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Going Dutch : Financial Regulation of clubs


By Dan Chapman

 

Following on from commentary elsewhere on this site about the forthcoming Financial Fair Play in UK football,  and the German approach to regulating the financial position of football clubs,   Full Contact’s Dan Chapman provides some insight by way of comparison to the Dutch approach.

Dutch club football has experienced tough times over the last few years, as their teams failed to make any real impression in European competitions during a period of recession and financial woe.   The oldest club in the Netherlands, Haarlem, went out of business two years ago ;  a plight that has yet to happen in the UK (where no club of equivalent stature has yet ceased to trade).   One other club fell extremely close to suffering the same fate.

Historically many Dutch clubs have survived financially through the sale of what seemed a never ending production line of star players,  with transfer income received by the top clubs such as Ajax and PSV cascading down to the smaller clubs,  and whilst the country still produces top-class footballers the global economic climate has drastically reduced the transfer revenue received by clubs.   With declining sponsorship income, gate revenues and loss of European competition rewards the Dutch game recently concluded that clubs were annually losing some 90 million Euros. 

Acting upon a fear that Haarlem would not be the last club to fail,  and that such financial losses were clearly unsustainable, the KNVB (the equivalent of the FA) revised licensing regulations to provide a greater scrutiny of clubs’ finances.   Clubs receive a financial audit three times per annum,  and from the 2013-14 season any club which does not financially break even will not be permitted to participate in the Champions League or Europa League.    Now,  as with the German penalties,  these are sanctions that have real teeth.   There is no ‘fair play tax’  or equivalent buy your way out of jail card in the Netherlands.

Every November, March and June a club provides financial information to the KNVB, which includes full-year results for the previous year, half-year results, financial projections and budgets for the forthcoming year.   A licensing committee then declares a club to be either ‘economically inadequate’, ‘adequate’ or ‘excellent’.    Where a club is held to be financially inadequate,  as six have recently been so declared,  the KNVB draws up an economic action plan with the club must adhere to, but with which the KNVB provides robust support and guidance.   Sanctions for non-adherence thereafter can be points deductions, fines or ultimately the withdrawal of a club’s licence.

In addition to the financial scrutiny, the licensing system also seeks to ensure that the legal structure of a club is transparent, that no one individual can exert an undue influence and that all administrative matters are being competently dealt with.   Further, the UEFA financial fair play demands are being incorporated in to the licensing system to ensure that the top clubs will not face UEFA sanctions.

What strikes one as crucial to the philosophy of the Dutch system is that the starting point is not to impose fines or sanctions, but to adopt a strict action plan which will actually assist.   Although six clubs were recently held to be ‘financially inadequate’,  in 2011 there were thirteen clubs so declared –  the implementation of the action plans has resulted in seven clubs elevating their status to at least ‘adequate’.    Coupled with a legacy of youth development,  the pro-active but strict regime of the KNVB is to be commended,  and as with the German system one is left fearing that the United Kingdom could and should take heed?

 

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Dan's avatar

About Dan
The spearhead and Senior Partner of Full Contact, Dan is an experienced solicitor and advocate, with a specialist background in employment law and sports.


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