Everton have been ordered to pay £35m in compensation and interest to Burnley after another landmark ruling against the club. It is the latest punishment applied to the Blues for what are now historic breaches of financial rules and the verdict, delivered by an independent commission, has caused fury within the club - which has already launched an appeal.
Here, the ECHO’s Everton FC correspondent Joe Thomas sets out the key arguments, how they unfolded and why the outcome is both controversial and significant.
Background to the case
This case stemmed from the Blues’ first breach of the Premier League’s profitability and sustainability spending regulations (PSR), which related to the financial period ending in June 2022 and for which Everton were ultimately deducted six points (a total reached reduced from 10 points on appeal). The Clarets finished four points below Everton that season - in which the Blues sealed survival with the dramatic comeback win over Crystal Palace in the final week of the campaign - and were relegated to the Championship.
Everton’s punishment was applied in the season after the offence was committed, leading Burnley to argue they could have stayed up had Everton not overspent by £19.5m across the four-year accounting period in question. The claim was therefore centred on the losses suffered by Burnley as a result of their relegation and the club entered proceedings seeking £51.7m. Everton had previously settled a dispute with Leeds United, also relegated in the same season as Burnley, out of court.
The panel of three that oversaw this claim was the same that gave Everton the 10 point deduction for the 2021/22 breach. Everton were unsuccessful in calls for the case to be heard by a different commission.
The issue of sporting advantage
A point key to understanding this case is that both clubs accepted Everton gained a sporting advantage by virtue of the PSR breach. Disagreement on this matter was over how much advantage it provided to Everton, over what period of time it should be calculated and what impact, if any, it actually had on Burnley’s relegation.
So, who argued what?
For Burnley the argument was straightforward. The club’s representatives insisted Everton gained enough of an advantage through their rule breach to avoid relegation. Essentially, particularly given the margins were so fine, Everton stayed up at Burnley’s expense because of the overspend. Everton refuted this. The club’s lawyers posited that while a sporting advantage was gained, it was impossible to quantify it. In any case, it was Everton’s position the club’s PSR breach did not cause Burnley’s relegation.
Couldn’t Everton have just sold another player?
At the core of the case was determining what impact Everton’s breach had on the fortunes of both clubs in the 2021/22 season. This took the argument into a range of hypothetical situations based around what would have happened had Everton not overspent. Getting to the bottom of this was a messy affair in itself because there were different ways Everton could have achieved compliance.
The easiest would have been for the club to have sold a player/players to bring in £19.5m between the end of the Premier League season in May and the June 30 deadline for PSR submissions. This would have enabled the club to fall within the rules without any loss of advantage on the pitch over the season that had just ended.
Everton, unaware they were set to breach PSR rules, did sell Richarlison to Tottenham Hotspur in this period for an initial £50m - a fee the club believed was beneath his true value. In his evidence to the original hearings, then-owner Farhad Moshiri detailed the rejection of an offer for an unnamed player, the sale of whom would have brought Everton within the rules.
The panel stated the decision to reject that approach showed it could not work on the basis the club would have sold him in order to comply with the rules, writing: “Mr Moshiri’s dismissal of the offer, just one month before Everton had to achieve compliance with the PSR, was unequivocal. We consider that in light of that evidence it is not realistic for Everton to claim that, in the counterfactual, it would have sold the player in summer 2022.”
Everton’s poor recruitment comes up again
In terms of selling other players, the panel pointed to a damning verdict on Everton’s recruitment over the period. Everton argued the club could have sold other players or not made certain signings and have been compliant whilst still staying up because their impact was so limited it did not improve their sporting performance.
Referring to previous judgements, the panel decided this was irrelevant because what mattered was the money Everton spent, not the value - or lack of it - those signings ultimately had. And in relation to potentially selling any of those players to draw the club under the £105m overspend limit, it ruled: “In particular, the commission questions whether the club could realistically have sold any of the named players. Daniel Purdy, Everton’s then Head of Recruitment, provided evidence to the original PSR hearing in which he emphasised the challenge he and colleagues had faced trying to secure player sales in order to comply with the PSR.”
Everton’s strongest point
Everton’s most compelling argument was the point at which the club actually breached the rules. PSR calculations are drawn up after the end of the football financial year, June 30. This means a club can do whatever it takes to comply with the regulations before that date and opens up the potential to do what was suggested above and sell a player or players after the season has ended but before the end of June. In that case, a club would have had the benefit of that player for the season in question and yet be able to use his sale to conform with the rules.
This also opens up the potential to argue that Everton being on the pathway to a PSR breach through the season did not cause Burnley to be relegated. Burnley were relegated after the final game of the season in May but Everton’s breach was not confirmed until July 1 - after the June 30 deadline for compliance.
When is a PSR breach committed? The greyest of grey areas
The timing of a PSR breach was at the heart of Leicester City’s battle with the Premier League following their relegation in 2023. Leicester argued that it was relegated in May and therefore the Premier League could not prosecute it for a breach of Premier League rules confirmed on July 1 because, by then, it had fallen into the jurisdiction of the English Football League. Three panels ruled on this point. The first found Leicester were accountable to the Premier League because the breach unfolded in a season in which it was a top flight club. Leicester than won that case on appeal - only for that decision to then be overturned when the Premier League brought another challenge.
The panel in the Burnley v Everton case ruled in favour of the Clarets, whose position was that the breach unfolded through the season the rules applied to, not Everton’s status at the end of the financial year that included that season. The commission found: “There is no doubt about the facts. By 2022 Everton was on a path to a PSR calculation that would reveal a true loss of £19.5 million above the permitted upper limit. “It is entirely correct that it was theoretically possible for Everton to mitigate that loss by a variety of means, the most obvious of which is selling players. But as a matter of fact it did not do so. The reality is that the PSR breach revealed by the PSR calculation had been present for many months before Burnley’s relegation at the end of the season… We therefore conclude that Everton’s breach of the PSR began before the end of the 2021/22 season and before Burnley was relegated.”
Everton’s chief grounds for disappointment
It is on this point that some of Everton’s anger was directed in the club statement released as the verdict was made public. The club said: “This ruling sets a dangerous and unworkable precedent for English football, given it is constructed on a principle that a club can be in breach of financial rules at any point in a financial year.” This is also likely to be central point of the club’s appeal. While not discussed in this judgement, in the years since Everton’s points deductions other Premier League clubs have sold infrastructure and women’s teams late within the financial year in moves that have helped them to comply with PSR. None have been pursued by the Premier League even though, on the interpretation of the Burnley v Everton panel, they would have been in breach of PSR throughout the previous season.
The 100,000 match simulation
With it established Everton gained a sporting advantage through their PSR breach and with the commission rejecting the arguments above - that Everton could have remedied the situation after Burnley’s relegation - the argument moved on to whether Burnley could show Everton’s breach did cause their relegation. This involved a series of complex calculations in which experts appointed by Burnley modelled different equations to work out how much every extra £1m Everton overspent could be said to have helped the club on the pitch. Four scenarios were played out, working out points-per-£1m spent by Everton over periods ranging from the 12 previous season to the four that the breach related to. The Blues’ matches for each season were then simulated 100,000 times to show that, in each of the four scenarios, Everton’s chances of relegation were higher than Burnley’s without the £19.5m overspend.
Everton’s representatives disputed the findings on a number of points and produced their own calculations, but were unsuccessful. The panel accepted the modelling was an “inexact science” but were swayed more heavily by that put forward by Burnley’s representatives. Once again, Everton’s excessive spending on signings that underperformed reared its head as the panel stated: “It may well be that Everton did not perform as well as had been expected, but the reality is that it performed better than it would have done if it had not spent beyond the PSR limit.”
Witness’ ‘lived experience’ another factor
The panel was also impressed by another expert put forward by Burnley, David Baldwin. Baldwin has 18 years’ experience in the football industry, working with the Football League and clubs like West Bromwich Albion and Huddersfield Town - and, previously Burnley. On his input to the case, it said: “We recognise that Mr Baldwin had a history of close involvement with Burnley, but we are satisfied that that did not colour his evidence. He was a straightforward, forceful witness who we consider was giving unvarnished evidence of his true opinion. “We considered Mr Baldwin to be a credible and impressive witness who has a wealth of experience in the industry which enables him to provide an authoritative opinion. Mr Baldwin’s reasoned evidence of the link between expenditure and performance is compelling and strengthens Burnley’s case that the breach of the PSR probably caused it to be relegated. “We recognise that notwithstanding Mr Baldwin’s clear opinion it is not possible to establish from his evidence a mathematical correlation between expenditure and points. Nevertheless, we accept the force of Mr Baldwin’s opinion that if Everton’s overspend of £19.5m had not taken place it would have received at least four fewer points in 2021/22 and would therefore… have been relegated.”
The conclusion
The above led to this ruling: “We therefore conclude that, on the balance of probabilities, the breach of the PSR caused Everton to avoid relegation and enabled it to stay in the Premier League. That finding means that Everton’s breach of the PSR caused Burnley to be relegated.”
What Everton said
Everton’s fury was clear upon the release of the findings, with the club stating it was “surprised and angered”. It added: “Everton has appealed the decision and is clear in its belief the ruling is fundamentally flawed in both law and fact. "The club does not recognise the findings of the panel in determining Burnley’s relegation from the Premier League in May 2022 was caused by a sporting advantage gained by Everton due to a breach of Profit & Sustainability Rules, for which a substantive sporting sanction has already been received. “This ruling sets a dangerous and unworkable precedent for English football, given it is constructed on a principle that a club can be in breach of financial rules at any point in a financial year. “Everton believes the panel’s ruling misrepresents the clear evidence presented by its legal representatives and that an appeal will be successful.”
What Burnley said
Burnley chairman Alan Pace said on the case: “When we were relegated in 2022, we disappointingly accepted the outcome on the pitch. What we could not accept and what no club should be asked to accept was competing in a competition later shown to have been compromised. “We did not come to this lightly. When resolution through every available channel was declined, formal action was imposed as the only path left to us. The Independent Commission has now confirmed, in clear terms, that a rule was broken and a competitive advantage was improperly gained. “Our action has always been about making football fair. Clubs that comply with the rules deserve to compete on a level playing field. Fans deserve it. The sport demands it. The commission’s decision affirms the existing framework to protect the game.”
What happens next
Everton will fight an appeal but said the club has received a commitment from the Premier League that the compensation it has been ordered to pay will not impact future PSR calculations. The club is operating from a position of greater stability having been taken over by the Friedkin Group in December 2024. The ruling is not expected to impact its transfer plans this summer.
Implications elsewhere
The ruling has been met with interest across the world of football. The success of Burnley sets a precedent for other clubs to seek compensation when rivals are found to have breached league regulations. The decision to release the verdict now is also of note. Everton had sought for the judgement to be withheld until the club's appeal had been heard but were unsuccessful. With the ruling on the case against Manchester City still to come, clubs will be watching how that situation unfolds with intrigue and an expectation they will be privy to the judgement regardless of whether any appeal is launched.
