Blog > News & Trivia

The Chelsea Financial Fair Play Situation Explained

The Chelsea Financial Fair Play Situation Explained

Over the last 18 months, Chelsea’s unique transfer strategy has attracted a lot of headlines. They broke the British transfer record twice in just 195 days, first with the signing of Argentine World Cup winner Enzo Fernandez from Benfica for £106m, and then with the acquisition of Brighton midfielder Moises Caicedo for over £115m the following transfer window. They've also received plenty of attention for their handing out of extremely long contracts to young players, with promising but unproven talents such as Mykhailo Mudryk and Nicholas Jackson receiving eight-year deals and so far failing to win many fans over.

A lot of football supporters have been confused about how exactly Chelsea have been able to finance all this spending and get away with such huge outlays without breaking financial fair play rules. The truth is that the club have deliberately structured their transfer dealings in a way that helps them avoid breaking regulations. In this article, we'll be explaining how.

We'll dive into the different rules the club has had to contend with and what pressure they have come under from football's governing bodies over their financial comings and goings. As the Premier League continues to crack down on alleged financial rule breaches, now is the perfect time to explore the Chelsea Financial Fair Play situation in depth.

Financial Fair Play in the Premier League

Financial Fair Play is now a commonly used term for most football fans, but this wasn't always the case; FFP was only introduced into the game by European football's governing body UEFA just over a decade ago, in 2011. This system of governance is in place to stop clubs from operating in a way that is financially irresponsible. 

As part of FFP, a budgetary framework has been put in place by UEFA to prevent clubs from spending more than they are able to generate, and more broadly encourage them to reduce losses and work within their means. If you'd like to find out more about the role of FFP in the game, check out our in-depth guide to UEFA Financial Fair Play.

The Premier League has its own specially designed version of FFP, called its Profit and Sustainability Rules (PSR). All top flight clubs have to abide by these rules, which were introduced in 2013; effectively, they demand that each spring, every club in the league submits a set of accounts for the current season and the accounts for the two previous seasons. The Premier League says that those accounts should "be based on the latest information available to the club", and it uses the records to assess whether a club has incurred excessive losses over any given three-year period. As a result, Profit and Sustainability Rules (PSR) help ensure that clubs do not lose more than they can afford to in a short-to-medium-term period.

PSR also demands that Premier League clubs pay transfer fees, salaries and tax bills on time, and inform the league about any payments they make to agents. Since the introduction of PSR and FFP, most clubs have managed to steer clear of any punishment; however, right now there are a handful of clubs under the spotlight for alleged wrongdoing. One of those clubs is Chelsea.

The Chelsea Financial Fair Play Situation Explained

Chelsea's heavy spending since the arrival of Todd Boehly and Clearlake Capital as owners has caused many people to become concerned about whether they are operating within the limits of financial rules. However, the widely-used process of amortisation — whereby clubs account for transfer fees across the length of player contracts, splitting the total fee across the whole contract — has allowed Chelsea to exploit a financial loophole, signing players for big money but splitting those payments across several years to help stay within financial fair play rules. UEFA recently brought in regulations to restrict contract lengths and limit this practice, a move which prompted the Blues to get more of this type of business done before the cut-off point (hence how busy they've been in recent windows).

However, that doesn't mean Chelsea have been fully in the clear. Last year, the club made headlines yet again for self-reporting "incomplete financial information" to UEFA, the Premier League and the Football Association. This related specifically to "historical transactions" that took place between 2012 and 2019 (a successful period in which they won two Premier League titles, an FA Cup and a League Cup) under the ownership of Russian oligarch Roman Abramovich. 

The seriousness of this situation was highlighted by UEFA's decision to fine the club £8.6 million for breaking FFP rules; however, that punishment wasn't the end of the matter. According to joint reports by the Guardian and other organisations, during the Abramovic era, a series of payments worth tens of millions of pounds were also made by other Abramovich-owned companies to entities seemingly linked to Chelsea, which were advantageous to the west London club. The payments were reputedly "routed through offshore vehicles" that belonged to the former Chelsea owner — so you can see why the football authorities got suspicious.

These allegations are yet to be resolved, and Chelsea are hoping that they can help their case by cooperating fully with governing bodies. The club did get one positive piece of news recently, though; the Premier League recently announced that following an independent commission examining all 20 Premier League clubs, Chelsea have not been found to have breached permitted Profit and Sustainability thresholds. Nottingham Forest and Everton, meanwhile, have been charged. It appears, for now, that Chelsea's unique transfer strategy hasn't broken any PSR regulations.

Have Chelsea Faced Punishment For Any Financial Rule Breaks?

As mentioned earlier, UEFA recently fined Chelsea £8.6million ($11m) due to Abramovich's “historical transactions”. However, the club are yet to face any additional sporting sanctions, either by the European governing body or the Premier League. Fellow English top division side Everton — who were recently deducted 10 points after being found to have broken PSR stipulations — have been critical of the lack of intervention on other clubs in the top flight. For now, though, Chelsea appear to be safe.

That being said, according to the latest reports in January 2024, Premier League CEO Richard Masters has confirmed that the league are "still investigating" the west London club in regard to the aforementioned leaked documents that appeared to show FFP breaches. 

‘"On Chelsea, as you know the new owners of Chelsea came forward to UEFA, the FA and Premier League about information of the previous ownership and we are still investigating that," said Masters. "We won't announce the outcome of that until we have completed the investigations."

Asked about the process of following up on these charges, Masters added "It's a very solemn duty, I have to say. No one likes enforcing the financial rules. This is the first time we've laid a charge in this specific way. But must be done because we have to think about the clubs that have complied with the rules and their fan base and that ultimately is the duty of the Premier League board and the EFL board."

How Have Chelsea Responded To The Allegations?

While Chelsea's accounts, along with those of the other Premier League clubs, have been examined recently, there is no current case against the club from the Premier League in relation to PSR. This could change, and any proven rule breaches would bring sanctions including the threat of a potential points deduction. However, the club seems to believe it has done nothing wrong.

“These allegations pre-date the club’s current ownership,” was Chelsea's response to the reports. “They are based on documents the club has not been shown and do not relate to any individual who is presently at the club.”

A club statement relating to the allegations and the UEFA punishment read: "Chelsea has fully cooperated and assisted UEFA with its investigation of these matters and, following an analysis by the UEFA Club Financial Control Body, the club has entered into a settlement agreement with UEFA. Under that settlement the club is to pay a financial contribution of €10 million to UEFA as a fixed payment.

It continued: "In accordance with the club’s ownership group’s core principles of full compliance and transparency with its regulators, we are grateful that this case has been concluded by proactive disclosure of information to UEFA and a settlement that fully resolves the reported matters. We wish to place on record our gratitude to UEFA for its consideration of this matter. Chelsea greatly values its relationship with UEFA and looks forward to building on that relationship in the years to come."

How Does The Chelsea FFP Situation Differ From Manchester City?

It is likely to be a long time until this matter of Abramovic's alleged payments is completely resolved. Meanwhile, Chelsea aren't the only Premier League facing serious scrutiny for alleged financial wrongdoing. 

Manchester City were recently charged with 115 alleged breaches of financial rules, and while Chelsea are attempting to explain away "historical transactions" by pinning them on their departed owner, the Manchester club are unable to do the same thing. 

The charges City are facing all allegedly occurred during a nine-year period stretching from 2009 to 2018 in which they were won three Premier League trophies under current owner Sheikh Mansour. According to the Premier League, the club failed to provide accurate financial information during this period and also failed to disclose in full a series of financial remunerations made to one manager over a four-year period. Extensive probes into City's accounts helped unveil these alleged rule breaches, and the matter is set to go to trial later this year.

The Chelsea financial fair play situation is not quite as serious as the charges faced by Manchester City, Blues fans will be pleased to know. However, as Richard Masters' comments underline, the club aren't fully in the clear just yet. Anyone concerned with financial fairness in the Premier League should keep a keen eye on this situation in the coming months.