Saracens salary cap award published - a summary in 10 minutes

Premier Rugby has published the full decision of the Disciplinary Panel ("Panel") appointed under the Premiership Rugby Salary Regulations ("Regulations") to rule on the charges of breaches of the Regulations by Saracens Rugby Club.

The result of the decision, by the panel chaired by former Supreme Court Judge, Lord Dyson, that Saracens would be fined about £5 million, and docked 35 points in the current Premiership Rugby season, has been known since November, but the full decision of the Panel has not been released until now.

The release follows the recent announcement by Premier Rugby that Saracens would be demoted to the Championship (the league below the Premiership) at the end of this season in any event, after Saracens failed to provide evidence of compliance with the Regulations. In reality, Saracens decided not to try to prove compliance and to accept their fate of relegation.

Since the finding of breach of the Regulations, the debate around Saracens' actions has been intense, but nuanced. The England rugby squad recently came together to contest the Six Nations, which starts next weekend. The players made it clear publicly that they had reassured the Saracens players in the squad that they held no grudges against them for the salary cap breaches, and blamed the club.

Many fans initially argued that the punishment imposed by the Panel was insufficient, because the strength of Saracens' squad would mean that they could compete for the higher places in the league, even with the heavy points deduction. Speculation is now raging over how Saracens and its stellar squad of players will cope with playing in the Championship next season.

The release of the Panel's award now allows us to understand its reasoning in imposing this sanction. The award runs to 103 pages, so to save you some reading time, here is a summary of the decision:

Competition law

  • Saracens alleged that the salary cap regime is incompatible with competition law (in both EU and English law which are the same for all relevant purposes), in that salary caps restrict the ability of clubs to compete with each other for the services of players.
  • The panel felt that there was no reason to make a different decision on salary caps from that made by the arbitral panel in QPR v EFL (Football Disciplinary Commission 19/10/17), which found that the rules regarding Financial Fair Play in football had as their object ensuring financial stability and promoting a competitive balance between clubs. The effect of that was to make results less predictable and thereby make the sport more attractive to fans and sponsors. That was also the objective in Premier Rugby adopting the Regulations.
  • There was no need for any fair salary cap scheme to apply consistently across Europe. European countries can and do have different salary cap regimes but the only question was whether the Regulations had an anti-competitive object. They could have a proper and lawful object whilst seeking to achieve it in different ways from other European leagues.
  • The salary cap did not have an appreciable anti-competitive effect in practice. There was little evidence to show the anti-competitive effect, as the evidence was given by Mitesh Velani, the CEO of Saracens, who had copied most of his evidence from a statement given in the previous salary cap disciplinary proceedings brought in 2015, which were settled without resolution. The evidence regarding the potential markets for elite rugby players (whether English or worldwide) did not prove an appreciable effect of the cap on competition.
  • The expert evidence relied on by Saracens failed adequately to consider what the position would be if there were no salary cap, so failed to prove the effect of the cap versus the 'counterfactual' scenario. Nigel Wray, the Saracens owner, said in evidence that he supported the idea of a salary cap in principle, but said that he felt the way that the cap was implemented by Premier Rugby was not working. The panel therefore felt that a realistic counterfactual would be that the Premiership would impose on itself some financial restriction, perhaps a different form of salary cap with an independent person overseeing the system. That meant that proving a significant effect was very difficult and Saracens failed to do so.

The Panel's function

  • Premier Rugby argued that the Panel's function was to review the findings of the Salary Cap Manager (an official of Premier Rugby) on the level of salary paid, and to uphold them or depart from them, allowing a margin for the SCM's appreciation. The Panel agreed, but only because the level of salary was defined in the Regulations as not including payments which the SCM reasonably considered did not constitute salary. The SCM was also entitled to take into account any matters which he reasonably considered relevant. Therefore, the Panel would not disturb the findings of the SCM on the level of salary paid unless he made a finding which was not reasonably open to him.

The breaches of the Regulations

  • In 2016/2017, Saracens were guilty of breaching the Regulations by making "co-investments" with players into properties, which the SCM reasonably concluded was done in order to supplement the players' wages, rather than only because of the merit of the investments. The investments were funded by mortgages and by loans from Nigel Wray and others, so that the player would benefit from any return on the investment, but was protected from any loss. Players were also enabled to acquire shares in properties, and to live in the properties, with the benefit of loans from Wray and others.
  • Between 2016 and 2019, a company owned by Nigel Wray's daughter and son-in-law also paid significant sums to players. These were said to be fees for separate commercial services by the players, but there was no written contract for those services, and the fees were lump sum fees not linked to specific appearances of events. The Panel found that these payments were rightly considered to be salary.
  • Between 2018 and 2019, Mr Wray and other individuals connected to Saracens invested in a company owned by a player. the SCM concluded that the share in the company acquired was worth £800,000 less than the amount paid, and treated that amount as salary. The Panel agreed that that was a reasonable conclusion for the SCM to come to.

The sanction

  • The sanction under the Regulations for breaching the cap is, barring some exceptions, £3 for every £1 by which the "overrun" of £350,000 is exceeded. This produced a figure of £5,360,272.
  • The combined effect of the breaches in two seasons could have resulted in the imposition of the maximum points deduction of 35 points for each season, producing a total of 70 points.
  • The Panel considered that the breaches of the Regulations were reckless, and very serious. They saw no reason to reduce the financial penalty but took the view that the full points deduction of 35 points for each season of breach, to be deducted in one season, would almost certainly guarantee relegation from the Premiership, and that would not be required to satisfy the purpose of the Regulations. They therefore imposed the two penalties of 35 points "concurrently", so that only 35 points were deducted.

Conclusion

It is sometimes said, flippantly, that a decision of an arbitral tribunal which makes no-one happy is a good decision. In that sense, the Disciplinary Panel's decision was successful - it disappointed Saracens's attempts to avoid the salary cap Regulations, but disappointed many rival fans and clubs by ensuring Saracens would not be relegated.

Once the Panel had decided that its decision was essentially a review of the decisions of the Premiership's SCM, the outcome was almost a given. The big question was the sanction.

The Panel's decision has, however, paved the way to Premier Rugby relying on the findings of past breaches to relegate Saracens for failing to prove ongoing compliance.

The Panel's decision was measured and balanced, but there is no doubt it will significantly affect the future of elite English rugby. The story is not over.