CVC deal - the (legal) battle between La Liga and Spanish giants

After months of negotiations, media speculations and accusations, the battle between FC Barcelona, Real Madrid, Athletic Bilbao and La Liga over the CVC deal has recently made it to its final - legal stage.

CVC deal explained

The original agreement on the ‘Impulso’ investment deal between the private equity company - CVC and La Liga was announced back in August 2020. Under the contract, CVC is going to provide Spanish League with €2 billion in exchange for an 8.5% stake in the league’s media rights revenue over the next 50 years. 90% of that sum is meant to be transferred directly to the involved clubs to be spend on infrastructure (70%), existing debts (15%) and signing new players (15%). The deal can be seen as a way for La Liga to recover after financial difficulties, mainly the net debt of the clubs, caused by the pandemic. Despite giving up a part of the broadcasting revenue La Liga will retain complete autonomy over media right sales and internal broadcasting regulations.

CVC deal has led to many tensions between La Liga authorities and famous clubs - Real Madrid, Fc Barcelona and Athletic Bilbao who are strongly and openly standing against this investment. However, the disagreement of three legendary clubs was not able to stop the confirmation of the ‘Impulso’ programme on the 10th December after voting in which a required two-third majority was met with 37 votes for, 4 against (Barcelona, Real and Bilbao were joined by a Segunda División club - UD Ibiza) and 1 abstention.

The position of La Liga

Javier Tebas, the president of La Liga, has been presenting the CVC deal as a capital rather than purely financial deal. In his opinion pursuing this investment is going to have a highly positive impact on the league by providing economic stability and an opportunity for clubs for further development, especially in the areas of digitalisation, youth academies and stadiums’ improvements. According to the League’s official position, provisions of the agreement assure that the money will not go to players but to the League and clubs which will grow the competition and raise the general value of La Liga. The authorities are convinced that without CVC the League would lose its value over the next few years, while with the investment that value can grow by 30%. The President was mostly surprised by the attitude of FC Barcelona pointing out that the Catalan club with its growing debt should see the ‘Impulso’ project as an opportunity to keep its player and pursue new signings. Being sure about securing the common interest of all actors in the football sector, he also accused the opposing clubs of placing their own interest above the process of levelling the chances and supporting smaller clubs. Oscar Mayo (La Liga executive director), in light of the recent news about FC Barcelona allegedly wanting to negotiate with the League and eventually joining the CVC deal, stated that La Liga was not open to any negotiations and can only welcome opposing clubs on the already confirmed terms.

Real Madrid, FC Barcelona and Athletic Bilbao

Javier Tebas failed to convince the three important actors in La Liga - Real Madrid, Fc Barcelona and Athletic Bilbao to agree on the deal. In result, those clubs decided to opt-out of the agreement hence they will retain their full allocation of central media right revenue and will not receive money from the private equity company. Joan Laporta (FC Barcelona president) compared the investment to mortgaging the clubs’ future, while Florentino Pérez (Real Madrid president) has been pledging to take legal action against La Liga since the very beginning of the project. The opposing clubs describe the CVC agreement as ruinous for Spanish football and point out the long duration as its greatest weakness.

Alternative solution

Next to the disapproval of the proposal, Barcelona and Real also introduced an alternative idea for financing deal for the League. Their “Project Sustainable” would consist of a €2billion, 25 years loan from JP Morgan, Bank of America and HSBC aimed to be shared between the teams. The clubs claimed that it would be a way more economical solution. However, this idea met a strong disapproval of La Liga President who called it “an attempt to break the consensus and generate uncertainty” and argued that “Now Pérez remembers the same clubs (there who play ‘uninteresting’ games) he ignored when he presented the Super League”. The alternative solution has been approached with a dose of suspicion as the companies involved in the possible loan were also a part of the Super League project.

Legal action

The three clubs first attempted to undermine the legality of the deal before the voting in December with an open letter to the Spanish Football Federation (RFEF) and Spanish National Sports Council (CSD). In the letter asking for an intervention, the ‘Impulso’ initiative was described as illegal and fraudulent. Despite the support expressed by RFEF and CSD’s idea of a meeting between parties, the talks ended with nothing. It soon became clear that CSD had in fact no power to prevent La Liga from finalising the deal.

Right after the voting on 10th December, the clubs opposing the CVC agreement released a joint statement:

“[The agreement] with the CVC revenue capital found is an illegal transaction that causes irreparable damage to the Spanish football sector as a whole, and flagrantly violates the most elementary principles of Spanish sports law and the La Liga status”

The letter was followed by a civil lawsuit (joined by RFEF) asking the Court of first instance no. 15 of Madrid for a temporary injunction against La Liga, which could have prevented any transaction under the agreement. The clubs were most likely to argue on the ground of the Royal Decree Law-5/2015 which considers the rights of exploitation of audio-visual content of Spain’s domestic football leagues and their cups. La Liga could have possibly infringed that law with the ‘Impulso’ deal by:

(1) Taking a position of a legal owner and making decisions about audio-visual rights that, according to Article 2(1), belong to the clubs and not the League,

(2) Adopting a preceder which was not transparent in violation of the principles of joint marketing mentioned in Article 4(d). Moreover, relying on the same article it can argued that La Liga not only failed to keep all clubs sufficiently informed and consulted before finalising the deal, but also rejected alternative ideas on the grounds other than “the economic profitability of the offer, the sporting interest of the competition, and the growth and future value of the audio-visual rights that the successful bidder may provide”.

(3) Agreeing on the agreement’s duration being fifty years when, according to Article4(f), “the duration of the marketing contracts may not exceed three years.”

The court in Madrid rejected the request and explained that it was too late for such an action, as an injunction would stop the process already initiated or executed. The different ruling would also lead to giving an advantage to the voice of minority against the choice of majority. Oscar Mayo asked about the accusations assured that the League is ‘confident in the legality of the deal’. Moreover, La Liga authorities could also defend the ‘Impulso’ investment on the ground of the Central Court of Administrative Litigation ruling, from January 2022. It was decided, in that case, that the clubs (in this particular example Real Madrid) cannot argue for a complete ownership of the audio-visual rights because for commercialisation and management aiming to maximise the quality and profitability the rights must be interpreted in the manner presented by Control Body which found that clubs are not given the full freedom in that area.

CVC deal and the Super League

In the broader perspective, the battle over the CVC deal is directly linked to the greater issue not only for La Liga but also for European football as a whole - the possible creation of the Super League. Javier Tebas openly admitted that “the better the La Liga, the project they’re [Real and Barcelona] believing in - the Super League, has less possibility if it has any at all”. He sees the main reason for Real and Barça’s disapproval of the CVC agreement in their unwillingness to be economically dependent on La Liga in case of arising possibility of the Super League coming into reality.

What’s next?

As the negotiations and legal actions ended up with a failure for Athletic, Real and Barcelona, La Liga is pursuing its collaboration with CVC. The 37 clubs involved in the ‘Impulso’ programme have already received €395 million and the first €1 billion of the total sum is to be payed by July 2022. The remaining capital is scheduled to be transferred over the period of two years (2023, 2024). As recently reported, Barcelona after unsuccessful attempt to challenge the legality of the deal is now willing to negotiate with La Liga on an eventual joining the project to balance its finances, sign new players for the 2022/23 season and be able to provide its rising stars such as Gavi and Araújo with more lucrative contracts. Considering this development the question for the future is not about if the CVC deal will come into existence but rather about the final number of the clubs involved.

Article written by Wiktoria Jazwinska, law and politics student at Queen Mary University of London