The Premier League is to urgently review its profitability and sustainability rules (PSR) in the wake of a successful challenge by Leicester City that legal experts have called “significant and embarrassing”.
Leicester escaped punishment despite breaching PSR spending limits by £20m after their lawyers successfully argued that the club were not bound by the rules because their accounts were not finalised until after their relegation in 2023.
The decision by an independent appeal board exposed a loophole in the Premier League’s rulebook that other clubs facing similar charges could also exploit in order to avoid the points deductions levied on Everton and Nottingham Forest last season.
Leading sports lawyer Simon Leaf, a partner at Mishcon de Reya in London, told City A.M.: “The decision of the Appeal Board will come as a significant and indeed embarrassing blow to the Premier League and its Rule Book.
“Leicester and the club’s legal team have exploited a significant lacuna in the PSRs, which effectively confirms that relegated clubs that have a financial year that ends in June have a free pass when it comes to complying with the PSRs.
“For three extremely senior lawyers to all agree that the PSRs ‘would seem to have been drafted without taking [some of the other Premier League Rules] into account’ demonstrates that urgent action will need to be taken to plug this gap.”
The Premier League said it was “very disappointed” after the appeal verdict was published on Tuesday, which it said did not take into account the spirit of the rules given that Leicester’s overspending was not in dispute.
“If the Appeal Board is correct, its decision will have created a situation where any club exceeding the PSR threshold could avoid accountability in these specific circumstances. This is clearly not the intention of the rules,” it added.
“It is of critical importance that the Premier League is able to enforce its rules consistently to maintain the principle of fairness. The League will now consider what further action it can take to ensure this is the case.”
The PSR defeat is a major blow to the Premier League’s ability to enforce its spending rules while it is engaged in multiple legal disputes with champions Manchester City and another historic case involving Chelsea.
Leaf said the Leicester decision would likely “embolden others that are presently undertaking their own legal challenges against the Premier League and those that may be subject to charges in the future”.
He added: “It demonstrates that despite the millions of pounds the Premier League has spent on lawyers in recent years, significant improvements are required to ensure that the regulations are applied as intended.”
The Premier League did not comment, but sources said its rulebook was regularly updated throughout the season as needed and agreed by clubs, for instance in relation to associated-party transactions and the owners and directors’ tests.