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Why Nottingham Forest’s appeal against FFP points deduction is likely to fail

Nottingham Forest are expected to appeal their four-point deduction for breaching financial regulations, but a legal expert warns the club’s lawyers will have a tough task in reducing it.

The penalty, announced on Monday, dropped Forest into the Premier League relegation places, leaving them one point behind Luton Town and safety with nine games remaining of the season.

Everton managed to get a 10-point penalty for breaching profit and sustainability rules (PSR) reduced to six on appeal – an outcome that is thought to have had some bearing on the Forest punishment.

The Toffees, who are four points above Forest, are still awaiting the outcome of an independent commission into a second separate breach of the financial rules and could well be docked more points.

Following Monday’s announcement Forest released a furious statement criticising the Premier League for its approach to punishing the club.

“The wording of the statement suggests they will appeal,” Simon Leaf, head of sport at Mishcon de Reya, told i. “And on the face of it, they don’t have much to lose in doing so. Especially as Everton successfully reduced the initial sanction that it received on appeal.

“However, as with the recent Everton appeal, they will need to show that the commission made a ‘material error of law’ when giving them a four-point penalty, which is a pretty high bar and would essentially require the new commission to criticise the approach that the original commission took.

“In addition, there is the possibility that a new commission could consider a more severe penalty may be more appropriate – especially given the extent to which the club failed to stay within the regulations.

“However, my own view is that despite the commission rejecting almost all of the mitigating points that Forest put forward, the legal team has done well in keeping the penalty down to four points and ironically were probably helped by the outcome of the Everton appeal.”

Lawyers for the Premier League and Forest were able to argue their case in front of a three-person panel made up of legal experts.

Forest’s statement made clear the club “were extremely dismayed by the tone and content of the Premier League’s submissions before the commission”, adding: “After months of engagement with the Premier League, and exceptional cooperation throughout, this was unexpected and has harmed the trust and confidence we had in the Premier League.

“That the Premier League sought a sanction of eight points as a starting point was utterly disproportionate when compared to the nine points that their own rules prescribe for insolvency.”

In its verdict the independent commission stated that Forest had overspent by £34.5m, whereas Everton were £19.5m over the permitted spending limits. Everton’s points deduction was reduced to six on appeal, which appears to be the starting point for Forest’s punishment.

The commission reduced Forest’s points deduction by two due to the club admitting the the offence early and their subsequent cooperation with the Premier League’s investigators. It did not accept Forest’s mitigating argument that the club had to wait to sell Brennan Johnson to maximise his value, leaving them unable to include his £47.5m fee in the accounting period they were found in breach.

Nonetheless, it is believed the outcomes of charges against Everton and Forest will have further reaching consequences for clubs found in breach of Premier League rules. Manchester City have been charged with more than 100 breaches of financial rules and an independent commission is expected to hear the case in the autumn. Chelsea are under investigation for potential rule breaches during the Roman Abramovich era that were self-reported by the new owners.

“Going forwards, recent decisions will act as a further warning to other clubs – particularly Manchester City – that the Premier League do not appear to be taking any prisoners in the current era when it comes to enforcing FFP regulations and going after clubs that are in breach, irrespective of whether the clubs have cooperated with the League,” Leaf added.

“This is a marked change in approach from the Scudamore years where suspected breaches didn’t always appear to be investigated with the same ferocity nor result in sanctions in comparison to the approach that the EFL took, and is a sign of the fractious times that we are in at the top of the game with the spectre of the independent regulator looming large.”

Forest have seven days from the announcement to appeal.

What would Forest’s appeal case look like?

In short, the same as their initial one.

Forest are not able to put forward any new information in their appeal – it is essentially just appointing a new commission to review the initial case.

The club will have to prove the initial commission did something legally wrong to reduce their punishment, which will be a real challenge.

It is likely they will once again hang their case on six areas of mitigation – the belief their situation as a club being promoted without previous parachute payments is “unique”, the sale of Johnson, the cost of promotion, that they gained no sporting advantage from the breach and two points centred on cooperation with the Premier League.

The appeals commission would have to totally reassess this to find any further reduction in the punishment. The initial case already saved two points from the punishment for Forest’s extensive cooperation with the Premier League since they were found to have breached.

It is also possible their mitigation could be reduced, meaning their penalty is increased closer to the six points the commission initially decided upon pre-mitigation, or the eight points the Premier League pushed for.

When will Forest’s appeal be resolved by?

The club now have seven working days to formally appeal the decision and the Premier League have set a backstop date of 24 May for the case to be completely resolved.

As this falls on the Friday after the final day of the season, everyone involved will hope the case is resolved before then, but given the time involved in appointing an appeals commission and organising the new cases, this currently seems unlikely.

What does the Forest deduction mean for Everton?

There are plenty of points in the 52-page report on Forest’s points deduction which will make Everton squirm ahead of their second PSR hearing in a year, slated to start next week.

It appears to come closer to enshrining a set of benchmarks for PSR breach punishments, which includes a standard three-point deduction for any breach. Points are then added for the severity of the breach. Both Everton’s initial £19.5m breach and Forest’s £34.5m fall into the “significant” category, worth a further three points.

Whatever Everton’s second breach ends up amounting to, it seems almost guaranteed they will face a further three-point breach, if not more, when many around the club had been hoping for a financial penalty instead.

What could a Forest appeal mean for Luton and Brentford?

There’s a fair argument that the real victims of all this are the clubs around Forest and Everton.

Forest dropped into the relegation zone on Monday after their four-point deduction, now one point behind Luton Town and four ahead of Burnley. Brentford, meanwhile, are five points above Forest but only one ahead of Everton.

A Forest appeal would mean the case could continue to the backstop date of 24 May and beyond the end of the season. This leaves teams like Luton and Burnley unsure of what they have to do to secure Premier League survival right up to the final game, as Forest’s position will still be potentially changeable.

Brentford boss Thomas Frank and Luton’s Rob Edwards have both spoken publicly about the impact this insecurity is having on their players.

Forest did not respond to a request for comment.

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