In a dramatic plot twist, Saracens, the reigning Premiership and European champions, appear to have negotiated their own demise from the Gallagher Premiership. 

In November 2019, an independent panel chaired by Lord Dyson issued Saracens with a £5.36 million fine and a 35-point deduction for breaches of the Salary Cap Regulations in each of the past three seasons [1].  The panel’s decision appeared to draw a line under the Salarygate saga. 

However, in an extraordinary turn of events, Saracens and Premiership Rugby Limited ("PRL") have now agreed that Saracens will accept the unprecedented punishment of automatic relegation at the end of the season.

So what has changed since the end of 2019? And why have Saracens agreed to be relegated?

What has happened?

On 18 January 2020, PRL announced that Saracens would be relegated at the end of the season following the "conclusion of dialogue between Premiership Rugby and Saracens over the club’s compliance with the Salary Cap Regulations, which began in November 2019" [2].

Saracens later commented that: "following open and frank discussions with PRL, we have accepted the unprecedented measure of automatic relegation from the Premiership at the end of the 2019-2020 season" [3].

The confidentiality provisions in the Salary Cap Regulations mean that further details are regrettably thin on the ground. This lack of transparency has served to fuel unhelpful levels of speculation as to what happened in November. Indeed, Lord Dyson himself recently called for PRL to lift "the cloak of privacy" over the panel’s decision because there is a clear public interest in doing so [4].

Where does the power to automatically relegate a club originate from?

The 2019/20 Salary Cap Regulations do not contain any provision for the automatic relegation of a club for breaches of the Salary Cap Regulations. The maximum punishment is a deduction of 35 league points.  Whilst this deduction could result in a club’s relegation at the end of the season if it were to finish the season at the bottom of the league, there is no express sanction of automatic relegation.   

A Sub-Committee of the PRL Board has the power to consider and advise the PRL Board as to changes to the Salary Cap Regulations, which could include automatic relegation.  However, in order to amend the Salary Cap Regulations during the season, the changes would need to be unanimously approved by the PRL Board [5]. There has so far been no indication that the rules have been changed mid-season.

However, under the Premiership Regulations, the Professional Game Board (established pursuant to an agreement between PRL and the Rugby Football Union, which governs, amongst other things, automatic promotion between the Premiership and the RFU Championship) may make proposals to the RFU to expel or suspend a Club from the Premiership [6]. The RFU may then decide whether or not to accept the Professional Game Board’s proposal, and whether any terms or conditions should apply to the expulsion or suspension of the offending Club. As one would expect, the offending Club is given the right to appeal the RFU’s decision.

Whilst it is not clear from the press releases that have been issued to date, it may well be that this provision that has been relied upon here. It would certainly appear that some terms and conditions were attached to Saracens’ relegation, as according to Exeter Chiefs’ chairman, Tony Rowe, Saracens had "two choices: they could either open up their books so that Premiership Rugby could do a forensic audit of exactly what has gone on, or they could take relegation. So it was their choice not to open up their books" [7].

What is the "forensic audit"?

Tony Rowe may be referring to the Salary Cap Manager’s "Open book powers" under the Salary Cap Regulations. Specifically, if the Salary Cap Manager "reasonably suspects a breach of the Regulations", then the Salary Cap Manager "may instruct the Investigators to carry out an Investigatory Audit" [8].

If, as seems likely, Saracens have been subjected to an Investigatory Audit since November 2019, then they would have been required to "use all reasonable endeavours" to co-operate and assist the Investigators with their audit, which includes making records and evidence available to the Investigators as requested [9].

However, the maximum available points deduction for a "Failure to Co-Operate" with an Investigatory Audit is a deduction of 6 league points [10]. As such, even if Saracens did not co-operate with the audit, it could likely have absorbed a further 6-point penalty and still avoided relegation.

Why have Saracens accepted relegation?

Saracens’ recent appointment of a new independent chairman, Neil Golding, appears to have been a turning point. Saracens have apologised for past mistakes and are now focusing on rebuilding "confidence and trust", implementing "governance reform", and have said that they took the "decisive step" of accepting relegation because it is "in the wider interests of the Premiership and English rugby"[11].   

However, the clear inference is that Saracens were destined to breach the Salary Cap Regulations for a fourth consecutive season at the end of the 2019/20 campaign. Indeed, the club appears to have found itself in quite a difficult position, as any monies payed to players as compensation for terminating their current contracts would count towards the current season’s salary cap. Furthermore, other clubs within the league may be unable to accept the transfer of any of Saracens’ current squad (either by way of a permanent move, or a loan arrangement) for fear of being in breach of the salary cap themselves. Although players could move overseas, this would render them ineligible to be selected for England – and whilst the World Cup may be over, the Six Nations is just around the corner (and Eddie Jones today named seven Saracens players in the England squad).

If Saracens committed another substantial breach of the Salary Cap Regulations (i.e. an overspend of more than £650,000), they would have incurred another 35-point deduction, which would almost certainly have led to relegation if the deduction was imposed this season [12].

Reading between the lines, Saracens’ star-studded squad has not changed appreciably following the panel’s decision in November 2019 (Liam Williams is currently the only confirmed departure), and unless Saracens had taken measures to address what Lord Dyson recently referred to as the "two particularly serious factors which influenced us",[13] Saracens would likely find themselves on the wrong side of another disciplinary panel decision. 

As such, Saracens’ decision to accept relegation has perhaps pre-empted the inevitable, and allowed the parties to avoid incurring the time and costs involved in confirming Saracens’ further breaches via a full disciplinary process. 

What happens next?

Saracens’ era of dominance has ended in remarkable circumstances.  In one of the biggest reversals in recent sporting history, the core of the current England team are destined for the second-tier of English rugby next season if they stay put.  Bizarrely, they may still do so as reigning European champions since Saracens have progressed to the European Rugby Champions Cup quarter finals. However, even if that is the case, Saracens would be unable to compete to retain their European title next season, as the European Professional Club Rugby Regulations require a team to be playing in the Premiership in order to be able to qualify.  

If Saracens manage to retain some of their England players, then relegation could have unintended consequences in terms of the contractual relationship between the England team, the clubs, and the players, since the existing arrangements do not contemplate players playing in the second-tier Championship. 

In the wake of Saracens’ demise, the Salary Cap Regulations look set to be overhauled. PRL has already announced that Lord Myners is leading a "comprehensive" review of the Salary Cap Regulations, which will include "an open consultation so that everyone involved in  the game has the opportunity to contribute to its future" [14].  As we have written on these pages before, the Premiership could seek inspiration for reform from the AFL in Australia [15].

A final sting in the tail?

If, as this article assumes, Saracens’ relegation is as a result of the powers under Premiership Regulation 2.5(c), there may yet be a final sting in this story for Saracens. Regulation 2.5(e) provides that a Club that ceases to be a member of the Premiership must indemnify the RFU, PRL and each of the other Clubs against any resulting losses suffered by those bodies, including loss of income or profits under any broadcasting, sponsorship or other commercial agreement entered into by those bodies in relation to the Premiership. As the most successful team in recent Premiership history, Saracens naturally bring significant commercial value to the Premiership. It will be interesting to see whether any claim is made against Saracens for losses resulting from their relegation.

References

[1] See https://mse.dlapiper.com/post/102fw8r/tackling-the-salary-cap-should-the-rules-be-sin-binned-after-salarygate; https://mse.dlapiper.com/post/102ftqc/head-to-head-saracens-v-salary-cap). 

[2] https://www.premiershiprugby.com/news/premiership-rugby-confirms-saracens-to-be-relegated

[3] https://www.saracens.com/saracens-accepts-relegation-from-the-gallagher-premiership

[4] https://www.therugbypaper.co.uk/domestic-club-rugby-union/34769/saracens-salary-cap-judge-says-prl-should-lift-cloak-of-privacy/

[5] Clause 7.4(b) and 7.5 of the 2019/20 Salary Cap Regulations.

[6] Clause 2.5(c) Premiership Regulations.

[7] https://www.bbc.co.uk/sport/rugby-union/51164177

[8] Clause 4.9(a) of the 2019/20 Salary Cap Regulations.

[9] Clause 4.9(c) of the 2019/20 Salary Cap Regulations.

[10] Clause 14.5(a)(iii) of the 2019/20 Salary Cap Regulations.

[11] https://www.saracens.com/saracens-accepts-relegation-from-the-gallagher-premiership/

[12] Clause 14.3(c) of the 2019/20 Salary Cap Regulations.

[13] https://www.therugbypaper.co.uk/domestic-club-rugby-union/34769/saracens-salary-cap-judge-says-prl-should-lift-cloak-of-privacy/

[14] https://www.premiershiprugby.com/news/premiership-rugby-confirms-saracens-to-be-relegated

[15] https://mse.dlapiper.com/post/102fw8r/tackling-the-salary-cap-should-the-rules-be-sin-binned-after-salarygate