Burnley are seeking compensation from Everton in relation to the Clarets' relegation in 2021/22
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A general view outside Everton's Goodison Park
A general view outside Everton's Goodison Park(Image: PA Wire)
Everton’s points deduction woes may be behind them but they might yet have to bear some financial pain. Burnley have brought a compensation case against the club in relation to their relegation from the Premier League in 2021/22.
The action taken by Burnley is borne from the club ending up in the bottom three in a campaign where Everton were found to have breached the Premier League’s profit and sustainability rules, a breach that they admitted, with the punishment for that coming in the form of a points deduction the following season.
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Everton suffered significant pain from their PSR breaches, landed with two points deductions for two separate seasons, served in the same 2023/24 campaign, something that saw them docked eight points after appeal.
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The club managed to stave off the threat of relegation despite the financial issues at the football club and tumult surrounding the ownership, and with the Toffees now under new ownership after the successful takeover by The Friedkin Group back in December, and survival this season all but assured, the PSR nightmare appears behind them.
There won’t be any retrospective points deduction punishments that Everton have to be concerned about when it comes to the compensation claim from Burnley, but there may well be some financial implications in the event of a legal victory for the Clarets. It is an unprecedented course of action to be taken, and there are no previous cases to go on to add any kind of guidance as to what might happen.
When the Toffees were found to be in breach of the Premier League’s PSR for the 2021/22 and 2022/23 financial years, five clubs moved to apply for potential compensation; Burnley, Leeds United, Leicester City, Nottingham Forest and Southampton.
The PSR breach for 2021/22 came with a 10-point deduction which was then reduced to six, while the punishment that was imposed in relation to the 2022/23 breach was two points. While both punishments ran concurrently last season, they were set apart from a legal standpoint when clubs were seeking compensation.
A two-point deduction in 2022/23 would have seen Everton still stay up on goal difference in a season when Leicester, Leeds and Southampton were all relegated. Those three clubs, as well as Forest, dropped their appeals upon the reduced penalty. But a six-point deduction in 2021/22 would have seen Everton finish on 33 points and in the bottom three, thus relegated to the second tier of English football.
The side that finished third-bottom that season was Burnley on 35 points, and the Clarets are pushing ahead with a search for compensation.
That is where the Burnley claim comes from, with the Clarets suffering a £58million drop in revenue as a result of their relegation to the Championship. The existence of parachute payments designed to soften the landing of relegation and stop clubs immediately sliding into the financial abyss, likely won’t be much of an issue.
The Clarets could claim for not only the direct financial impact of a loss of a portion of broadcast rights, but also the diminution in value of commercial deals as a result of their relegation.
Burnley’s case will likely hinge on the legal concept of ‘loss of chance’, defined as being where a claim for damages and compensation may arise ‘when a negligent omission by a professional leads to the loss of a valuable business opportunity or the loss of a valuable claim’. In this case, who is the negligent party will have to be determined, with Premier League law at the time not requiring matters to be determined in the one season, something which has since been amended. Everton would argue that they operated within the Premier League’s legal framework that existed at the time.
Lawyer and football finance expert Stefan Borson, writing on his Substack, commented: “If Burnley can establish that Everton’s admitted financial rule-breaking denied them a fair opportunity to stay in the Premier League, the tribunal can assign a probability-based value to the lost opportunity. For example, if the tribunal determines Burnley had a 50% chance of survival in a fair scenario, they could be awarded 50% of the financial benefits of staying in the top flight.”
What may hurt Everton is the admittance of the breach for that period, suggesting that it was known at the time and could have been done to provide a competitive advantage over their rivals in the bid to survive. Transfer business at that time will likely be scrutinised to ascertain what advantage, if any, arose from having been in breach, and where those breaches occurred.
Everton have engaged renowned silk Mark Howard KC to represent them this summer, with the hearing set to take place at the International Dispute Resolution Centre for Arbitration and Mediation in London.
The same commission that imposed a ten-point deduction on Everton initially is also deciding on the compensation for any claims for financial damages associated with it by aggrieved clubs. The commission’s chairman, David Phillips KC, had previously stated: “I am satisfied that the applicant clubs have potential claims for compensation.”
Everton challenged that position at the time by stating that their appeal, and subsequent reduction in the points deduction, was handled by a different commission.
Everton will make the case that Burnley’s own poor performance was the reason for their relegation from the Premier League, not the limited breach of PSR by the Toffees. But given that Everton picked up three points against the Clarets that season they may find that works against them.
The case is an important one for the Premier League, especially against the backdrop of the League’s legal battle with Manchester City over 115 alleged breaches of financial regulations over a decade-long period. A Burnley success could kick open the door to other claims from clubs over a loss of revenue for lost league positions or missing out on qualification for the UEFA Champions League or Europa League as a result of financial breaches by clubs that did achieve success. If some of the City charges are proven that could see plenty of claims come forward from clubs who may feel they suffered lost revenue as a result of that. It is a case that could have far-reaching consequences