By Keith Weir
LONDON (Reuters) - The credibility of European soccer's Financial Fair Play (FFP) rules will be questioned after it emerged that Manchester City and Paris St Germain would not be banned from the Champions League for breaching them.
City and PSG have been offered settlements for breaking rules designed to limit clubs' financial losses and those agreements could be rubber stamped as early as this week.
The punishments likely to be meted could include fines or limits on the size of squads that clubs can field in Champions League matches next season but a ban - the ultimate sanction - is not believed to be on the agenda.
Executives from rival clubs may cry foul that big spenders such as City, backed by cash from Abu Dhabi, and Qatari-owned PSG are not being hit harder. Imposing a fine for running up excessive losses seems an incongruous punishment for clubs with such deep pocket.
Daniel Geey, a lawyer with Field Fisher Waterhouse in London, said that UEFA had only recently made it clear that it would allow clubs to reach settlements as part of the process.
"The benefit of settlement procedures, which are common in European competition law, is that the company admits the breach and an appropriate sanction is agreed which usually prevents further appeals," he said.
"The settlement procedure does, however, allow for the possibility of aggrieved clubs to challenge the terms of the settlement," added Geey, who is the co-author of a new study on FFP.
UEFA's critics are likely to draw unfavorable comparisons with the treatment of Spanish club Malaga, who were excluded from the Europa League this season because of late payments to creditors, suggesting smaller clubs suffer more.
Banning big clubs from the Champions League runs the risk of damaging a competition that generates revenues of around 1.3 billion euros ($1.80 billion) from sponsors and TV companies.
SPONSORSHIP OR SUBSIDY?
This year was seen as the crunch time for enforcing the break-even rules in FFP, a blanket term for measures designed to put European soccer on a more stable economic footing.
UEFA has emphasized all along that the rules have been developed in coordination with European clubs and not dreamed up by president Michel Platini to punish the nouveau riche of the English Premier League.
The break-even criteria seemed simple in their summarized form but the details left plenty of room for nimble accountants to exploit.
Clubs were allowed to lose no more than 45 million euros over the last two seasons.
City, chasing a second Premier League title in three years, had combined headline losses of 150 million pounds ($252 million) between 2011 and 2013 in what would appear at first glance to be a flagrant breach.
However, a raft of exemptions means clubs can discount spending on youth development, stadium infrastructure and longer-term contracts and allowed City to say it believed it complied with FFP.
Another gray area is sponsorship where eyebrows have been raised over City's backing by Abu Dhabi's Etihad Airways and lavish support for PSG from the Qatar Tourism Authority.
Teams have to convince UEFA's club financial control body that sponsors with close links to their owners are paying market rates rather than channeling subsidies to them.
Karl-Heinz Rummenigge, chairman of European champions Bayern Munich, drew attention to PSG's funding earlier this year.
"We all know about the money stream coming in from Qatar, allegedly about 200 million euros per season," Rummenigge said in February.
"I hope that Michel Platini will take this matter seriously. Clubs that breach the FFP rules will have to pay the price."
UEFA has been keen to stress the independence of the panel, led by former Belgian Prime Minister Jean-Luc Dehaene, which has been investigating clubs over FFP.
There was surprise last week when former French international Platini was quoted as saying he did not expect there to be expulsions from European competition from next season.
In its defense, UEFA believes that FFP is starting to have a beneficial impact, with total losses for top flight clubs across the continent falling by 600 million euros to 1.1 billion euros in 2012.
Some top clubs believe that UEFA will be satisfied with firing a "warning shot" in this year's initial judgements and that repeat offenders can expect tougher sanctions in 2015.
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(Writing by Keith Weir,; editing by Martyn Herman)