QPR challenges legality of Championship financial fair play rules

In a statement, QPR confirmed that legal proceedings against the rules, imposed by the Football League, are "ongoing".

QPR was promoted to the Premier League from the Championship in the 2013/14 season but its relegation back into the Championship was confirmed following a 6-0 defeat to Manchester City on Sunday.

For the 2013/14 promotion season, QPR reported losses of £9.8 million. However, that figure did not include a write down of approximately £60m worth of loans by the club's owner and other shareholders.

Rules in force at the time meant Championship clubs could be issued with a fine if they exceeded limits on losses set out under the rules and gained promotion to the Premier League during the course of the season where they were in breach of those rules. The limits in place at the time allowed Championship clubs to report losses of up to £3m or £8m if the latter figure accounted for owner investments in club infrastructure.

Under the rules, clubs that recorded losses above the limits set would be a fined a proportion of the amount they overspent above the limit for the first £10m in losses above those permitted by the rules. Where clubs lost more than £10m than what they were permitted to, they would be fined £6.681m for the first £10m they lost and 100% of the amount they recorded as losses on top of this figure.

QPR's legal action pre-empts any charge the Football League could have brought against the club for the 2013/14 accounts the club published in March.

"Any charge against QPR (if any) for breach of FFP rules shall not be commenced pending the outcome of that challenge," QPR said.

Sports law expert Trevor Watkins of Pinsent Masons, the law firm behind Out-Law.com, said: "The Football League is due to meet next month where it will determine issues relating to the 2015/16 season, notably the issue of acceptance of membership of clubs relegated from the Premier League. QPR's losses for the 2013/14 exceed those permitted under the rules in place at the time. The Football League at that meeting is likely to consider whether to sanction QPR for that breach. In the extreme, and on top of any fine, QPR could be refused membership of the Football League."

"QPR's legal challenge looks to pre-empt the meeting of Football League chairmen. However, if QPR is unsuccessful in its challenge before the independent tribunal, it could decide to explore a further challenge outside of the Football League's dispute resolution process, if they are able to do so, which could create further uncertainty for all the parties involved," he said.

Competition law expert Angelique Bret of Pinsent Masons said that QPR's case could be based on similar arguments to those raised in another on-going legal case brought against UEFA over its FFP rules.

Since the 2013-14 season, UEFA has had the power to ban clubs from playing in its flagship Champions League competition or Europa League if clubs that have qualified for those competitions fail to 'break even' over a three year period. Football agent Daniel Striani is challenging the validity of the FFP break even rules in the Belgian courts.

"Striani's arguments are based on the competition rules and fundamental freedoms grounded in the Treaty on the Functioning of the EU," Bret said. "Amongst other things, Striani is challenging the UEFA FFP rules on the basis that they may be  inherently anti-competitive because they restrict clubs' freedom to manage their own resources, which could distort competition between clubs.. It may be that QPR will raise similar arguments in its case against the Football League."

Expert in resolving major sports law disputes Julian Diaz-Rainey of Pinsent Masons said: "Whilst we can only speculate on the precise basis of QPR's legal challenge against the Football League's FFP rules, it would be interesting to see whether arguments are raised not just on competition grounds but on the way the rules are interpreted and applied."

Last year, new financial controls that differ from those that applied during the 2013/14 were agreed by Championship clubs and come into effect at the start of the 2016/17 season.

Under the new regime, clubs will be able to run up losses of £15 million or greater and up to £39m maximum over a three season period provided that they comply with a number of financial regulations. "This will include providing evidence of secure owner funding and future financial information for the two seasons ahead," the Football League said in a statement at the time.

Championship clubs that run up losses of less than £15m over a three season timeframe would not have to provide details to the Football League about how those losses will be funded.

To address the issue of promotion and relegation, clubs that fall out of the Premier League into the Championship will be subject to a maximum loss threshold for the three seasons determined in accordance with an "average allowance".

At the moment, Premier League financial regulations permit clubs to lose up to a maximum of £105m over three seasons, or £35m a season for the purpose of the average allowance calculations. A maximum £13m average allowance figure would apply for every season within the three year period that a club spends in the Championship.

Although the new rules do not take force until 2016/17, the Championship clubs have agreed to new transitional arrangements that will see clubs able to run up maximum losses of £13m next season.