Analysing Forest's Points Deduction
Nottingham Forest were deducted four points on Monday as the PSR saga rumbles on.
On Monday, it was confirmed Nottingham Forest had been deducted four points for a breach of the Premier League’s Profit and Sustainability Regulations (PSR) in the 2022-23 financial year.
The Premier League finally confirmed the decision, along with the publication of a report from the Independent Commission (IC), around 75 minutes after multiple national publications had broken the news.
The four-point punishment handed down to Forest is two points less than the six-point punishment dished out to Everton on appeal of their initial 10-point deduction for a breach in FY 2021-22.
However, Forest had actually breached by £34.5million over their allowable loss limit of £61m, whereas Everton had breached by £19.5m. The club to have breached by more has been given a smaller punishment.
There may well be indignation at Everton, who are preparing for their own case relating to a charge in FY 2022-23, which is expected to be heard before the end of March.
Forest, meanwhile, issued a strong statement condemning the Premier League.
Here, More Than A Game breaks down the basics of the IC’s report.
HOW DID THIS COMMISSION COME TO FOUR POINTS?
Let’s start at the end, as it were. The headline figure is, of course, the four-point deduction, which has plunged Forest into the relegation zone, albeit only one point from Luton Town in 18th place.
The IC — chaired by Mark A. Hovell and also inclusive of Mr Robert Glancy KC and Mr Steve Holt FCA — deemed that, due to a “significant breach” of the PSR, Forest should be deducted three points.
They have based this “starting point” off of the decision made by the Appeal Board (AB) in Everton’s case, which by this Commission’s reading, set a three-point marker as a starting point for any breach, with an inferred upper limit of an eight or nine-point deduction, based on the automatic deduction for a team entering insolvency (nine points). MTAG business writer
put this possible, 3-9 bandwidth to sports barrister Sam Cuthbert, who saw strength in that argument, in an interview recorded earlier this month.It appears that this Commission also saw strength in a similar bandwidth. Any breach categorised as “significant”, which is to a Commission’s discretion but, based on the evidence we have at hand, encompasses both £19.5m over the allowable limit and £34.5m, must result in a points deduction with a three-point “starting point”. Depending on the scale of the breach “within the band”, points can be added on, or conversely could be lowered if certain mitigation or justification is accepted.
In this case, due to the scale of Forest’s breach, a further three points were added on, taking it to a six-point deduction overall.
Based on the precedent of Everton’s case, and the fact that Forest’s breach was bigger, the midlands club are then perhaps fortunate that this Commission — and the Premier League — agreed that Forest’s “exceptional cooperation” and an “early plea” were to be rewarded with two points. Note that in Everton’s case, David Phillips KC — the chair of the IC — did not give Everton credit for cooperating with the Premier League, although the Toffees did not put forward an early plea of guilt.
Forest did ask for their “early plea” to be considered as worthy of a third of any punishment (i.e. two points), with a further reward for their cooperation with the Premier League, but the Commission disagreed.
This IC, unlike either the Commission in Everton’s first case or the subsequent AB, set out a tariff calculation.
WHAT DID THE PREMIER LEAGUE ARGUE?
The Premier League set out that they believed an eight-point deduction would be suitable for Forest’s breach, but they did accept that the club had both admitted the breach immediately and “cooperated extensively” during the process. The Premier League stated:
“This is substantial mitigation which together justify a material reduction in sanction.”
The Premier League argued that this mitigation, as it were, should be worthy of two points deducted from any punishment.
Relative to Everton’s case, there is strength in the Premier League’s logic. The League submitted the following:
Forest’s excess was 77% larger than Everton’s
Forest’s excess was 57% of the applicable threshold (£61m), whereas Everton’s excess was 19% of the applicable threshold (£105m).
Therefore, the Premier League set out that — before taking mitigation into account — Forest should be punished based on the below calculation:
A minimum of three points must be deducted (based on the AB’s decision in Everton’s case).
Forest’s was 1.77 times that of Everton’s. Therefore, 3 x 1.77 = 5.31.
Three plus five equates to an eight-point starting point prior to mitigation.
The report continues: “The Premier League then considered the extent to which the sanction should be discounted to reflect mitigation. It suggested that the combined mitigation provided by the two factors of an early plea and cooperation justifies a discount of two points. This would be a meaningful reduction to a points deduction of the size suggested by the Premier League as the starting point (i.e. two points off eight) and would satisfy the twin objectives of fairly rewarding Forest for its conduct and appropriately incentivising other clubs in future cases to adopt a similarly cooperative approach.”
It should be noted that the Premier League, in contrast to the Everton case, did not put forward any aggravating factors other than the scale of Forest’s breach.
WHAT DID FOREST ARGUE?
Forest claimed that any points deduction should be suspended, going against the case law laid out by the AB in Everton’s case, which states only an immediate deduction can fulfil the requirements of the PSR.
Their defence team, led by Nick De Marco KC, argued this point, claiming that Everton had never specifically asked for a points deduction to be suspended.
The Commission, however, fell back on case law, agreeing with the AB that an immediate deduction must be implemented in order to eradicate any sporting advantage enjoyed over the period of the breach.
Forest also claimed they should receive a 50% “discount” due to their cooperation and guilty plea. They argued that Everton’s breach was actually “far more serious” due to the Toffees losing £124.5m over a three-year reporting period, compared to Forest’s £99.5m losses.
What might have swayed the Commission from agreeing with the Premier League’s request for a starting point — prior to mitigation — of eight points, is Forest’s assertion that this would place them right on the upper limit of the range laid out loosely by the precedent of Everton’s appeal (i.e. three-to-nine points).
Forest argued that in the vast majority of cases in which clubs have breached PSR, they would anticipate a maximum punishment of eight points, as to therefore fall below the automatic deduction applied in the event of insolvency.
MITIGATING FACTORS
Aside from their early plea and cooperation with the Premier League, Forest also argued four other heads of mitigation.
The club contested that it was in a “unique” position, due to having been promoted from the Championship by winning the play-off final at the end of the 2021-22 campaign.
To support this claim, Forest used the examples of Fulham and Bournemouth, who were promoted alongside them, but had been in the Premier League as recently as 2021 and 2020 respectively, and were therefore in receipt of parachute payments — the Cottagers had received £44.41m, while the Cherries had taken in £79.77m. Forest also pointed to their threshold, having only been in the Premier League for one season, only being £61m, rather than £105m.
The Commission did not agree with Forest’s insistence they were in a “unique” position, pointing to 12 other clubs having been promoted without the benefit of parachute payments over the last decade. The Commission deemed that Forest were well aware of the threshold they were working towards, and therefore should have acted sooner to keep within that limit. It also noted that Forest spent excessively (to the tune of £142.8m net) in FY 2022-23.
This brings us to another of Forest’s points of mitigation — Player A.
Brennan Johnson was sold by Forest at the end of last summer’s transfer window, with Tottenham spending £47.5m on the Wales international who, as a ‘homegrown’ product, will bank Forest pure profit for the books.
Forest argued that, had they sold Johnson prior to June 30th, 2023, then they would have been within the PSR. However, they elected to hold out for a deal that was more profitable and sustainable for the club, selling Johnson to the highest bidder later in the transfer window.
This was seen as a “golden mitigation” argument by Forest, who relied on the “near miss” of having sold Johnson after the deadline. Yet, as any reasonable observer should have expected, this argument fell flat.
Forest sold Johnson two months after the PSR deadline, despite knowing they had to do so beforehand in order to make ends meet. And, in fact, they had rejected multiple offers for the youngster earlier in the summer.
BRENNAN JOHNSON OFFERS
30.06.23: Atletico Madrid — £42.9m
21.07.23: Brentford — £32.5m
24.07.23: Brentford — £35m
28.08.23: Brentford — £40m
01.09.23: Tottenham — £47.5m*
*Bid accepted
Forest turned down four offers for Johnson prior to his sale to Spurs — one from Atletico Madrid, which came on the final day of the PSR deadline, and three from Brentford, two of which came in the following month.
The club contested that it should be able to refer to the Johnson sale as a “near miss” in PSR terms, as it had always intended to sell the player, who was deemed to be their only asset capable of attracting a big enough fee to ease their concerns.
Yet the Commission, ultimately, found in the Premier League’s favour, deeming Forest to have been “sailing close to the wind” by knowing they would only have two weeks at the start of the window to sell Johnson.
The panel also, fairly, suggests Forest could have taken up the option to sell Johnson earlier, for less money, to show a willingness to fall in line with the PSR.
The Commission decided selling Johnson two months late did not constitute a “near miss”, stating:
“This business decision flies in the face of mitigation. In all these circumstances the Commission determines that it cannot be rewarded as a mitigating factor.”
The decision to sell Johnson in September also impacted one of Forest’s other mitigation attempts — that they did not enjoy a sporting advantage.
While the Commission noted that “the inference of sporting advantage, and therefore of unfairness, is not an irrebuttable presumption drawn from the mere fact of a PSR breach”, the panel was comprehensive in its rejection of this argument.
In the main, this was down to Forest’s huge expenditure on recruitment across the 2022-23 campaign, and then the fact that Johnson made four appearances — one in the League Cup and three in the league — at the start of the season before his move to Spurs went through, despite the club arguing that as Johnson had not played a full game (strictly speaking, this is true, though he did play 240 minutes in the league across three appearances), with Forest picking up three points from those matches.
“Forest effectively went through the entire 2022/23 season with a squad that it could not afford (if it wanted to comply with the PSR) and with Player A that it had not sold. The Commission has not been asked to consider this as an aggravating factor; the Premier League advanced none in the Complaint, but it cannot ignore this and give mitigation to Forest when it is right to infer that Forest would have enjoyed a sporting advantage over that season.”
Forest’s mitigation based on the “reasons for excess” were also rejected.
While Forest were found to have simply made a mistake in believing they could claim back more COVID-related add-backs than they were allowed to, it was nevertheless judged as not a “reasonable” error to make.
Likewise, any costs attributed to promotion to the Premier League were also rejected as mitigating factors.
And, while the Commission had “sympathy” with Forest in regards to their forecast of finishing in 12th place last season, it ultimately did not allow this “optimistic” prediction as mitigation for a loss of anticipated merit money.
WHAT NEXT?
Forest released a venomous statement, taking aim at the Premier League — and the Commission — for not finding in their favour when it came to mitigating circumstances. Quite ironic, given the Premier League gave Forest some grace for, among other matters: “Releasing a brief and neutral press release regarding the proceedings.”
You can read the full Forest statement by clicking the button below, but it is safe to say owner Evangelos Marinakis is not best pleased.
With the new expedited guidelines, Forest now have until close of business on Monday, 25th March to lodge an appeal, should they wish to do so.
And, what next for Everton? While Forest will stew in the bottom three until at least March 30th, Sean Dyche’s team will be hoping for the best from their hearing, the result of which must be given by April 8th, at the latest.
Another points deduction seems likely, and based on the precedent set here, that might well start at three points before possibly being scaled up depending on the size of the breach, and then potentially down depending on mitigation.
However, there are certainly some points of contention in this report that Everton may attempt to use in their favour for their upcoming case. For example, they were penalised more heavily for a lower breach of their respective threshold, while they were also said to have aggravated their breach with “reckless” spending on players, whereas Forest were not.
A decision on an appeal would be due from Everton by April 15th, and that process could drag on until after the end of the season.
One thing is clear — it’s another royal mess as the relegation battle looks increasingly likely to be settled off the pitch and, instead, in the courtroom.
By Patric Ridge