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The sale of Liverpool Football Club; controversial or commonplace?

"At a football club, there's a holy trinity - the players, the manager and the supporters. Directors don't come into it. They are only there to sign the cheques."

Bill Shankly, 2nd September 1913-29th September 1981

Never having met Mr Shankly I cannot say how he would have reacted to the recent sale of his beloved Liverpool Football Club ("LFC") to New England Sports Ventures LLC ("NESV") which was completed under very public circumstances on 15th October 2010. But I suspect that he would have been horrified in light of his above quote. Not necessarily at the new owners who have a proven record of success with the Boston Red Sox - and it would be grossly unfair to judge them before they have had a chance to do anything - but in the manner in which the sale was conducted.

Of course times have moved on significantly since Mr Shankly made his comments. Directors/Owners have now become central figures in a club's dealings and wield considerable influence in almost every area including, it is suspected in some clubs, picking the team. Will this become more commonplace and is it really so controversial? If you had invested hundreds of millions of pounds into a project and you had a proven track record of success wouldn't you want to exert as much of your own proven influence as possible? Or should these people curb their power to the Board Room and leave the Boot Room matters to the true football personnel?

This article is intended as a commentary on the sale from the unpopular Messrs Hicks & Gillett and to explore whether it was indeed controversial. The "commonplace" tag in the title is intended to stimulate debate as to whether the sale was actually so out of the ordinary as to warrant extra attention. Or was it merely a further indication that capitalism has devoured socialism's great game and the deal was simply another piece of faceless litigation between two non-English corporate heavyweights slugging it out over an asset from which they hope one day to reap a handsome reward? I shall address everything in full below. Let me say for the record that, in my personal opinion, the entire game has gorged itself on greed and is fed by a culture of short-termism that can only have a damaging impact on the future of the sport. I also feel that these repercussions are already beginning to be felt - the words "insolvency", "administrators" and "football creditors" now make bigger headlines than your favourite striker's hat-trick against your local rivals. Or indeed my own personal favourite of "ugly defender scores own goal." However, it is my intention to give as balanced a view as possible on the entire affair and I hope that is borne out in this article.

Abbreviated chronology leading up to the Court proceedings

This is not the forum to enter into an exhaustive discussion of the history which could well take up an entire article in itself. I have opted to provide selected highlights which lead up to the Court proceedings.

The legal proceedings

Again, this is not the correct place to enter into an exhaustive discussion of what actually took place in court but the highlights below should serve as an aide-memoire and lead-in to the commentary below.

Wednesday 13 October 2010

* RBS applied for a Mandatory Injunction to restore the validity of the Board of KFL to the position prior to 5 October 2010. Hicks & Gillett also sought an injunction to restrain the sale to NESV.

* RBS submitted that Hicks & Gillett were in breach of various corporate governance provisions relating to KFL's Board membership.

* Hicks & Gillett contended that there had been repudiatory breaches by both KFL and RBS which therefore entitled them to treat the agreement as having been terminated.

* Mr Justice Floyd ruled in favour of RBS and applied the first test laid down by the House of Lords in American Cyanamid v Ethicon (1975) AC 396 which is whether there was a serious issue to be tried. The Judge concluded that there was no seriously arguable defence to RBS's claim and he gave extremely direct dicta to that effect.

* It was ordered that the board of KFL should be reconstituted to its form of 5 October 2010 and that the sale should be dealt with by that Board. The injunction sought by Hicks & Gillett was declined.

Thursday 14 October 2010

* RBS applied for an "anti-suit injunction" which is extremely rare. The effect of these injunctions is to prevent parties from commencing or continuing proceedings in another jurisdiction. In this case, RBS felt that Hicks & Gillett were simply trying to frustrate the English proceedings via the Texas courts. An anti-suit injunction does not require the English court to make any findings about the jurisdiction of the foreign court.

* It was held that the conduct of Hicks & Gillett was "unconscionable" with their only purpose being to deprive RBS of the benefit of their injunction and earlier judgment.

* Mr Justice Floyd also took into consideration the fact that the English Directors could be committed to a Texan prison if it were not made immediately. It was also noted that any further delays would prevent the Club from being able to meet its liabilities to RBS. As such, the court made the anti-suit injunction and the sale was able to proceed the following day.


Why did the sale end up going to court and should the sale, and indeed future sales of any football club, be the subject of such public scrutiny? Was it controversial or commonplace or none of the above?

It is my view that this is simply the latest high-profile club whose sale has been the subject of due legal process. It is lamentable that a club which used to be known for conducting their affairs in private - "The Liverpool Way" - with a glorious tradition both on and off the pitch have now become headliners in the most non-athletic of ways. However, I do not deem this to be unusual nor indeed un-commonplace. The list of clubs who have changed owners publicly and with a degree of acrimony is extensive and includes, in recent times, Manchester United, Chelsea (Bates/Harding), Spurs (Venables/Sugar) and of course Liverpool. These clubs are scions of the English game but just as susceptible to hostile takeovers, leveraged buyouts or directors' disputes as any other corporate entity.

Why did LFC's sale go to Court?

My answer to this question is simple - it was because of two deeply entrenched positions adopted by opposing parties who had lost all semblance of effective communication and wished to assert their rights at law. Sadly, this does not sound any different to the basis of any other piece of litigation. Which is the thrust of one of my points of view in this article - that football cannot expect to be treated any differently to other businesses as we move further into the 21st century.

After all, what are the alternatives? Most sports are fiercely self-regulating and I'm sure that Sepp Blatter would prefer these disputes or deals to be dealt with within the "football family" but there is really no power to enforce such a course of action despite the promulgation of Article 64 (2) & (3) of the FIFA Statutes which provides as follows:

"2 Recourse to ordinary courts of law is prohibited unless specifically provided for in the FIFA regulations.

3. The Associations shall insert a clause in their statutes or regulations, stipulating that it is prohibited to take disputes in the Association or disputes affecting Leagues, members of Leagues, clubs, members of clubs, Players, Officials and other Association Officials to ordinary courts of law, unless the FIFA regulations or binding legal provisions specifically provide for or stipulate recourse to ordinary courts of law. Instead of recourse to ordinary courts of law, provision shall be made for arbitration. Such disputes shall be taken to an independent and duly constituted arbitration tribunal recognised under the rules of the Association or Confederation or to CAS.
 The Associations shall also ensure that this stipulation
 is implemented in the Association, if necessary by
 imposing a binding obligation on its members. The
 Associations shall impose sanctions on any party that
 fails to respect this obligation and ensure that any
 appeal against such sanctions shall likewise be strictly
 submitted to arbitration, and not to ordinary courts of

I readily concede that the above Article does not appear to specifically envision a dispute between a club and its lending institution. But certainly the wording "it is prohibited to take disputes ... affecting. ... clubs ... to the ordinary courts of law" could, on some interpretations, be held to convey the meaning that any dispute whatsoever involving a club and anyone or anything else should be channelled through FIFA.

Such an Article has placed FIFA under enormous pressure at the level of the European Parliament ("EP") which adopted the following motion on 29 March 2007:



3. [The EP] Takes the view that applying to the civil courts, even when not justified in sports terms, cannot be penalised by disciplinary regulations; and condemns the arbitrary decisions by FIFA in this respect;

4. Asks UEFA and FIFA to accept in their statutes the right of recourse to ordinary courts, but recognises that the principle self-regulation implies and justifies the structures of the European sports model and the fundamental principles governing the organisation of sporting competitions, including anti-doping regulations and disciplinary sanctions."

If there is no faith or indeed no adequate remedies within FIFA then clubs have no option but to turn to the High Court (or their local civil courts). It is of note, I believe, that there was no protest from FIFA HQ in Zurich about the recent spate of high-level football clubs seeking redress outside of FIFA or the Court of Arbitration for Sport ("CAS"). This must be taken as a tacit admission that whilst a particular level of dispute can, and should, be dealt with through FIFA (or National Associations) they are inherently ill-equipped to deal with the commercial realities of today's world. Hence, the application to the High Court by both RBS and Hicks & Gillett.

Should LFC's sale, and indeed future sales of any football club, be the subject of such public scrutiny?

Hicks & Gillett, now famously, promised during their acquisition of LFC in February 2007 that "The payment of interest on ... the [lending] facilities will not depend to any significant extent on the business of Liverpool." It set out the [pounds sterling]298m they had borrowed from RBS and Wachovia to facilitate their takeover and investment of LFC. The club itself cost [pounds sterling]174m. What actually happened was that Hicks & Gillett did pay the interest on the loan, approximately [pounds sterling]35m a year, from LFC's income. This meant that instead of showing record profits from turnover of [pounds sterling]185m the club posted a [pounds sterling]53m loss in 2009.

Why did this happen? A promise not to do something in the future is not, strictly speaking, enforceable. And it would behove fans of LFC, and indeed other clubs, to heed the statement provided by John W Henry of NESV on 4 November 2010 when asked if he would be "leveraging" the costs of NESV's purchase of the club onto the club:
 "It [the promise not to leverage] was not asked for. I
 don't remember anything being discussed along those lines
 except that there was a desire for all of the debt to be
 removed except stadium debt."

And that has been done. RBS has confirmed that that the [pounds sterling]150m owed to them has been repaid, as has the [pounds sterling]50m owed to Wachovia. RBS are still owed [pounds sterling]37m for the development work on the proposed new stadium - such a bone of contention under Hicks & Gillett. Does this mean that NESV are simply the next in a line of foreign speculators hoping to make a fast buck from an English sporting institution (not that Hicks & Gillett did so)? The answer, quite simply, is that they could be. However, examining their success with the Boston Red Sox it can be seen that NESV invested money into them, resolved a tricky stadium issue, lead them to the championship and have not drawn a dividend in their 9 years of ownership. If the same model is adopted at LFC then fans of the Reds will find themselves eternally grateful to the former Board and their legal team.

The reason this case was the subject of such intense scrutiny was because of the high-profile nature of the club and the fast-paced and exciting twists and turns of the court case. But, make no mistake, fans of the so-called smaller clubs will be just as invested in a winding-up petition by HMRC, for example, as a major club being bought and sold for hundreds of millions of pounds.

My conclusion to this section ties in with my submissions in the above section - that there is simply no way of avoiding such public scrutiny when so much is at stake and the lives of so many people are invested in the club. It also ties in with the peculiarly British idiom of being hopelessly entranced with the private lives of football players and, latterly, the private machinations of the clubs. It is only natural as the amount of money increases in the game that our gazes should come to rest above the Boot Room and into the Board Room if that is where the real action is now taking place.

Certainly, our fascination with Abramovich's, Storrie's and Ridsdale's would only have served to bemuse Mr Shankly.


I was in the High Court for the recent hearings involving Portsmouth FC and LFC. Granted, both were of very contrasting natures. Portsmouth were fighting off a challenge from HMRC but were placed there, some might say, because of the actions of some of their Directors/Owners. Southend, Cardiff, Plymouth Argyle and Leeds are just a few other clubs who have found themselves fighting off similar claims. This brings me to my final question - just how unusual is it to see clubs in the High Court? My belief is that, whether it is to do with unpaid taxes, the actions of Directors/Owners, or change of ownership and disputes thereto, there is really nothing unusual about it anymore. It is simply a sign of the changed times that, as ever greater tides of money flood the game, so will there be more vicious and hard-fought disputes. Litigation these days is expensive and, while every effort is made to settle cases, we all know that sometimes nothing short of a High Court judgment or order will suffice.

As a fan of football it saddens me to see the disputes overshadowing the dribbles; the litigation grabbing headlines ahead of leading scorers; but as a Sports Lawyer I am certain that High Court actions are preferable to having these matters dealt with by FIFA or even The FA. My reasoning is, I hope, clear - that the boom of Pay TV money must be balanced out with the commercial realities of 21st century life; that where there is money there are, generally speaking, disputes. And where there are disputes there must be the Rule of Law.

To sum up, therefore, I would say that the sale of LFC is both commonplace and controversial but seeing football clubs in court is becoming both more commonplace and less controversial every year.

by Max Eppel *

* Max Eppel is a Sports Law and Commercial Barrister at City of London solicitors McFaddens LLP. He is also a Players' Agent Licensed by the FA. For more information on Max please visit and
Early 2004 * The then LFC board accept that they
 need to sell the club specifically to
 enable them to compete with Manchester
 United FC ("MUFC"), Chelsea FC ("CFC")
 and Arsenal FC ("AFC") in match-day
 revenue. The need for the backing of a
 wealthy owner to assist with the funding
 was the primary motivation behind the
 decision to sell.

 * 3-year search for a new owner

February 2007 * Hicks & Gillett acquire LFC for [pounds
 sterling]5,000 per share which values the
 club at [pounds sterling]174.1m, which,
 along with the debt at [pounds
 sterling]44.8m, puts the overall figure
 at [pounds sterling]218.9m.

 * "We have purchased the club with no
 debt on the club," and "The spade has to
 be in the ground [on the new stadium
 proposal at Stanley Park] within 60 days,"
 are 2 particular highlights from their
 original press release.

 * Attempts to distinguish their
 acquisition from the bitterly fan-opposed
 Glazer/MUFC one by insisting the club
 would not be laden with debt via a
 leveraged buy-out.

January 2008 * First protests on the Kop against Hicks
 & Gillett.

 * Advanced negotiations with Dubai
 International Capital entered into but no
 sale is agreed.

By February * The relationship between Hicks &
2008 Gillett breaks down leaving the club
 paralysed because each of the Americans
 owns 50% of the club so decisions cannot
 be taken.

October 2008 * No work undertaken on the new stadium,
 18 months on from "spade ... in the
 ground" comments.

January 2009 * Discussions with the Al-Kharafi family
 of Kuwait over buying LFC. No deal

June 2009 * LFC's accounts for the year ending July
 2009 reveal that the owners did in fact
 borrow to fund the takeover, having
 secured a [pounds sterling]350m loan
 facility with Bank of Scotland ("RBS") &
 Wachovia to Kop Football Limited ("KFL")
 - the SPV used to acquire the club.

 * Despite a record turnover of [pounds
 sterling]159.1m the parent company, Kop
 Football Holdings Ltd, made a [pounds
 sterling]42.6m loss. This is mainly due
 to the interest payments of [pounds
 sterling]36.5m per year.

 * No work has taken place on the stadium.
 Hicks & Gillett point to the global
 financial crisis.

 * Auditors KPMG provide a warning that
 there exists "material uncertainty"
 casting "significant doubt" on LFC's
 ability to continue as a going concern.

 * Christian Purslow replaces Rick Parry
 as Managing Director with his sole task
 being to secure [pounds sterling]100m of
 fresh investment into the club to reduce
 the debt.

 * LFC fail to secure Champions League
 football for next season.

April 2010 * Hicks & Gillett reject an offer of
 [pounds sterling]110m from the Rhone
 Group for 40% of the club.

 * RBS refinance the loan for 6 months on
 the condition that the club is put up for
 sale and Martin Broughton (in conjunction
 with Barclays Capital) appointed as an
 Independent Chairman to oversee the sale.
 The other members comprise Ian Ayre &
 Christian Purslow (as well as Hicks &

 * Hicks claims the club is worth [pounds

June 2010 * Hicks & Gillett attempt to refinance
 their loan but are blocked by the other 3

August 2010 * 2 potential bids are said to be on the
 table from Kenny Huang and Yahya Kirdi
 but they fail to materialise.

 * Hicks attempts, unsuccessfully, to
 secure refinancing from Blackstone hedge
 fund for the [pounds sterling]237m debt.
 Reports emerge that RBS have set a
 deadline of 15 October.

September 2010 * LFC's supporters instigate a
 large-scale campaign against the American

October 2010 * With the date looming to repay RBS or
 face a [pounds sterling]60m penalty
 charge, rumours emerge that a proposed
 deal with NESV was agreed on 5 October.

 * A boardroom struggle ensues, with an
 official statement from the club
 detailing Hicks and Gillett's attempts to
 remove Chairman Martin Broughton,
 Managing Director Christian Purslow and
 Commercial Director Ian Ayre from the
 board and install Mack Hicks and Lori Kay

 * The following day, a statement is
 released by Martin Broughton to confirm
 that a proposed sale to NESV had been
 agreed subject to the court proceedings
 instigated by Hicks & Gillett.

 * RBS, the primary creditors, are granted
 an injunction on 12 October preventing
 Hicks & Gillett from changing any Board
 members. The fear is that if they install
 their own people then the sale will be

 * On 13 October the High Court (Mr
 Justice Floyd) rules in favour of RBS
 which means that the Board can be
 reconstituted and the sale can proceed.

 * On the same day, Hicks & Gillett
 commenced legal proceedings in Texas.
 They alleged that the English Directors
 and NESV (amongst others) had conspired
 to sell the Club below the market value.
 The Texan court then issued a Temporary
 Restraining Order preventing the sale to
 NESV and preventing RBS from enforcing
 its loan.

 * On 14 October a further ruling was
 sought from Mr Justice Floyd and he again
 found in favour of RBS.

 * The sale to NESV was completed on
 Friday 15 October.
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Author:Eppel, Max
Publication:The International Sports Law Journal
Date:Jan 1, 2011
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