Leicester’s PSR referral: How many points could they be docked? Would it take effect in EFL? Transfer embargo?

The Premier League has referred Leicester City to an independent commission for an alleged breach of profitability and sustainability rules (PSR) in 2023-24.

The club, whose relegation to the Championship was confirmed last month, could face a significant points deduction when they begin next season in the second tier.

This is the latest chapter in an ongoing battle between the club and the Premier League and the English Football League (EFL), which runs the Championship, League One and League Two.

As Leicester have moved between the top two divisions in English football over the three-year accounting period up to 2023-24, the issue of jurisdiction was looked into by the tribunal, which found the Premier League can investigate the club for alleged breaches.

Here, The Athletic looks at what this all means, what points deductions the club could face, where the EFL stands on any Premier League sanction and the potential repercussions for a club already reeling from a disastrous season on the pitch.

How did we get here?

Leicester have been attempting to stave off PSR sanctions ever since their shock relegation from the Premier League in 2023.

At the time, having finished in the top eight in three consecutive seasons, they asked the Premier League for mitigation as their spiralling spend was necessary to sustain a challenge at the top of the Premier League.

For the three-year cycle ending 2023, they had posted losses of £215.2million ($288m), with £105m allowed after various adjustments, including the Covid-19 pandemic.

In March 2024, the Premier League referred them to the commission for allegedly breaching PSR limits by £19.5m, but Leicester won an appeal against that decision in September 2024 by arguing they were neither a Premier League club at the point of breach, when they filed their 2022-23 accounts, because they had been relegated, and had not yet become an EFL club either.

That decision has been upheld by the arbitration panel. However, further losses of £19.4m for 2023-24 take total losses in the new three-year cycle to £201.6m and only £83m is allowed due to them spending one season during that period in the Championship.

Rob Tanner

What has the tribunal found?

For such a contentious case, this most recent ruling is relatively — and refreshingly — straightforward. The three-strong tribunal of former Supreme Court judges Lords Mance and Neuberger and leading international arbitrator Michael Crane was asked to rule on two disputes.

The first is whether the appeal board that ruled that the Premier League did not have the jurisdiction to charge Leicester for breaching PSR in 2022-23 made a complete mess of the law in doing so. And the second is whether the Premier League has the jurisdiction to investigate Leicester for an alleged breach of PSR in 2023-24, despite the club playing in the Championship that season.

Leicester won the Championship in 2024 under Enzo Maresca, right (Alex Livesey/Getty Images)

On the first matter, the tribunal ruled that, while it thinks the appeal board was wrong, and the Premier League did have the right to charge and prosecute the club, the appeal board’s decision was not legally “perverse”, which is the bar the Premier League had to clear to overturn the decision.

But on the second matter, the tribunal ruled in the Premier League’s favour, as its rules clearly state it does have the right to pick up a PSR investigation into a promoted club providing the English Football League had already started one, which it had.

Matt Slater

Could Leicester be docked points this season or in the EFL?

If the 2023-24 case had proceeded as the authors of the Premier League rulebook had intended, this matter would have been resolved this season and any points deduction would have already been applied to Leicester’s total.

But because Leicester refused to submit their 2023-24 accounts to the Premier League by December 31 2024, and then proceeded to fight these two jurisdiction battles, there is no chance of the Premier League being able to prosecute the club this season.

So the matter will undoubtedly spill over into next season, when the Premier League, egged on by the EFL, is very likely to ask a new tribunal to apply a significant points deduction that would be applied in the Championship.

We know Leicester were £19.4million over the allowed threshold for the three-year cycle ending with the 2022-23 season and that was when the threshold was £105million. Their limit for the three-year cycle up to the end of last season, when they won the Championship, will only be £83million, as the limit for a season in the EFL is only £13million, not £35million.

Leicester were relegated last month, but a points deduction could come next season (Michael Regan/Getty Images)

And because both the EFL and Premier League have prosecuted numerous PSR cases now, we also have a good sense of how many points a tribunal is likely to deduct for a significant breach, particularly if it is considered to be “aggravated” as opposed to “mitigated”.

Given Leicester’s long fight to avoid being sanctioned by either league and their most recent failure to submit accounts to the Premier League, they are almost certainly going to be charged with an aggravated breach. This would suggest a starting point of 12 points, with a good chance that the Premier League will ask for even more.

It is perhaps ironic that if Leicester had accepted their fate for 2023-24 sooner, and taken whatever punishment the Premier League sees fit, the points deduction would have already been applied and they would start next season with a clean slate.

There is one further thing for the club to ponder, too, as the EFL has still not completely given up on the idea that it could pick up the 2022-23 PSR investigation it was unable to complete when Leicester were promoted last season. And if that is not depressing enough, the EFL will be all over the club’s accounts for next season, so the prospect of transfer embargoes and agreed budgets is very real.

Matt Slater

How similar is this to the Everton and Forest cases?

It is similar in that we are talking about a row over overspending and the application of the Premier League’s rulebook. But the individual circumstances of these three cases are quite different.

Everton’s PSR troubles were ultimately brought on by mismanagement of the club’s new stadium project, poor recruitment and the sudden loss of benefactor Alisher Usmanov’s sponsorship cash when he was sanctioned by the UK government after the Russian invasion of Ukraine.

The Nottingham Forest case is more similar in that it involved a promoted club moving from one jurisdiction to another, but Forest chose not to contest their PSR breach on any close reading of the two leagues’ slightly different rulebooks and timelines.

Forest, on the other hand, did not attempt to argue they had not overspent in their first season in the Premier League — they simply suggested they would have been under the limit if they had sold Brennan Johnson to Tottenham Hotspur a few weeks earlier, but that would have meant accepting a smaller fee, which cannot be the intention of rules designed to promote sustainability. Forest also pursued a path of least resistance in order to get points knocked off their sanction in mitigation.

Leicester’s case is closer to Everton’s in that it is fundamentally about a sudden drop in revenue, although in their case that drop is related to the disastrous collapse in form in 2022-23 and the subsequent loss of Premier League prize money.

Matt Slater

What have Leicester said?

Leicester have never challenged that they may be in breach of PSR and admitted as much in their 2022-23 accounts following their shock relegation from the Premier League in 2023, but they have consistently argued that it was about who could charge them and when.

That issue has now been settled as the arbitration panel has finally decreed it is the Premier League’s jurisdiction for the three-year cycle ending 2024.

Although the Premier League stated in January none of its sides would face a charge, it made clear a charge could be forthcoming for Leicester once the arbitration process was concluded. The club has said it will “engage cooperatively” with the proceedings.

Rob Tanner

What impact could this have on Leicester, transfers and the manager?

A big sanction would have a huge impact on a club that is already facing considerable difficulties.

A growing section of the fanbase has turned on the club’s hierarchy, accusing them of mismanagement that has led to the recent decline. There have been several protests this season and, should Leicester start next season with a significant points deduction, that toxic atmosphere will increase.

The prospect of PSR charges hampered their summer recruitment last year and a points deduction will put off prospective targets even more. Further sanctions will force them to sell more assets.

The future of Leicester manager Ruud van Nistelrooy remains unclear (Mike Hewitt/Getty Images)

The managerial position will also become complex.

Leicester appear to be planning for next season without manager Ruud van Nistelrooy as no discussions have taken place about the next campaign, but attracting a replacement will be difficult as the prospect of a sanctions weight dragging the club further down will not appeal to preferred targets.

Rob Tanner

(Top photo: Catherine Ivill – AMA/Getty Images)

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