In December 2019, Premier Rugby Limited (“PRL”) appointed Lord Myners CBE to conduct a “comprehensive” review of its Salary Cap Regulations (the “Regulations”). As discussed in our previous posts, the review was triggered by an independent panel’s decision to issue Saracens with a £5.36 million fine and a 35-point deduction in November 2019 for breaches of the Regulations in each of the past three Premiership seasons (see here).  Saracens later agreed to be relegated at the end of the season in a deal reached outside the scope of the Regulations (see here).

Lord Myners’ report, which was published last week, sets out a package of recommendations for improving the Regulations.  We discuss the key points below.  In particular, it was pleasing to see Lord Myners making recommendations in many of the areas that we had previously highlighted as in need of improvement (here), including: (i) improved transparency; (ii) tougher penalties; (iii) prioritising enforcement; and (iv) binding the players to the rules.  But Lord Myners stopped short of recommending radical change, such as introducing a collective agreement.

So will Lord Myners’ recommendations be adopted? And do they go far enough to achieve the salary cap’s twin goals of financial stability and competitive balance?

Separation of Powers

Lord Myners’ first recommendation was that the powers of regulation, investigation and prosecution should be separated between different bodies. Under the current Regulations, the clubs not only set the rules, but they also get involved in applying and enforcing them. As Lord Myners noted, the clubs “pulled the rug from beneath due process” in 2015, by agreeing a last-minute private settlement of disciplinary actions for salary cap breaches by Saracens, despite the Salary Cap Manager deciding that  Saracens had a case to answer. Similarly, earlier this year, the clubs effectively stepped in to override the independent disciplinary panel process by negotiating a retrospective amendment to the Regulations in the middle of the season, which meant that Saracens received a further 70-point deduction for failing to comply with a forensic audit, thus guaranteeing Saracens’ relegation this season.

In Lord Myners’ sensible view, the clubs should no longer be involved in the application or enforcement of the Regulations. Lord Myners therefore recommended that each club should undertake to respect the independence of the Regulations and agree not to engage in any matters relating to investigations, sanctions, or disciplinary processes under the Regulations.

Lord Myners also recommended separating the Salary Cap Manager’s current responsibilities for both: (i) running investigations; and (ii) making charging decisions, by appointing an independent cap governance monitor (“CGM”) to take responsibility for determining whether or not a charge should be issued based on the evidence gathered during the investigation. The CGM would also be responsible for approving or rejecting any proposed divergence from the disciplinary process set out in the Regulations, including any settlement agreements.

Lord Myners also suggested, in passing, that “it might be a good idea to review corporate governance against generally established principles of good governance”, which appears to be a subtle way of suggesting that the Premiership’s governance and decision making could be improved across the board.

Promoting greater transparency

As we noted in our previous blog posts, the Regulations currently provide that disciplinary proceedings in relation to salary cap breaches – including “the issues in dispute, the evidence and arguments presented by the parties and any decision reached” – are confidential. As a result, the independent panel’s award in the Saracens case was originally withheld from publication, despite the chairman of the panel, Lord Dyson, recommending that it should be published. This lack of transparency fuelled an unhelpful degree of speculation and misunderstanding as to what Saracens did or did not do. Furthermore, by the time that the award was belatedly published, much of its content (including the names of specific Saracens players alleged to have been at the centre of the scandal) had already been leaked to the press and released in the public domain.

Whilst Lord Myners acknowledged that the Regulations are ultimately a private agreement between the clubs, he recommended increasing the transparency of the disciplinary process in relation to future salary cap breaches. This would include publication of both charges and disciplinary decisions (with suitable redactions where necessary to obscure any confidential or personal information).  Lord Myners also recommended publishing: (i) the Salary Cap Manager’s guidance to clubs; (ii) the Salary Cap Manager’s end of season report, containing aggregated information and findings based on data submitted by each club in each season; and (iii) any changes to the Regulations themselves and their supporting rationale. Overall, this increased transparency would be a welcome reform, which would bring PRL into line with UK Sport’s Code for Sports Governance and the rules of many other leading sports.

However, Lord Myners did not recommend that all hearings should be held in public.  On balance, although public hearings may provide a deterrent and be in the public interest, the additional costs of public hearings, and the sensitivity of some of the personal and financial information involved, meant that PRL should keep the need for public hearings under review for now.  But Lord Myners said that if another club was found guilty of widespread abuse of the Regulations, he would have no reservations in recommending that all future hearings be held in public.  In our view, public hearings are part of the transparency debate, but publishing disciplinary charges and decisions would boost the effectiveness of the Regulations significantly. 

Introduce greater flexibility in sanctioning, as well as more severe sanctions for significant breaches

Lord Myners was broadly satisfied that the sanctions available for severe breaches of the Regulations are sufficiently robust. However, he recommended that disciplinary panels should have greater discretion and the ability to take into account a wider range of factors in order to make sure that their sanctions are appropriate.

In a sensible recommendation, Lord Myners suggested that additional sanctions should be made available in respect of the most serious cases, including relegation, suspension, revocation of titles, and repayment of prize money. Moreover, in cases of consistent breaches, an independent monitor could be assigned to oversee the operations of a breaching club. However, other sanctions such as limitations on squad sizes, and restrictions on registering new players were rejected: Lord Myners deemed that the former could lead to health and safety issues, whilst the latter would be difficult given that new players are usually contracted well in advance of a new season commencing.

Lord Myners also recommended that a failure to cooperate with any investigatory process should be punished severely, as if it were a breach of the salary cap itself. Furthermore, a club’s refusal to submit to a forensic audit should be punished at the very top end of the sanctions available. These recommendations appear to be a direct response to Saracens’ recent conduct.

Bind the players and their agents to the Regulations

We have previously noted the peculiarity of the Regulations applying to the clubs alone – and not to the players – despite players’ wages being the subject of the salary cap.  Lord Myners appears to agree, by recommending that for the Regulations to have real impact, club officials, players and agents who deliberately circumvent the rules (or act recklessly as to whether they may be in breach) should also be held to account through imposition of meaningful sanctions, embedded into the Regulations.

Under this recommendation, players would be obliged to sign enhanced declarations at the beginning and the end of each season, setting out all of their anticipated and actual earnings respectively. This would include providing the names of all companies and trusts for which the player is an officer, shareholder or beneficiary, and details of any arrangement where a benefit in kind is transferred. Players should also be under an obligation to notify the Salary Cap Manager if they become aware of an attempt to circumvent the salary cap, and be subject to severe sanctions for failure to do so.

Lord Myners also recommended that agents should be brought within the scope of the Regulations, with requirements in relation to disclosure and cooperation mirroring those of their players, with sanctions for any breach including the suspension of the agent’s licence, forfeiture of commission and/or imposition of fines. This would require a provision to be added to the RFU’s agent declaration that includes an agreement by each agent to comply with the Regulations.

Finally, given his recommendations above, Lord Myners also suggested that the Salary Cap Manager should also work with the Rugby Players’ Association and RFU to provide a programme of education for players and their agents so that they understand their obligations under the revised Regulations.

Lord Myners did not specify whether these declarations should be statutory declarations.  But in our view, club executives, players, and agents could all be required to make statutory declarations as to their respective compliance with the Regulations. If so, signing a false declaration could result in an action for perjury – not just disciplinary action – which should incentivise full compliance with the rules.

Greater accountability for the board and executives of clubs

Tougher penalties are also recommended for other individuals within the club structure. For example, Lord Myners recommends that, if a club owner is found to have seriously and systematically breached the Regulations, then a disciplinary panel could determine that they are not fit and proper to own the club, and put the club into stewardship.

Similarly, club officials must also be made accountable. Under the current Regulations, if a club recklessly or deliberately exceeds the salary cap, the other clubs may resolve to remove the chair, CEO or finance director who had falsely certified the club’s compliance with the Regulations. However, in Lord Myners’ view, this inappropriately puts the power of sanctioning breaches in the hands of other clubs. Furthermore, it can currently be circumvented by having an individual other than the chair, CEO or finance director sign the certification.

Lord Myners therefore recommends that any senior executive, director or shareholder of a club who knew, or, importantly, who ought to have known about a breach or attempted circumvention of the cap should be subject to sanctions, including a ban on any association with PRL or any of the clubs for up to 2 years (for a first offence) or for life (for any subsequent offences).

Under Lord Myners’ recommendations, each club would also be required to nominate a salary cap officer, with reporting duties to the Salary Cap Manager.

Increased investigatory powers and resources 

Lord Myners’ final recommendations involve increasing the Salary Cap Manager’s investigatory powers and the clubs’ reporting obligations. These include: (i) clarifying the power of the Salary Cap Manager to attend clubs without notice, and to require clubs to provide finance reports and access to management documents; (ii) allowing the Salary Cap Manager to make requests to see players’ tax returns on a random basis; and (iii) enhancing powers available to auditors in their annual audit to include mandatory interviews, sampling of tax returns, and more extensive provision of information and documents from the clubs, reinforced with sanctions for clubs that do not comply with reasonable requests within a reasonable timeframe.  Lord Myners also recommended that two clubs should be chosen at random each year to be subject to a mini investigatory audit, with at least one of those clubs selected from the top six clubs at the end of the previous season.

In another welcome recommendation, Lord Myners suggested that the role of the Salary Cap Manager should be re-named “Salary Cap Director”, and that a deputy salary cap manager and a full time data analyst should be newly appointed to support the Salary Cap Director.

Conclusion

Lord Myners’ review – which was informed by an online public consultation involving 450 stakeholders (including the submission of our own suggestions, here) – provides a detailed package of recommendations for improving the current Regulations. Unfortunately, PRL has only indicated that it will “consult carefully with our clubs”, so it remains to be seen whether these recommendations will be adopted, and if so, to what degree.

Overall, we agree with Lord Myners that improving corporate governance, increasing transparency, introducing tougher sanctions, binding players and agents to the rules, and increasing enforcement would all improve the current Regulations.  Nevertheless, Lord Myners’ recommendations were not as bold as they might have been.  Specifically, we have previously suggested that the Premiership could take inspiration from leading US and Australian sports by adopting a collective agreement – i.e. a comprehensive contract governing the sporting and commercial relationships between the players and the Premiership – which could make the Premiership both financially sustainable and competitive. 

However, Lord Myners does not discuss collective agreements in his report, even though he was asked to consider “tools and powers from other sports […] around the world”.  In his report, Lord Myners says that he was “asked to concentrate on the salary cap”, rather than “other forms of financial control”, which may indicate that PRL precluded him from considering any radical changes.  But Lord Myners also acknowledges that he was seeking “a model that would produce a world-leading set of regulations for the future conduct of PRL”.  In our view, it is odd that Lord Myners does not engage with the idea of a collective agreement, which is the bedrock of some of the most successful sports leagues in the world. 

In short, it will be interesting to see how the clubs react to the Myners Review and whether his recommendations are adopted. Will the clubs be prepared to surrender their involvement in the administration and enforcement of the Regulations to make the rules fairer and more transparent? Or will they maintain the view that the Regulations are a matter for the clubs? The ball, so to speak, is now in their court.