French newspaper Le Parisien reported that Paris St-Germain have signed a huge sponsorship deal with the Qatar Tourist Authority. The four-year deal is said to be worth E150m this season, rising to E200m in the final year of the arrangement. The deal is also reported to be back-dated so that the club will receive the full E150m this season, even though deal has only just been announced.
PSG are 100% owned by the Qatar Sports Initiative (QSI), which is in turn owned by the Qatar Investment Authority (QIA) – a Sovereign Wealth Fund owned by the Qatar government. Sovereign Wealth Funds are common amongst Oil producing countries (even Norway has one) and exist as a vehicle for investing excess oil-revenue profits. The Qatar Tourist Authority is a government funded organisation.
This sponsorship deal has clearly been arranged to artificially boost the profits of PSG so that the club can comply with FFP rules. PSG are heavy spenders and without the huge deal would fail the FFP test in the first Monitoring Period. However, the scenario of owners (or parties connected to the owners) artificially inflating income was envisaged when the FFP rules were drawn-up. Under the rules this is called a Related Party Transaction. On page 85, the rules define a Related Party as follows:
3 a The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);
b) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);
It therefore seems likely the Qatar Tourist Authority would be classed as being Related to QSI. Under the rules,all Related Party Transactions have to be reviewed by the UEFA Financial Control Body (EFCB). This body is required to review all Related Party Transactions and identify a ‘fair value’ for the transaction – where this differs to the amount paid, the transaction will be adjusted for the purposes of the FFP test. So, assuming the rules are applied strictly as per the UEFA FFP rulebook, we would expect the deal to be adjusted downwards. [Note: the EFCB will also be responsible for reviewing Man City's £12.8m 'Intellectual Rights' payment revealed in my 16 Dec article.]
Of course it won’t be easy for the EFCB to identify a fair value for the deal. However there are precedents and in December 2012, Atletico announced a new sponsorship deal with Azerbaijan which was reported to be worth E20m a year. As a result, the club now wears shirts bearing the logo "Azerbaijan, land of fire"* . PSG may well find that their E150m-E200m a year deal is adjusted to around E20m – if this happens the club will fail the FFP test and face UEFA sanction (possibly resulting in an outright ban from UEFA competitons).
There are a few other things to consider about this deal. The EFCB were deliberately set up an independent panel (their Chairman is the former Belgium Prime Minister) so shouldn’t, in theory, be influenced by political pressure. This affair isn’t going to be entirely comfortably for UEFA – if the panel do their job, they will effectively be branding the PSG owners (the Qatar government) as a body that is not playing by the rules. It could then, potentially ban the Qatar government’s football team (PSG) from UEFA competitions. Given that FIFA have given Qatar the 2022 World Cup and also Platini’s desire to head-up FIFA in 2015, it could all get rather messy. Hence UEFA’s desire for the EFCB to be entirely independent.
It’s hard to be precise about the number of genuine tourists that visit Qatar. The Tourist Authority suggests the number may be as low as 60,000 this year and up until recently there were only 5,000 hotel beds in the country. Even if higher estimates are correct and 400,000 visit Doha each year, the PSG deal works out to a spend of around E440 per current visitor. Although Qatar is more progressive than many Middle-East states, alarm bells sounded last month when poet Al-Jami was jailed for life for criticising the ruler.
*presumably "land condemned by EU for Human Rights violations" was just too long.
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