There you go....
Middlesbrough host Derby County in the Championship on Wednesday night but the visitors’ owner Mel Morris should not expect a warm welcome from counterpart Steve Gibson. In fact, he should probably bring his own sandwiches after Middlesbrough failed with two attempts to take Derby to an English Football League disciplinary hearing last month.
In a case that even the three-strong arbitration panel described as “impenetrable”, Middlesbrough wanted to launch a fresh inquiry into Derby’s spending in the 2018-19 Championship season and join the EFL’s appeal against the verdict this August that cleared Derby of breaching the league’s financial fair play rules.
The panel, comprised of two QCs and a former Supreme Court judge, rejected both applications, ruling that a “non-party” did not have the right to commence an arbitration against a club and Middlesbrough had no right to enter the EFL’s ongoing case against Derby, as the EFL is only challenging their accounting methods, not the sale of their Pride Park stadium to Morris.
It was that controversial transaction in 2018 that sparked the row between the two clubs and their owners, as Derby were the first to spot a loophole in the EFL’s regulations that allowed clubs to offset their operational losses against a one-off profit from the sale of a tangible asset, such as a stadium or training ground.
The league’s spending rules are assessed over three seasons, with clubs allowed to make a maximum loss on their playing budget of £39 million. When Morris (above right) sold Pride Park for £81 million to a subsidiary he owns in June 2018, the £40 million the club banked in their accounts turned what would have been a breach of the “profitability and sustainability” rules between 2016-18 and 2017-19 into a small profit.
Derby made no secret of what they were doing, and the stadium-sale-and-leaseback plan was subsequently copied by Aston Villa, Birmingham City, Reading and Sheffield Wednesday. But Gibson (above left) has long questioned the £81 million price tag for Pride Park, an opinion that crystalised when Derby beat Middlesbrough to the division’s final play-off place in 2018-19 by a single point.
They would go on to beat Leeds United in the play-off semi-finals but missed out on a return to the Premier League because of a 2-1 Wembley defeat by Aston Villa.
Middlesbrough then endured a difficult campaign last season as they cut their wage bill and went with a younger squad. The club eventually pulled away from the relegation zone but not before they had sacked their former player Jonathan Woodgate as manager. Now managed by Neil Warnock, Middlesbrough are eighth in the table, four points off the play-off places.
Derby, on the other hand, are in last place and have just parted company with their manager Phillip Cocu. Morris is also on the verge of selling the club to Dubai-based businessman and minor United Arab Emirate royal Sheikh Khaled.
That deal has been agreed in principle for over a month and Sheikh Khaled has passed the EFL’s owners’ and directors’ test but the takeover has not been completed yet. The club’s precarious league position will undoubtedly be a factor in the hold-up, as will the possibility of expensive legal action by Gibson.
He and Morris, both self-made multimillionaires who went on to buy their local football clubs, have been sparring about Pride Park’s valuation, clubs’ apparent overspending and the league’s rules for more than 18 months, with Gibson telling the EFL in May 2019 that he would sue the league if it did not take action against Derby.
That action eventually ensued when the EFL started proceedings against Derby six months later. The EFL’s case was based on two issues: the £81 million price tag and Derby’s unusual method of accounting for transfer spending.
That case took 11 months to be decided, as Derby contested the process every step of the way, including an attempt to have the matter thrown out because they believed the EFL was only prosecuting the case because of Middlesbrough’s legal threat.
That argument did not work but the East Midlands club, and their high-profile barrister Nick De Marco QC, claimed a resounding victory in August when another independent panel cleared Derby completely on the Pride Park charge and found them guilty of only one of five rules breaches in relation to their accounting methods.
The league has admitted defeat on the stadium issue but is appealing against the ruling on how Derby have been amortising the values of their players. The fact the EFL is not challenging the valuation of Pride Park is the reason the most recent arbitration panel rejected Middlesbrough’s request to join the appeal, as the club have only ever questioned the stadium sale, not the amortisation policy.
Neither the EFL, Derby nor Middlesbrough wished to comment on the case.