EXPLAINED: Burnley v Everton to be played at the International Dispute Resolution Centre, London (TBC, 2025)
Champions League level barristers gear up for a neutral ground battle and a potential dry run of a multi-club Manchester City claim
Further to confirmation in The Times in November 2024 that Burnley were pursuing a claim against Everton, The Lawyer has now confirmed that big hitting, £1,200-£1,500 per hour Leading Counsel, Mark Howard KC has been appointed to defend Everton against Burnley FC’s claims in a private hearing due to commence in the next few weeks.
Here is an explainer on what will be an interesting indicator of what we can also expect if Manchester City are found liable for major breaches in the landmark 115 case.
Background
The background is well known. In November 2023, a Premier League Independent Commission (IC) found Everton guilty of breaching its Profitability and Sustainability Rules (PSR). Everton admitted losses in excess of the permitted £105m over a three-year period by about £19.5m. Everton’s admission is important for Burnley and there was no appeal of the liability element of the Everton case.
The Appeal Panel (AP) reduced the sanction from 10 points to 6.
This unprecedented Premier League punishment opened the door for other clubs to seek redress. Whilst the IC noted that clubs relegated in recent seasons could potentially claim compensation as a result of Everton’s admitted rule-breaking, the IC did not publicly indicate its desire to award compensation under PL Rule W.51.5 (see below) and we are not aware of any directions for the admission of evidence relating to loss caused to any club by the breach. It is, however, possible this did happen in private. We do know that a number of clubs indicated early on in the Everton process that they may seek compensation with the IC forced to make a procedural determination published in November 2023.
The IC informed those interested clubs (Leeds, Forest, Southampton, Leicester and Burnley) that they needed to inform it if they wished to pursue a claim for W.51.5 compensation within 28 days of the decision being handed down.
We now know that only one of the clubs, Burnley, has pursued a claim—either under rule W.51.5 or another provision (see below for further discussion).
Why Burnley? And why not anyone else?
Burnley were relegated from the Premier League at the end of the 2021/22 season - the season in which Everton were found to have breached PSR, and to which the 6-point sanction applied in 2023/24.
Burnley will say that a) had Everton not breached the spending rules, they’d have finished below Burnley; and/or b) had the 6 point deduction taken place in the 2021/22 season, they would not, or may not, have been relegated with Everton taking their place. That said b) is a difficult argument as the PSR could never establish the breach in the season being tested - audited numbers are formally test only after the end of the season in question.
It appears that no other team believes it can demonstrate that the admitted overspending caused them any recoverable losses or, perhaps, some have privately settled with Everton. Leeds would appear to have a potentially simple case for a single place of merit payment lost in 2021/22 (around £2m (now would be £3m per place)). It is also plausible that others are awaiting the Burnley decision before deciding on a next move.
Burnley’s losses
Burnley’s goal is to recover losses suffered due to Everton’s overspending and be restored to the position they would have been in had Everton not breached PSR and their Premier League agreement.
For the year ended 31 July 2023, Burnley announced a £58m revenue decrease mainly due to the drop in broadcasting revenue (Premier League distributions after parachute payments), which more than halved in the Championship, falling £57.1m from £104.9m to £47.8m. Commercial income also fell £3.1m (27%) from £11.5m to £8.4m. Matchday actually rose by £1.7m (24%) from £7.0m to £8.7m due to the increased number of matches in the Championship and the fact that the season ended with the title.
The assessment of losses is complicated by the need (and reality) of Burnley to mitigate their loss of Premier League revenue. Burnley primarily did this with substantial wage decreases (perhaps even 50% reductions) despite increasing its staff numbers. This, of course, means that Burnley did not simply lose the whole of the £58m revenue - they lost the profits (if any). The brief, one year Premier League absence probably also mitigates any claim for a potential loss of the value of the club.
Burnley must convince the tribunal that Everton’s overspending - and the lack of an earlier points penalty - materially affected the outcome of the 2021/22 relegation race. If that is established, the tribunal could quantify Burnley’s damages based on the probability that Burnley would have stayed up in a scenario where Everton did not breach the PSR. This approach allows for a nuanced outcome, reflecting the fact that survival was not guaranteed, but it ensures Burnley is compensated for the opportunity they unfairly missed.
In short, a claim of up to £10m does not appear wholly unrealistic (ignoring the possibility that Burnley’s players consider they lost wages due to the Everton breaches).
Loss of a chance?
Burnley’s case may hinge on the legal doctrine of “loss of a chance.” In English law, a party can claim damages not only for losses that definitely occurred, but also for the loss of an opportunity to achieve a beneficial outcome. In plain terms, even if Burnley cannot prove with certainty that they would have avoided relegation absent Everton’s rule breach, they can argue they lost the chance to stay up – and that chance had tangible value. Courts and tribunals can assess the probability of a missed outcome and award damages proportionate to that likelihood. For example, if it’s determined that Burnley had (hypothetically) a 50% chance of surviving in a fair competition, they could recover about 50% of the financial benefits of Premier League survival. This doctrine has been recognised in English case law for many years. In sports litigation, it means a club can be compensated for being denied a sporting opportunity due to another’s wrongdoing, even though sporting results are never fully predictable.
The basic principle as to the applicability of the loss of a chance test was set out by the Court of Appeal in Allied Maple v Simmons & Simmons [1995] EWCA Civ 17 and recently by the Supreme Court in Perry v Raleys Solicitors [2020] AC 352.
Where a claimant (Burnley) is required to prove what it would itself have done in a hypothetical situation (Everton not overspending), that is to be decided on the balance of probabilities; but where it is required to show what a third party (in this case Everton) would have done in the counter factual, that is to be assessed on a loss of a chance basis.
So, the relevant standard for loss of a chance here is:
Burnley must show there is a real and substantial chance that Everton would have gained 4 (or more) less points had they not overspent;
The tribunal then applies a percentage to the figure claimed to reflect its assessment of the likelihood that the event would have happened.
In addition, Burnley don’t need to prove that Everton’s misconduct was the sole cause of their relegation, but they do need to show a causal link that the breach materially reduced their survival prospects.
Everton’s arguments will not be helped by the fact that three of Everton’s points in the season came from the defeat of Burnley themselves.
Burnley look to have a strong chance of establishing at least a real and substantial chance that but for Everton’s overspending breaches, it would have survived.
Why is this not in court? Premier League Rules W and X
Unlike a typical claim in civil court, compensation claims are handled within football’s regulatory framework.
This is bolstered by the FA agreement to arbitrate. West Ham failed to undermine that in its case vs Sheffield United in 2007.
The Premier League rules contains provisions (under Section W, the disciplinary section) that explicitly allow for compensation to be awarded to third parties when a club breaches the rules. Rule W.27 is particularly relevant:
It says that if a club is found guilty of a rule breach, an independent commission may declare its intention to use Rule W.51.5 to award compensation to any person or club that suffered as a result of that breach:
Now that Burnley have lodged a claim, it appears the same three-member IC that judged Everton’s breach as a ten point sanction will also assess Burnley’s claim and decide if compensation is warranted, and if so, how much. Burnley will submit evidence of their losses, and Everton will have a chance to respond, all within the IC’s process. If this is not a W 51.5 case, then the matter will be dealt with under either Rule X or a Rule K FA arbitration. There is likely to be little material difference to the process save that the judgment will not definitively be published and a new tribunal will hear the case.
Past cases
While a Premier League club pursuing compensation for another club’s rule breach is rare, it is not without precedent. A famous example is the 2007 Carlos Tevez affair. West Ham United fielded Carlos Tevez in violation of third-party ownership rules, yet avoided a points deduction at the time, which allowed them to narrowly escape relegation. Sheffield United, the club relegated that season, claimed this unfairly condemned them to the drop. Sheffield United took legal action, arguing West Ham’s breach denied them a fair chance of survival – a classic loss-of-a-chance argument. After protracted proceedings, West Ham agreed to an out-of-court settlement paying around £18m (net of legal costs) in compensation to Sheffield United
More recently, in the English Football League (EFL), we’ve seen similar compensation battles. In 2019, Derby County was accused of breaching financial rules to gain a competitive edge in the Championship. Middlesbrough FC, who narrowly missed out on a playoff spot in 2018/19, claimed that Derby’s financial cheating cost them a chance at promotion. Middlesborough owner, Steve Gibson, sought roughly £40m in damages , valuing the chance of Premier League promotion that his club lost out on. The dispute was eventually settled in early 2022 by an agreement between Gibson and Derby’s owner, Mel Morris, before any final trial for £2.7m.
Likewise, Wycombe Wanderers, relegated from the Championship in 2021 by a margin of just one point, pursued a claim against Derby County, arguing that had Derby been deducted points for their breaches that season, Wycombe would have stayed up.
These cases did not produce published tribunal judgments (because they were settled privately), but they underline the fact that clubs are increasingly ready to use legal avenues when they believe another club’s misconduct cost them dearly. The principle is the same as Burnley’s case: a rule-breaking club can be held responsible for the ripple effects of its actions on other competitors.
Implications for City?
Burnley’s compensation bid could have far-reaching consequences. Other clubs may well seek ways to pursue Everton and Nottingham Forest in respect of the PSR breaches already established. If successful (or even if it results in a substantial settlement), it would set a clear example that clubs harmed by a rival’s PSR rule-breaking can seek recourse and can be made whole for their losses, or a proportion of them.
There is no doubt that such claims could open a “huge can of worms” and invite a chain reaction of litigation that could last many years.
The situation with Manchester City illustrates the potential scale of such disputes. Manchester City have been charged with numerous alleged breaches of Premier League financial and other rules in a case spanning multiple seasons. The potential claims could cover loss of league titles, Champions League qualification and other merit payments and the associated revenues that rivals believe they were denied during years when City may have broken the rules. In theory and if proven, there are very many clubs that could argue they were affected by City’s actions. Those claims would be fiercely contested and could take a number of years to resolve.