massimo-cellino

Massimo Cellino’s disqualification – A fit and proper person?

Rarely is it a dull day at Leeds United. Only last month the club faced the prospect of having to pay £150,000 in unpaid legal fees to the firm Ford & Warren dating back to the reign of Ken Bates. Since the reign of Ken Bates the club has undergone numerous ownership changes in a short space of time. The club was bought from Bates by financial investment group GFH Capital in December 2012 but ownership changed hands again in April 2014 when Massimo Cellino and his company Eleonara Sport Ltd bought the club. The Football-League today announced however that Cellino had failed Owners’ and Directors’ test to own a club due to being found guilty of tax evasion in Italy. 

What-is-the-test

The Owners’ and Directors’ Test is commonly referred to as the fit and proper persons’ test and gains considerable prominence in the media and football community during takeovers. It is a complex area of sporting governance as it has to consider elements of company law. The test is in place to ensure that directors’ and owners’ standards in football go over and beyond the minimum standard set at law in the Companies Act 2006. The FA’s Regulatory Commission oversees the application of the test.

The most important element of the test is ensuring that those running the football club are identifiable. The test defines an owner (known as an ‘officer’) as someone who has the powers of a director of an incorporated company[1], an officer of an Industrial Provident Society[2] or a chairman, secretary or treasurer of a club that is an unincorporated association[3]. The intricacies of companies mean that, sometimes, identifying the individual who has control over the club isn’t always easy so company law legislation must be relied on. The sheer detail that must be considered is too wide for this post to consider but it is worth knowing that it can happen.

Once a director is identifiable they must satisfy a list of criteria. This ranges from not having direct or indirect control over another football club[4] to corruption convictions[5]. A complete list is detailed in the test. Should a director fail to satisfy one of these elements they will be disqualified from being able to control the football club for a period set by the Regulatory Commission[6]. They are of course entitled to lodge an appeal should they feel the decision is unjust.

Surrounding-circumstances

In March 2014, a month before the buyout of Leeds United, Massimo Cellino was found guilty by an Italian court of tax evasion[7]. When he attempted to buy the club he initiated the Owners’ and Directors’ Test which he subsequently failed due being found guilty of tax evasion in Italy. It was held that he had failed to satisfy the rule of a “conviction for a like offence to any of the above offences by a competent court having jurisdiction outside England and Wales[8]. A like offence is in reference to the tax evasion which, if found guilty in an English court, would amount to a dishonest act[9] which is a disqualifying condition. Essentially s.1.1(iii)(i) is in place to ensure that the test is compatible with overseas laws. In modern football where owners regularly come from abroad, this is a vital rule.

It would appear that this is a simple case but that is far from the truth. The issue arose around the judgement delivered by the Italian courts regarding the tax evasion conviction; or rather the lack of conviction. Under Italian law a defendant is only considered to be guilty once they have exhausted all appeal avenues. The judgement delivered by the Italian courts did not contain enough factual information to prove his guilt therefore, for the time being at least, Massimo Cellino had not failed any of the criteria as he was not guilty.

The Italian courts subsequently re-issued their judgement and this time went into greater detail regarding Mr. Cellino’s guilt. By the time the Football League had received the new judgement, translated it and offered Mr Cellino a chance to comment on it, it was now December 2014. In front of the Commission for a second time his legal representation argued that, despite the greater detail, Mr. Cellino could still not be considered guilty due to the fact he had lodged an appeal against the judgement. The Football League argued that the word conviction should be used in sense of the English legal system therefore meaning the judgement fell “squarely within that definition, since it expressly and unequivocally [found] Mr Cellino guilty of a crime [10]. If such a judgement were issued in England then the party involved would be subject to disqualification and so there should be no inconsistencies.

Interestingly the Football League looked to Italian sporting governance to solidify their argument. The Italian Olympic Committee’s Code of Behaviour in Sport allows for interim disqualifications even when the conviction is not final[11] so if it were the Italian Football Federation they would have every right to disqualify Mr. Cellino.

Mr. Celino’s legal representation also sought to argue that even if he was indeed guilty of tax evasion this could not reasonably be considered dishonest due to the fact the penalty imposed by the Italian courts was only a fine. It is a rather weak argument since the realms of dishonesty are not defined by the penalty of the act but rather the act itself. Unsurprisingly this argument was brushed aside fairly easily.

The-decision

Massimo Cellino was disqualified from owning a football club for a year due to the tax evasion ‘conviction’ in Italy. The disqualification is effective from the date of the original conviction which was the 18th March 2014 therefore Mr. Cellino will be able to take control of a football club come the 18th March 2015.

What-next-for-Cellino-and-Leeds-Utd

Leeds United now have three working days for Cellino to give up ownership. Failure to do so can result in expulsion from the league[12]. An appeal process is available should Mr. Cellino wish to take advantage of it. He has seven working days to submit his appeal from the date the decision was made[13] and an appeal hearing will be heard within fourteen days of the appeal being lodged[14]. During this time he will be able to continue ownership of the club.

The decision isn’t particularly favourable to Leeds United. Should any appeal be dismissed it will cause further instability to an already turbulent ownership model and could lead to the club changing owners once again.

Conclusion

The battle between Massimo Cellino and the Football League regarding the Owners’ and Directors’ Test is one which encapsulates the transnational issues that can occur both in sport law. The global phenomenon that is sport means governing bodies need to be prepared to draft rules that take into consideration that laws and practices of other nations. Although it is fair to say that a scenario like this is very difficult to legislate against and thus interpretation of rules is vital.

Links


References

[1] s.1.1(i), Owners’ and Directors’ Test 2013-14

[2] s.1.1(ii), Owners’ and Directors’ Test 2013-14

[3] s.1.1(iii), Owners’ and Directors’ Test 2013-14

[4] sch. 1(i), Owners’ and Directors’ Test 2013-14

[5] sch. 1(iii)(b), Owners’ and Directors’ Test 2013-14

[6] s.7, Disciplinary Procedures – Regulations 2013-14

[7] Public Prosecutor of Cagliari (no. 7354/12)

[8] s.1.1(iii)(i), Owners’ and Directors’ Test 2013-14

[9] s.1.1(iii)(a), Owners’ and Directors’ Test 2013-14

[10] Football League, (2014). Decision of the Football League in relation to Mr. Massimo Cellino.

[11] Article 11, Codice di Comportamento Sportivo

[12] s.5.1, Owners’ and Directors’ Test 2013-14

[13] s.6.1, Owners’ and Directors’ Test 2013-14

[14] s.6.3, Owners’ and Directors’ Test 2013-14

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