REVEALED: What really happened with Tevez, Third Party Ownership, West Ham and Sheffield United
The Great Escape on the pitch, a lucky escape off it
Years before PSR ever existed, a London arbitration centre hosted the biggest Premier League litigation battle - Sheffield United v West Ham. Burnley’s claim for compensation against Everton and the potential of multiple claims against Manchester City if the 115 case goes against them, brings that 2008 case into sharp relief. What if anything does the judgment in that case tell us about how a tribunal may look at a case of Premier League breach, damage, causation and relegation?
Background
The Sheffield United v West Ham dispute revolved around the late-summer 2006 signings of Carlos Tevez and Javier Mascherano, two high-profile Argentina internationals who unexpectedly joined West Ham instead of more prominent clubs.
At first, the arrivals seemed an extraordinary coup for a side that had only recently returned to the top flight. Behind the scenes, however, the contracts for Tevez and Mascherano contained private agreements with offshore companies linked to Kia Joorabchian, an agent, allowing those entities to exert considerable influence over the players’ transfers. The Premier League’s rules explicitly prohibit arrangements that grant third parties “material influence” in club or team matters, and West Ham did not disclose these agreements when registering the players.
Tevez, for various reasons, had little impact on West Ham’s performance until the last 9 or 10 games of the season. He and Mascherano, fresh from Argentina and the 2006 World Cup, had difficulty fitting in with a new club playing English football in a new country where neither spoke English. Furthermore, it appears that Alan Pardew, West Ham’s manager for the first half of the season, was less than enthusiastic about Tevez’s arrival and played him out of position. Then, he was injured. Mascherano played even less. All these factors resulted in Tevez achieving little of note until the last 9 games of the season. Mascherano went to Liverpool in the January window.
Joorabchian, Tevez, Mascherano and third parties
In the summer of 2006, a consortium of investors represented by Joorabchian was preparing to make a bid for a takeover of West Ham. By the end of August 2006 negotiations were well advanced.
At that time, Joorabchian was also involved with attempts to place Tevez and Mascherano with a European club. They were leaving Corinthians in Brazil where they had been playing, and Joorabchian had also severed his ties with that club. The players’ rights were held not by Corinthians but by a variety of off-shore companies. Joorabchian was talking to Manchester United, Chelsea and Liverpool in England and Inter Milan in Italy. Ultimately, Joorabchian couldn’t find a Champions League team to take the players.
So Joorabchian’s idea was that either the potential takeover of West Ham by his consortium would succeed, in which case he and the rights owners would be happy to have players of the calibre of Tevez and Mascherano playing for West Ham, or it would fail. In the latter event, the intent would be to transfer the players to more prestigious clubs, but in the meantime they would be playing for West Ham as “a shop window” for them to demonstrate their Premier League quality. As for West Ham, they would get the players without having to pay any transfer fee.
Secret agreements
Under the contractual arrangements for Tevez, he personally executed a standard form of Premier League player contract with West Ham dated 31 August 2006. The term of the contract was expressed to be until 30 June 2010 so that it was, on the face of it, to last for almost 4 years with only limited possibility of early termination. However, this player contract did not reflect the full contractual picture. The true contractual arrangements were radically different in consequence of what became called by the parties the “private agreement”.
West Ham were expressly told by the Premier League that “third party ownership and control over a player might cause a problem within the Rules of the Premier League”. So West Ham decided to have two contracts relating to each of the players - one a conventional Premier League player contract and the other the private agreement incorporating all the rights owners’ entitlements. The private agreements were to be kept secret from the Premier League.
In Tevez’s case (the Mascherano one was similar but not identical) a contract dated 30 August 2006 was entered into between Tevez, West Ham and the two Tevez rights owners, both Virgin Islands companies. Tevez signed the contract personally.
So, the rights owners retained their “ownership” of Tevez and had the absolute entitlement to require West Ham to transfer him to another club in the January 2007 transfer window (West Ham would get £2m) and in every transfer window thereafter.
In short, West Ham never controlled the rights of the players. West Ham’s then Legal Director (and subsequent CEO) admitted: “The whole motivation behind the private agreements was purely to protect Joorabchian and the positions of the companies should the takeover not succeed, because they would then be able to serve notice on West Ham in a transfer window requiring the transfer of the players.”
West Ham guilty of seriously misleading the Premier League
The Premier League were suspicious. West Ham's Legal Director expressly assured them that West Ham had no arrangement with any third party in respect of the players and owned all the rights in the players. He lied. The Independent Commission that heard the evidence in April 2007 (see below), later concluded that even on his own account, West Ham's Legal Director was guilty of seriously misleading the Premier League.
Eventually, around the time Mascherano was transferred to Liverpool, West Ham decided to disclose the secret agreements to the Premier League. West Ham had, by then, been acquired not by Joorabchian but by Icelandic investors led by Eggert Magnusson.
The reaction of the Premier League to the disclosure of the secret agreements is apparent from their letter to West Ham dated 29 January 2007:
“The Board takes the view that these contracts should have been disclosed to the League and to the FA at the time of the application to register these players. It takes the view, further, that had this been done, the League would have considered West Ham United to have been in breach of Rule U.18 by entering into the contracts, and accordingly the players would not have been registered for West Ham.”
The charge and the breaches
On 2 March 2007, after exchanges of correspondence, the Premier League informed West Ham that it had referred suspected breaches of Rule B13 and Rule U18 to an Independent Commission (“IC”).
West Ham initially admitted only part of the complaint, but at the outset of the hearing before the IC on 26 April 2007, it accepted the complaint in its totality. Accordingly, the IC was only concerned with mitigation, aggravation and sanction.
Clearly these were simpler times because on the following day, 27 April 2007, the IC announced its decision. This was a Friday, and West Ham were due to play a critical match against Wigan (a fellow relegation threatened club) the following day. By this point, West Ham had won 4 from 6 and were no longer stranded at the bottom of the league. Victory at Wigan would take them level on points.
Amazingly, West Ham’s principal argument for leniency was that the secret agreements were, in any event, unenforceable in law as being an unreasonable restraint of trade. There was no evidence that West Ham had ever raised such a point in the discussions with Joorabchian or his lawyers either before or after the IC.
Whether or not this contention was well founded, it evidently impressed the IC which expressly proceeded on the premise that the secret agreements were indeed unenforceable.
Sporting advantage? What sporting advantage
The IC stated that a points deduction “is a course that we consider would normally follow from such a breach of these rules”. Nevertheless, somehow, it decided not to impose any points deduction taking into account the following factors that would likely no longer fly:
The (belated) guilty plea
The new ownership and management of the club
The view that conforming contracts could, theoretically, have been concluded as had happened when Mascherano had been transferred to Liverpool
The delay between the discovery of the breaches and the hearing before the IC in that a points deduction then on 27 April “would have consigned the club to certain relegation” (despite the fact that the delay was all West Ham’s doing)
The fact that Tevez had continued to play for West Ham after discovery of the rule breaches (a fact that makes no sense in this context)
The effect on the players and the fans of a points deduction on “the eve of the end of the season” (an argument that has recently failed completely in the Everton and Nottingham Forest cases)
The voluntary but belated disclosure of the secret agreements by West Ham
The IC imposed a total fine of £5.5 million, directed that the Premier League could terminate Tevez’s registration and ordered West Ham to pay costs. It may not look like it, but in coming to this decision the IC took a grave view of what it described as “an obvious and deliberate breach of the rules” and “dishonesty and deceit”.
It is obvious that West Ham were spectacularly fortunate.
Yet it got better because the Premier League also decided not to terminate Tevez’s registration and he was allowed to play in the last three games of the season. To equally spectacular effect…
NB: It is worth noting that Sheffield United appealed the Independent Commission decision. An Arbitration Panel dismissed the appeal and held that the IC’s original decision was neither irrational nor perverse and that the Premier League’s subsequent actions were reasonable. Interestingly, the arbitration panel consisted of Sir Philip Otton, David (now Lord) Pannick KC and Nicholas Randall. Lord Pannick KC acts for Manchester City in the 115 case. Sheffield United also went to the High Court to try and appeal the Arbitration Panel but leave was denied.
The relegation battle 2006/2007
The relegation battle was keenly fought at the end of the 2006/7 season. At one time, it seemed that West Ham were destined for relegation. On 4 March 2007, West Ham conceded two goals in the last minute, to lose 3-4 at home to Spurs with the winner scored by Paul Stalteri on 90+5. They were bottom of the Premier League with only 20 points.
Tevez key to “the Great Escape”
Tevez grew in importance toward the season’s conclusion. Ultimately, the Sheffield United claim broadly turned on Tevez’s contributions in the final 9 games of the season which were significant.
In the first two games of this sequence Tevez scored in the 2-1 victory over Blackburn on 17 March 2007; he scored one goal and created the other in the 2-0 victory over Middlesborough in the following match. In the last two games of the sequence, Tevez scored twice and created the third goal in the 3-1 victory over Bolton on 5 May 2007; in the final game of the season against Manchester United on 13 May 2007 he scored the only goal of the match in West Ham’s unlikely victory over the Premier League champions.
Sheffield United relegated on Goal Difference by one goal
Sheffield United, finishing with 38 points, devastatingly went down by a goal after losing an effective relegation play off on the final day of the season against Wigan.
Feeling they had been unfairly deprived of Premier League status, Sheffield United brought a legal claim against West Ham alleging that its breach of Premier League rules enabled Tevez to play throughout the season when, by all rights, his registration should have been invalid.
As for Carlos Tevez
After the end of the 2006/7 season, relations between West Ham and Joorabchian and the rights owners deteriorated. Following West Ham’s avoidance of relegation, they became enthusiastic at the idea of keeping Tevez at the club. Indeed, in June 2007, West Ham made an offer to enter into a new 5-year contract with Tevez for amounts totalling £34m over 4 years.
Tevez wasn’t interested. Negotiations took place with Manchester United. West Ham did not conduct these negotiations - they were conducted by the Joorabchian and the rights owners. Nevertheless, any transfer required West Ham’s consent. West Ham was not co-operative over a transfer to Manchester United. In consequence, the rights owners sued West Ham to enforce the secret agreement. Eventually, that litigation was settled by Tevez being transferred to Manchester United and West Ham receiving £2m from the rights owners.
As for Joorabchian and the rights holders
Apparently, West Ham told the arbitration (see below), that they did not want to be paid anything for the United transfer since they had not paid anything originally when Tevez had come to them. Nice guys.
However, the Premier League insisted that West Ham as the holders of Tevez’s registration had to receive money as, in effect, a transfer fee. So the rights owners paid the £2m to West Ham against an understanding that Joorabchian would recoup that sum, plus his costs, from acting as an agent for West Ham in unspecified future player transfer dealings.
This was not before Joorabchian had been the subject of an international arrest warrant over allegations of money laundering. Joorabchian denied any wrongdoing, telling friends that the warrant was an attempt to bring him to Brazil as a witness in a "politically motivated" trial surrounding Corinthians.
And the disputes kept coming. Joorabchian sued West Ham for the money and those proceedings were settled very shortly before the hearing of the arbitration covered below. Needless to say, under the settlement, Joorabchian received a guaranteed amount for acting as consultant to West Ham in relation to player transfer activity.
100 fans at the Houses of Parliament
After six minutes of injury time, on 13 May 2007, Sheffield United are down. A month later more than 100 supporters are at the Houses of Parliament.
Sean Bean, a member of the board and one of United’s best known fans, was speaking after MPs invited a delegation from Bramall Lane to Westminster as their fight with the Premier League approached its most critical stage: "I am in a position to be able to express my opinion and that of many Sheffield United fans who feel aggrieved by the decision that was made by the original Premier League panel.”
That critical stage was Sheffield United’s last attempt to overturn the decision of the Independent Commission of the Premier League not to dock West Ham points.
It failed.
It would be another year before the FA arbitral tribunal (“FAT”) heard Sheffield United’s claim and issued its decision dated 18 September 2008. It was held that Sheffield United was entitled to recover damages from West Ham for breach of contract.
NB: West Ham fought on and on 2 October 2008 filed an appeal from the arbitral decision to the Court of Arbitration for Sport ("CAS"). Sheffield United said that the pursuit of an appeal to CAS was a breach of the arbitration agreement between the two clubs and that CAS had no jurisdiction to entertain any such appeal. The High Court agreed and the FAT decision was, effectively, final, Sheffield United was entitled to recover damages from West Ham.
The FAT
West Ham went into the arbitration in a weak position. It had already been established that they had committed “an obvious and deliberate breach of the rules” and demonstrated “dishonesty and deceit”. Their Premier League punishment was bemusingly lenient. So West Ham were required to push legal points hard as a complement to factual issues:
Could clubs take action against each other rather than the league?
Could West Ham have feasibly put in place arrangements to sign Tevez that were not in breach of the rules?
Did Tevez make a difference?
Regardless of whether Tevez made a difference to West Ham, wasn’t it simply Sheffield United’s poor performance that led to their relegation?
Could clubs take action against each other?
Much of the legal submissions were taken up with a technical legal question as to whether clubs, under the Premier League contract, had direct contractual duties to each other and could, therefore, make claims against each other or just to (and against) the Premier League.
West Ham submitted that neither their rule breaches under Rule B13 (utmost good faith) nor Rule U18 (prohibition on third-party influence) were intended to give rise to claims between member clubs, with the Premier League being the sole intended enforcer.
However, the FAT decisively rejected this narrow interpretation, grounding its reasoning in a fundamental analysis of contractual obligations arising from the Premier League Rules.
Could West Ham have signed Tevez in a way that was not in breach of the rules?
In short, the FAT was of the view that it was very unlikely that West Ham could have signed Tevez and Mascherano in the summer of 2006 without breaking Premier League rules.
West Ham had attempted to argue that the later transfer of Mascherano to Liverpool demonstrated that compliant contracts could be arranged. However, the FAT found that the circumstances surrounding the Liverpool transfer were "entirely different". Liverpool, being a "big four" club participating in the Champions League, operated in a different financial sphere, and the nature of Mascherano's transfer involved different financial terms and a structure that likely could not have been replicated by West Ham in the summer of 2006.
This scepticism was further supported by West Ham's conduct even after the IC’s decision, which the FAT considered amounted to "further breaches of the obligation under Rule B13 to behave with the utmost good faith towards the Premier League."
Amazingly, given their lucky escape from a points deduction, while assuring the Premier League that the secret agreement with Tevez had been terminated, West Ham were simultaneously reassuring Joorabchian and the rights owners that the substance of the agreement would still be honoured.
Causation and Football
The FAT concluded:
Tevez would never have been registered as a West Ham player if the true contractual arrangements had been disclosed to the Premier League at the outset.
Tevez would not have been playing for West Ham at all in the Premier League during the 2006-7 season if there had been no breach of the Rules.
The Premier League would have suspended Tevez’s registration for West Ham for the last two games of the season if it had known about the discussions with Joorabchian following the IC’s lenient decision.
But even then, the FAT said, it does not follow that West Ham would have been relegated, and Sheffield United accordingly not relegated, if Tevez had not been playing for West Ham.
So did Carlos Tevez relegate Sheffield United?
The hearing heard a lot of football evidence. Evidence was given by Graham Taylor, Frank Clark, Sam Allardyce, Alan Curbishley, Neil Warnock, Gary Speed, Lucas Neill, Henry Winter, Tony Gale, Peter Shreeves and Dario Marcolin, an assistant coach of Inter Milan. The judgment records the FAT being told of Sir Alex Ferguson said that it was Carlos Tevez who “kept them up” and that most of the 7 victories West Ham achieved in the last 9 games were “down to Carlos”; the Chief Football Writer of the BBC as saying: “Make no mistake, West Ham would have gone down without Tevez”; and Gary Lineker on Match of the Day describing Tevez as “the man who has ultimately turned their season around.”
West Ham’s witnesses including Lucas Neill were largely there to make the case for other factors like Neill’s own performances in defence.
Unsurprisingly, the FAT concluded that Tevez's contribution, particularly in the last nine games of the season, was crucial and that West Ham would have secured at least three fewer points over the season without him. This difference of three points was the margin by which West Ham stayed in the Premier League and Sheffield United were relegated.
The impact of Sheffield United’s poor performance
West Ham argued that even if the FAT found that Tevez had made a material difference to its points total, it was not conclusive that it caused Sheffield United’s relegation. West Ham argued that the true effective cause of Sheffield United’s relegation was its own poor performance on the field, particularly in the home loss to Wigan in the final game of the season. Sheffield United had needed only a draw to survive but lost 2-1.
West Ham argued that regardless of what they achieved with Tevez playing, Sheffield United could readily have saved themselves from relegation by better performances of their own. Whilst the FAT was somewhat persuaded by West Ham’s argument, ultimately, it decided it did not need to choose between the factors. It was sure Tevez had impacted West Ham’s points total significantly. Therefore, it found, at most Sheffield United’s own poor performance was an equally effective cause. It concluded that this was insufficient to displace the causation of another effective cause (Tevez). It summarised the law as: “The contract-breaker is liable so long as his breach was “an” effective cause of his loss; the court need not choose which cause was the more effective.”
FA Tribunal conclusion
The conclusions were blunt:
West Ham was in breach of:
Rule U18 in the contractual arrangements which it made in order to obtain Tevez as a West Ham player in August 2006.
Rule B13 in what it told, and did not tell, the Premier League about the arrangements.
West Ham was in further breach of Rule B13 in the discussions held with Joorabchian and his solicitor about the private agreement at a time when it was assuring the Premier League that the private agreement had been terminated.
If the Premier League had known what West Ham was saying to Joorabchian’s solicitor following the IC decision, the Premier League would have suspended Tevez’s registration as a West Ham player. Because the Premier League did not know, Tevez was available to West Ham for the concluding games of the season during which Tevez’s contribution was outstanding and in the FAT’s view worth at least three points to West Ham.
So, Tevez was worth at least three points to West Ham over the season and those made the difference between West Ham remaining in the Premier League and being relegated at the end of the season.
In consequence, West Ham remained in the Premier League and Sheffield United were relegated.
West Ham was, therefore, liable to Sheffield United in damages for breach of contract.
Settlement
After protracted negotiations, on 15 March 2009, West Ham agreed to a settlement paying around £18m in compensation to Sheffield United. This was later disclosed in the 2008 and 2009 accounts of Sheffield United.
Despite the vast increases in the size of the Premier League prize, the settlement remains the highest ever Premier League club v club legal outcome.
Until now?
So, Burnley v Everton (and others?)
What does this case indicate about future, similar compensation claims? Although the Premier League’s rules have evolved over time, many features of this case will still apply to the current and prospective cases:
Clubs can take action against each other not just against the Premier League.
Clubs can not appeal to CAS.
Clubs can only appeal to the High Court in very limited scenarios.
Arbitration challenges under Rule X of the Premier League rules of IC decisions relating to other clubs are unlikely to succeed - such tribunals are reluctant to interfere with original decisions if the decisions are neither irrational nor perverse.
Evaluation of the actual cause of relegation and damage will be thorough.
Even in cases of egregious and admitted behaviour by one club, the tribunal is likely to require tangible evidence of actual impact of the breaches on the relegated team - this FAT indicated it would have rejected “hypothetical exercises [that] involved too much reliance on assumption and speculation.”
The relegated team is unlikely to be penalised for their own performance levels - as long as the other club’s breach is “an effective cause”, it will not displace even poor performance from a relegated team.
Once established on a balance of probabilities, the breaching club is then liable to pay the relegated clubs damages in full.
I looked at the Burnley case in more detail in this explainer including how they may seek to make out their claim including by a loss of a chance claim.
It is clear that Independent Commission’s hasty decision in late April 2007 was controversial. It spawned multiple appeals, challenges and consequential cases. The decision not to dock points appears to have been clearly overly lenient given West Ham’s deceptive behaviour.
Unfortunately, for clubs found liable for serious wrongdoing in 2025, the lessons have no doubt been learnt.