the UEFA team at the appeal. Most appeal courts work on the record from the first hearing and show some respect and deference to the body that made the original decision. Usually, one has to present a very compelling reason to have new evidence admitted on appeal to prevent procedural abuses.

The CAS does not work that way. It hears the case de novo, that is, “from scratch.” What does this mean practically? It means that ManCity got to run the case twice, with no practical consequences for losing the first trial. None. And it gets worse. The second trial enabled City to run a completely different defence at the second hearing, ambushing UEFA at the appeal.

Witnesses who were “not available” at the first hearing suddenly became available to testify for City before the CAS. Many key documents that City failed or refused to produce at the Adjudicatory Chamber were produced at the last minute before the appeal, after UEFA’s accounting experts had already prepared their reports and had testified at the prior hearing. So City got a full scouting of UEFA’s witness testimony and documents in the first hearing, while springing key witnesses and documents on UEFA at the last minute. You don’t have to be a legal expert to see how unfair that was.

The limitation clock is ticking ... whether you know it or not

UEFA’s regulations mandate a five-year limitation period on prosecutions, and the CAS ruled that a significant number of violations could not be prosecuted because they fell outside this time frame. This is probably why Karl-Heinz Rummenigge felt that UEFA had failed to run the case properly. But was missing the deadline really UEFA’s fault, or did two of the three panel members start the clock too soon?

The key question in a limitation defence is, “When was it triggered?” or, in legal parlance, “When does the limitation clock start ticking?” Sometimes it is obvious. When someone smacks you in the face, you know you have been wronged and the limitation clock is obviously ticking.

But what if the wrong is not obvious? Say there is a one-year limitation period on negligence, and your neighbour breaks a pipe in his house that starts leaking water into your foundation. You don’t notice it until two years after the negligence when your house collapses. Are you out of luck because the negligent act took place more than a year ago? Of course not.

This is one of those situations where the law gives judges tools to make sure justice still gets done in the face of a technical rule that would produce an absurdity. How can you seek a remedy for a wrong you don’t know has occurred? Every credible legal system in the world incorporates a version of “reasonable discoverability.” That is, the limitation period is not triggered (the clock doesn’t start ticking) until the aggrieved party “knew or ought to have known” that the wrong has occurred. The law about delaying the triggering of a limitation period is particularly clear in cases where there has been a fraud or intentional concealment of a wrong.

ManCity went out of their way to hide its illicit transactions and resisted reasonable investigations (as proven by their conviction for doing just that). In this case, the limitation clock should not have started running until November of 2018 when UEFA obtained copies of emails documenting ManCity’s scheme to hide their transactions. One member of the panel got this argument, and there was a split decision on when the limitation period should have started running. The other two panelists concluded that the limitation clock was running before UEFA knew, or even could have known, that a wrong occurred.

In case you are wondering, the Swiss legal system clearly incorporates a reasonable discoverability rule and one of the three panel members found a rather elegant way of solving this problem without even resorting to it.

Consciousness of guilt

One of the central themes of this case revolved around the fact that City refused to turn over key documents and produce relevant witnesses, up to and through the hearing. There is no doubt that they failed to produce what they were required to, and they were punished with a small fine for that intransigence.

But doesn’t that just amount to a cheating tax? Wouldn’t every team facing the choice between two years out of the Champions League or a manageable fine chose to undercut the process by hiding any documents that made them look guilty? There is a legal tool to deal with this perversity, as well. It is called “the adverse inference”. In criminal law it is often called “consciousness of guilt.”

It works like this: When a party neglects or refuses to produce evidence under its control that is relevant, the panel is entitled to draw an adverse inference from that failure. To put it more simply, the court, by law, shall conclude that the hidden evidence would be harmful to the party that withheld it. Considering the key documents that City never produced, this should have been an open and shut case.

The mental gymnastics that two of the panel members did to avoid drawing an adverse inference was not just weak, but downright dishonest, and it ignored the procedural record in front to them. It could merit an article on its own, but suffice it to say that one panel member would have been quite content to bring the hammer down on ManCity using the adverse inference rule, and they would have been fully warranted in doing so.

Complete disaster

There are a number of other problems with the decision. The arbitrators applied a strange double standard to the burden of proof at a key moment, they showed bizarre deference to defence witness testimony, and the dispute between the panel members got so bad that they seemed to throw in the towel on reaching a rational consensus on key issues. Why two of the arbitrators made such a hash job on this case could be down to absurd levels of legal conservativism, timidity, or — something else. Whatever was going through their heads, their judicial performance was akin to missing a sitter in front of an open goal. The sport will suffer for their folly.

Photo by Julian Finney - UEFA/UEFA via Getty Images