First inter-club compensation award for breach of Premier League rules

Everton Football Club has been ordered to pay rival club Burnley approximately £35 million in compensation for loss suffered as a result of Everton’s breach of the Profitability and Sustainability Rules (“PSR”) within the Premier League Rules. The figure comprises £26m in assessed principal loss and £9.1m in pre-award interest calculated to 31 July 2025, with interest continuing to accrue beyond that date. The Commission found that the breach conferred a sporting advantage on Everton which caused Burnley to be relegated in the 2021/22 season, resulting in financial loss. 

The decision is significant as the first example of a club being ordered to compensate another club for breach of the PSR. It will also impact future decisions, as the Commission determined the following matters which are likely to arise in other claims for compensation under the Premier League Rules:

• Scope of the losses which can be recovered: claims for compensation of this kind are limited to losses caused by breaches of the Premier League Rules which have already been proven before the Commission in previous proceedings, and cannot extend to wider losses. 
• Status of the underlying complaint proceedings: findings of fact from the underlying complaint proceedings before the Commission will be binding on the parties to the compensation claim, even though the claimant will not have been party to the underlying proceedings. 
• Period to be examined when assessing compensation: breaches of the PSR such as overspending may occur throughout the relevant season, and do not only crystalise at the end of the club’s financial year. 
• Relevance of sanctions: sanctions issued for a club’s breach of the Premier League Rules will not necessarily reflect the sporting advantage conferred by the breach, so cannot be used to evidence the loss suffered. 

This decision is a key illustration of how financial rule enforcement operates in English professional football. Its implications extend to every club in the Premier League, and are considered further at the end of this post.

Everton is appealing the Commission’s decision. 

Background

Under the PSR, clubs are subject to limits on the losses they can incur over a rolling three‑year period. In broad terms, the PSR framework caps permissible losses at £105 million across that three‑year period.

Everton's losses for the period ending 30 June 2022 were found to be £124.5m, an excess of £19.5m, indicating an overspend. The Premier League issued a complaint and, in November 2023, the Commission imposed a 10 point deduction on Everton, applied in the 2023/24 season. The sanction was subsequently reduced to 6 points on appeal. 

Rule W.55.5 of the Premier League Rules provides the Commission with a broad power to order a club which has breached the rules to pay unlimited compensation to any other person or club.

At the end of the 2021/22 season, Everton had finished 16th on 39 points, with Leeds United 17th on 38 points and Burnley 18th on 35 points, relegated to the EFL Championship. Relying on Rule W.51.5, Burnley brought a compensation claim against Everton arguing that, had the club not breached the PSR – ie had Everton not overspent during the period to 30 June 2022 – Everton would have been relegated instead, and Burnley would have stayed in the Premier League. Burnley sought compensation for the losses it suffered as a result of being relegated. 

Decision 

A three-member panel awarded Burnley compensation, rejecting Everton’s arguments on all three contested issues: timing, causation and quantum. 

Timing

Everton contended that its breach of the PSR only arose when its financial year closed on 30 June 2022 because, before that date, it could have changed its spending (for example by selling a player in summer 2022) and avoided a breach occurring. Therefore, Everton argued, Burnley’s alleged loss arising from its relegation, confirmed on 22 May 2022, had crystalised before Everton’s breach. On ordinary causation principles, a loss suffered before a cause of action arises cannot found a damages claim. 

The Commission rejected these arguments. Construing the PSR purposively (rather than literally) it held that a breach of the PSR is not a single event crystallising at year-end, but rather a state of affairs capable of arising and persisting during the playing season before annual accounts are finalised, and Everton's breach had in fact been present before Burnley's relegation. 

Further, the player-sale counterfactual was not “practical and realistic” so as to meet the test in Durham Tees Valley Airport Ltd v Bmibaby Ltd [2010] EWCA Civ 485 for analysing how a party would have acted in the counterfactual, had they performed a contract. The evidence showed that Everton's principal shareholder had unequivocally declined an offer for one of its players in the weeks before the year-end deadline, and the Commission concluded that Everton would never have accepted an offer at that time. 

Causation

It was common ground that Everton’s breach of the PSR had conferred a sporting advantage, in the form of a greater number of points won in the 2021/22 season. The dispute was as to the number of additional points, and thus whether Everton’s sporting advantage caused Burnley to be relegated. 

Burnley initially argued that the simplest method of quantifying the impact was to adopt the 6 point deduction imposed on Everton in the underlying PSR complaint proceedings. However, the Commission highlighted that sanctions imposed for a breach are not intended to be equivalent to the sporting advantage conferred by the relevant breach.

Both parties presented expert evidence which modelled the impact of Everton’s overspending on Burnley. 

Burnley's expert concluded that Everton's overspend generated between 3.85 and 7.13 additional points during the 2021/22 season. On Everton’s expert’s model, the sporting advantage attributable to Everton's breach in 2021/22 was modest, between 0.2 and 2.6 points, and Burnley would have been relegated regardless of Everton’s breach of the PSR, relying on factual evidence put forward by Everton of its own inefficient spending on player recruitment. 

The Commission preferred Burnley's expert’s analysis. It noted that, while causation in this context is an inexact science with fine margins, Everton’s model did not account for many factors likely to affect match results. It concluded that Everton's additional expenditure of £19.5 million likely accounted for an additional 4 points, or possibly more, and the effect of those additional points was the difference between relegation and staying in the Premier League. Therefore, on the balance of probabilities, the Commission found that Everton’s breach of the PSR caused Burnley to be relegated. 

Quantum 

Burnley originally sought compensation in the region of £51.7m. Everton argued that Burnley had in fact made a net gain as it had mitigated its losses so effectively. 

Rather than treating Everton's £19.5m overspend as a ready-made measure of Burnley's loss, the Commission calculated what Burnley's financial position would have been over the four-year period ending in summer 2025 had it remained in the Premier League, and compared that to what in fact happened after relegation. It did so across four equally weighted scenarios, reflecting the range of likely league finishes Burnley might have achieved. 

That exercise produced a total loss before interest of £26m, made up of two elements. First, an operating loss of £24.6m: in the relegation world Burnley suffered a cash outflow of £21.2m from its operations, whereas in the modelled Premier League world it would have generated a cash inflow of £3.4m, a swing of £24.6m. Second, a player trading loss of £1.4m: Burnley spent £21.4m net on player transfers after relegation, compared to a modelled spend of £20.0m had it stayed up, a difference of £1.4m.

Burnley was awarded pre-award compound interest in addition to its principal loss, calculated annually at weighted-average borrowing rates derived from Burnley's actual cost of borrowing during the relevant period: 10.49% for the year to July 2023, rising to 11.81% for the years to July 2024 and July 2025. Applying these rates produced £9.1m in interest, bringing total compensation to £35,038,000 as at 31 July 2025, with interest continuing to accrue at 11.81% per annum beyond that date.

Implications

• Before this ruling, clubs were largely concerned with sanctions within the Premier League's own disciplinary machinery: points deductions, fines, or transfer restrictions. The Commission’s ruling will trigger clubs assessing their financial position to consider not only what the league might do, but who else might sue, and for how much.
• If the decision is upheld on appeal, a club’s activity throughout the season – not just at financial year-end – will be open to scrutiny in the event of a PSR breach. 
• Statistical modelling is now a feature of Premier League disputes. The Commission acknowledged that quantifying the points impact of a spending excess is "an inexact science", yet accepted simulation evidence as sufficient to establish causation on the balance of probabilities. That acceptance is likely to generate detailed debate amongst experts on methodology, data reliability and counterfactual assumptions in any future case. Clubs considering a claim, or anticipating having to defend one, should take early advice on the expert evidence required.
• This judgment comes as Premier League clubs have voted to replace the PSR with two new frameworks from 2026/27: a Squad Cost Ratio (“SCR”), which limits a club's total squad costs (including wages, transfer and agents' fees) to 85% of revenue in any given season (reduced to 70% for clubs in the Champions League), and a Sustainability and Systemic Resilience (“SSR”) test focused on short, medium and long-term financial health. Notably, compliance under SCR will be tested by a mandatory assessment on 1 March each season, with further monitoring in October and any points deductions applied immediately to that season rather than retrospectively. SSR compliance will be tested in July each year. In that respect the new framework moves in the same direction as the Commission's reasoning in this case: both treat financial compliance as a live, in-season obligation.  
• In view of this decision, an uptick in litigation arising from commission proceedings is likely. Clubs that believe they have suffered loss as a result of a rival's breach of the Premier League Rules now have a clear template for bringing a compensation claim: the legal basis, the causation methodology and the quantum framework have all been established and tested. Clubs on the other side of that equation, whether in relation to existing PSR matters or future SCR compliance, should assess their exposure accordingly and take early advice.