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An independent disciplinary commission has ordered Everton to pay nearly £40 million in damages plus interest to Burnley, stemming from the Toffees' breach of Profitability and Sustainability Rules (PSR) during the 2021/22 campaign.
Burnley were relegated that year, therefore losing out on a significant sum of money that could have been earned with Premier League membership in 2022/23.
The Lancashire club successfully argued that Everton gained an unfair sporting advantage by overspending. Burnley also established that if Everton’s subsequent six-point deduction had been applied during the 2021/22 season instead of retrospectively, it would have been the Merseysiders spending the following year in the Championship.
Burnley win landmark legal case and could pocket £40m
The Clarets have been up, and down, twice since 2021/22 but only now has a decision been passed down.
The case marks the first time a Premier League club has successfully won substantial damages from a rival for financial rule-breaking.
"This decision is a watershed moment in Premier League financial regulation," said James Philippsohn, Associate at Quillon Law. "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.
“The significance of this decision lies in the willingness to award substantial damages based on a lost opportunity, a principle that could have far-reaching consequences where regulatory breaches are alleged to have caused financial harm," Philippsohn added.
The precedent set by this £40m award will have a significant impact on boardrooms of English football clubs, altering the risk profile for teams who might see a circumvention of the financial rules and taking a points deduction as a necessary evil.
While Everton have lodged an appeal against the judgment, describing it as 'fundamentally flawed', the wider implications loom large over the rest of the league.
"The £40m award will focus minds considerably, and all eyes now turn to the Manchester City proceedings, where the aggregate compensation exposure across multiple claimant clubs could dwarf anything previously seen in domestic sports law, should City be found to have been in breach of the rules," Philippsohn warned.
With Manchester City facing 115 unprecedented charges for alleged financial misconduct, a guilty verdict could trigger a tranche of lawsuits from rival clubs seeking compensation for lost titles, Champions League revenue, and top-flight survival.
The bulk of City's 115 charges relate to a time-frame between 2009 and 2018, during which time the club won seven major honours, or nine including the Community Shield.
