Burnley compensation case could have wider impact

An independent commission ruled on Wednesday that Everton must pay Burnley £35.1m after their breach of the Premier League’s Profitability and Sustainability Rules (PSR) in 2021-22 was found to have given them a crucial sporting advantage.

Everton stayed up and Burnley went down in that season but, four years, on there is now a big bill to settle. Everton, who said in a statement they were “surprised and angered” by the verdict, intend to fight on but the case is likely to have long-term implications.

This all dates back to the 2021-22 season, when Everton were found to have breached PSR with an overspend of £19.5m. Everton finished that campaign in 16th position but, importantly in this case, Burnley ended up relegated in 18th. The final gap between the two clubs was four points.

Burnley have always felt wronged, believing that Everton’s breach resulted in them enjoying an unfair sporting advantage. The claim has consistently been made, all the way back to May 2023 with the first legal action involving Burnley, that Everton would have been relegated had they kept within spending rules.

Everton, it is worth stating, have always been willing to accept that their PSR breach “conferred a sporting advantage”. They admitted as much when reaching an out-of-court settlement with Leeds United last year, a team they finished one place above in the 2021-22 Premier League season. That one position was worth in excess of £2m through the merit payment system.

Everton have known their PSR breach carried implications but they have consistently disputed the “extent and effect” of the sporting advantage they held over Burnley. It was also argued that Burnley suffered no financial loss during their one season in the Championship, with Premier League football quickly returning to Turf Moor in 2023-24.

A three-person panel of David Phillips KC, Alan Greenwood and Nick Igoe — the very same commission that had hit Everton with an initial 10-point penalty at their first PSR hearing with the Premier League in October 2023 — reached a pivotal conclusion after hearing all submissions.

“We conclude that, on the balance of probabilities, Everton’s breach of the PSR caused Burnley to be relegated,” they wrote.

That decision, in part, was reached after Burnley had put forward detailed statistical modelling to support their claims. Two academics, Dr Rob Wilson and Will Daniels, established a link between player-related expenditure and points won in the Premier League over 12 seasons and calculated that Everton’s overspend of £19.5m had resulted in a gain of between 7.13 points and 3.85 points.

Everton had pushed back on those findings and questioned whether the £19.5m overspend ought to have been spread over the three-year PSR assessment period. Their own calculations, even when applying the whole overspend to 2021-22, found that the advantage enjoyed by Everton would not have bridged the eventual four-point gap they held over Burnley last season.

The commission, though, found Burnley’s evidence to be “more compelling” and was even “lent support” by Everton’s own submissions. We await Everton’s appeal. That was lodged immediately and will likely be heard before the end of the year.

Everton have attempted to postpone any payment directly to Burnley due to concerns over the relegated club’s ability to return any money. They state in the ruling that Burnley’s financial position is “so weak that there is a real risk that if the appeal were to succeed, Burnley would be unable to repay compensation that it would have received from Everton.”

Compensating clubs on the back of a costly relegation is not new. Sheffield United eventually reached a £20m settlement with West Ham United relating to the impact of star man Carlos Tevez in the 2007-08 Premier League season. He was ruled to have played when ineligible, scoring a number of key goals to help West Ham avoid the drop at Sheffield United’s expense.

“This decision is a watershed moment in Premier League financial regulation,” James Philippsohn, associate at Quillon Law told the New York Times. “By successfully applying ‘loss of chance’ principles, Burnley have opened a litigation pathway that transforms PSR breaches from a sporting sanction into a civil liability event

In the future, depending on the outcome of lengthy ongoing proceedings, clubs may wish to make a claim against Manchester City.  Certainly it is good news for sports lawyers.