Wednesday, September 14, 2016

China’s soccer seduction illustrates a governance challenge for world football

Chinese investment in the world game may be welcomed by European football fans but Simon Chadwick, Professor of Sports Enterprise at Salford University Manchester, warns it brings a raft of new governance issues (an integrated and controlled supply-chain) that must be addressed by FIFA, UEFA and national Football Associations:

RUMOURS HAVE RECENTLY intensified that England's Premier League club Liverpool are subject to a takeover bid from Chinese investors. Earlier in the year, it was reported that billionaire entrepreneur and art dealer Liu Yiqian had made an offer for Liverpool but was rebuffed in his approach.

Over the last month, new reports have emerged suggesting that China’s state-owned China Everbright has since stepped in as the most likely buyer, a rumour the company nevertheless denies. Once more, reports indicate that Liverpool’s owners Fenway Sports Group (FSG) have again held-up a ‘not for sale’ sign.

However, stories now circulating in some quarters point to FSG finally having agreed to dispose of their Merseyside asset, for what may possibly be a ten figure sum (in pounds). This rumour has yet to be confirmed, as has the name of the buyer, although as one source has put it, “the buyer will be some sort of Chinese state investment vehicle.”

If such a sale does go through, it will be the latest chapter in a period of intense activity by Chinese investors buying into European football. The reasons for this activity have already been well documented, not least in a series of columns I have written.

Clubs ranging from Inter Milan in Italy to Wolverhampton Wanderers in England now boast Chinese owners. Some of them have acquired controlling ownership stakes (as in Inter’s case); others have purchased a minority shareholding (as in Atletico Madrid and Manchester City’s cases); some of them are now in outright ownership (such as Wolves).

As China’s new investment elite has gone about its business, so some of the fundamental governance principles of world football are increasingly being tested. This is already posing major challenges for football, its governing bodies, and some of its most important leagues and competitions.

Assuming the Liverpool deal does go through, then the Premier League will be paying very close attention. China Everbright is part of the state-owned China Everbright Group, which is a serious issue for the Chinese government because China Media Capital (CMC), also a Chinese state investment vehicle, already owns 13 per cent of Manchester City.

In England football club owners with more than a 10 per cent stake in one club are not permitted to own more than 9.9 per cent of any subsequent clubs in which they invest. In other words, the Chinese state theoretically cannot own Liverpool and Manchester City at the same time unless it restricts its shareholding in one of them to 9.9 per cent or less.

The reasons for controlling ownership in this way should seem obvious: the potential conflicts of interest ranging from match-fixing through to market manipulation in the form of, for example, ‘managed’ player transfers. These of course raise all manner of issues that may be against the interests of clubs, fans, football, and the general public.

UEFA is similarly mindful of such matters, although football’s European governing body is somewhat more relaxed in its approach to regulation. UEFA permits ownership in more than one club as long as the investing entity does not have a controlling interest (more than 50.1 per cent) in any of them. This ruling has been backed by the Court of Arbitration for Sport (CAS).

Even so, a Liverpool deal could see the Chinese state contravening both English and UEFA regulations, as well as CAS’s ruling. One also needs to factor AC Milan into the mix; all summer rumours raged about the identity of the Italian club’s new owners, one of the most prevalent being that the Chinese government was somehow involved. In the end it proved to be the case, with state-owned Haixia Capital among the investors.

Such are the concerns of some in football, that a report last week by Bloomberg revealed that the Premier League has enlisted the help of a corporate investigation firm to probe the identities and business histories of the new wave of Chinese investors. Not only is multiple ownership of clubs in the spotlight, so too is whether the likes of Lai Guochuan (who recently acquired West Bromwich Albion) pass the Premier League’s ‘fit and proper person’ test.

In the words of a Premier League representative, the test “[checks for] proof and provenance of funding, [who the] owners and directors [are], and who the ultimate beneficial owner is.” This process resulted in a Chinese bid for Hull City being rejected by the Premier League amid rumours the club’s proposed new owners, Dai Xiu Li and Dai Yongge, had failed the test.

However, the two Chinese investors are thought to be preparing a second approach for Hull, which, in spite of the Premier League’s regulations, raises concerns about the always opaque nature of governance standards in China. Indeed, one has to question whether any of world football’s authorities have the political nous, the will, or the resources to go head-to-head with the Chinese state.

This issue could, however, be the tip of a very large governance iceberg lurking in football’s waters launched by Chinese football’s bamboo revolution. For example, earlier this year Brazilian international Ramires unexpectedly transferred from Chelsea to Jiangsu Suning. Months later, the electrical store chain Suning acquired a controlling stake in Inter Milan.

It was with a strong sense of inevitability that stories emerged recently that Ramires could well be on the verge of signing for…you guessed it, Inter. If Suning’s mooted acquisition of representation business Stellar ultimately takes place, it could see a Chinese high-street electrical appliance retailer securing arguably unprecedented control over the football labour market.

A similar situation is evident at Wolves too. Acquired by China’s Fosun, which bought a stake in super-agent Jorge Mendes’ representation business earlier this year, the club were intriguingly active in this summer’s transfer window. At one stage, it was being reported that the second-tier club was about to sign Anderson Talisca from Benfica for £20 million (amid reported interest from Liverpool).

In the end, Talisca did not move to England’s industrial West Midlands, preferring instead to move to Champions League contenders Besiktas of Turkey. Yet what his case illustrates is a governance issue (an integrated and controlled supply-chain) one suspects world football did not anticipate and is not yet in a position to effectively address.

Across the world, China’s great football seduction has left many people with dollar signs in the eyes. Yet beyond the money and the hype lie some challenging and very real governance issues which the likes of the Premier League, UEFA and, perhaps more importantly, FIFA must rapidly get to grips with if the integrity of the sport is to be upheld.

Simon Chadwick is ‘Class of 92’ Professor of Sports Enterprise at Salford University, Manchester in the UK, where he is also a member of the Centre for Sports Business. First published in The Asia and the Pacific Policy Society Policy Forum. Read the original article.

See also: The unknown costs of China’s state-sanctioned soccer club spending spree (28 Aug 2016);  European football: meet soccer's 'hot money' new club owners from China (21 July 2016);  China’s push for FIFA World Cup victory (through taking over the world game) (19 June 2016); Chinese football and future power: not simply in the sport to play the game (23 Apr 2016); China's clear signal to the global football game: the centre of power is shifting (10 Feb 2016); Do Chinese fans prefer traditional football clubs? (9 Jan 2007); Report: Still a market for ManU tours to China (29 Sep 2005)

Saturday, September 03, 2016

Football investments’ Reputational Risk threatens to catch up with the UAE

Human Rights Watch warned as far back as 2013 that the United Arab Emirates was using football  to launder its image. According to James M Dorsey, a senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies in Singapore, Gulf investors hope that soccer investments will allow them to embed themselves in the international community in ways that would ensure international public empathy in times of need and leverage diplomatic and commercial opportunities:

The Turbulent World of Middle East Soccer

REPUTATIONAL RISK associated with autocratic investment in high profile soccer clubs threatened to catch up with the United Arab Emirates as a powerful coalition of political and civic leaders in Manchester, England, demanded that the Gulf country release political prisoners, investigate allegations of torture and respect human rights.

The leaders, who include members of parliament and Manchester’s city council, lawyers, and human rights activists, made their demands in a letter to UAE Deputy Prime Minister Sheikh Mansour bin Zayed Al-Nahyan, the owner of Manchester City FC.

Sheikh Mansour, a half-brother of UAE president Sheikh Khalifa bin Zayed al-Nahyan is the senior official responsible for the Abu Dhabi judiciary. UAE officials have insisted that the acquisition of Manchester City as well as Sheikh Mansour’s investment in a Major League Soccer team in the United States was a personal rather than a government investment.

Human Rights Watch warned as far back as 2013 that the UAE was using soccer to launder its image.  Former English Football Association Chairman Lord Triesman called at the time for making a country’s human rights record one of the criteria for establishing whether a state entity or member of a ruling family passes the "fit and proper person test" for ownership of a Premier League club.

Nicholas McGeehan, Human Rights Watch’s senior Gulf researcher, describing the UAE as "a black hole" for basic human rights, has asserted that "a Premier League club (Manchester City) is being used as a branding vehicle to promote and effectively launder the reputation of a country perpetrating serial human rights abuses."

The portrayal of acquisitions and sponsorships of prominent soccer clubs by autocrats as an effort to launder a country’s reputation casts a shadow over the use of soccer as part of the soft power strategy of the UAE as well as Qatar that expects to host the 2022 World Cup.

Gulf investors in soccer hope that soccer investments will allow them to embed themselves in the international community in ways that would ensure international public empathy in times of need and leverage diplomatic and commercial opportunities.

Sheikh Mansour’s acquisition in 2008 of Manchester City in which he has so far invested $1.3 billion has paved the way for a host of deals between the city and UAE companies, including a $1.3bn urban regeneration project.

The projects, some of which are managed by the Abu Dhabi United Group (ADUG), which is owned by Sheikh Mansour, have sparked protests by activists who assert that the deals allow developers to destroy monumental sites such as a 16th century pub in downtown Manchester and replace them with high-end residential complexes.

“The UAE has deep pockets but a worryingly poor human rights record. Many Mancunians will appreciate what Emirati money has done for Manchester, but they’ll also be extremely concerned about freedom of speech being suppressed and the host of unfair trials and torture cases that have occurred in the UAE. This is real opportunity for Manchester City Council and all other bodies in Manchester with commercial relations with the UAE to use their considerable influence with the Emirati authorities to raise human rights and show that they care about these issues,” said Amnesty International advocacy officer Kieran Aldred.

The leaders called in their letter, that was organized by Human Rights Watch and Amnesty International, for an investigation into allegations of torture and the release of Emirati human rights lawyer Mohamed al-Roken, who was sentenced to 10 years in jail in July 2013 following a huge crackdown on political and human rights activists in the UAE.

Mr. Al-Roken was one of 94 people sentenced in a court case that human rights activists denounced as unfair and a violation of due process. The defendants were denied legal assistance while being held incommunicado pre-trial, allegedly tortured, and refused the right of appeal.

“In addition to our concerns about the imprisonment of Mohamed al-Roken and others like him, we have concerns about the UAE’s ongoing abuse and exploitation of migrant workers, the existence of laws that appear to tolerate the physical abuse of women, and the authorities’ exclusion from the UAE of NGOs, journalists, and academics who have criticised the UAE’s record on human rights,” the letter said.

Despite significant moves by the UAE government to relieve the most onerous aspects of the Gulf’s kafala or sponsorship system for migrant labour, Al Khaleej newspaper reported earlier this month that mostly Indian workers in Abu Dhabi's Mussafah camp had not been paid by their employer for more than 10 months and were struggling to survive. The workers ran the risk of being penalized because they had been unable to renew their visas.

The workers’ plight coincided with an agreement between the UAE and India to ensure that blue-collar Indian workers receive the wages and benefits promised to them before departure to the UAE and that they were not travelling on fake visas or job offers.

The UAE government last month ordered employers to arrange free accommodation for workers paid $540 or less per month. The decision applies however only to companies with more than 50 workers.

Glaringly absent among the signatories of the letter was Labour Party member of parliament and Manchester mayoral candidate Andy Burnham who had expressed concern when Sheikh Mansour initially acquired Manchester City. Several other Labour parliamentarians were also absent. It was not immediately clear why the Labourites had not joined the initiative.

The letter was published on this month’s anniversary of the 1819 Peterloo massacre in Manchester in which 18 people were killed and 700 wounded when the cavalry suppressed a pro-democracy and anti-poverty rally.

“Manchester has a rich tradition of standing up for political rights, women’s rights and the abolition of slavery. So the city’s close relationship with the UAE government, which has such a poor rights record, causes alarm for those who celebrate its historic past,” Mr. McGeehan said.

Dr James M Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of W├╝rzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog and a just published book with the same title.