The one line in the salary cap rules that's likely to become a legal battleground for Saracens

Saracens’ alleged breach of Premiership Salary Cap rules could come down the interpretation of one sentence in the 57-page ‘Salary Regulations’ document.

Last week Saracens were docked 35 points and fined a total of £5,360,272.31. The club have appealed and the points deduction and fine have been suspended pending that the appeals process.

The issue? Wray was listed with Companies House as a director alongside players such as Owen Farrell, Richard Wigglesworth and the Vunipola brothers in companies Faz Investments Ltd, Wiggy9 Investments Limited and VunProp Ltd, and these ‘co-investments’ and potentially others have been branded as falling within the cap.

The decision of the Rt. Hon. Lord Dyson and his independent panel was that the North London club ‘failed to disclose payments to players’ in each of the last three seasons. Saracens were also found to have exceeded the ceiling for payments to senior players in each of the three seasons.

The broad understanding is that these breaches relate directly to the failure to declare the controversial ‘co-investments’ as salary. Wray hinted at the club’s defence last week, saying the club “steadfastly maintains that player co-investments do not constitute salary under the regulations. This view is supported by independent legal and professional experts.”

Saracens and Wray don’t think they’ve been caught red-handed, rather they believe that they haven’t breached regulations, and they will argue that the ‘co-investments’ that Wray took up with players falls outside regulations. What’s more, they’ll argue that Premiership Rugby Limited have already interpreted similar investments (possibly by other clubs) as such prior to this case.

“The club will continue to vigorously defend this position especially as PRL precedent already exists whereby co-investments have not been deemed part of salary in the regulations.”

So what’s the clause that the case will be fought on? Saracens appear to have come a cropper in section 2.3.

2.3 b) Any payment or benefit in kind which falls within the definition of Salary under the Regulations shall be deemed, for the purposes of the Regulations, to be made in the Salary Cap Year in which the payment is contracted to be paid or in which the service is provided.

The clause in question:

ii) payments to any employee benefit scheme, including without limitation any payments by the Club or Connected Party of the Club to an Employee Benefit Trust, Employer Funded Retirement Benefit Scheme or any equivalent entity shall be included in the Salary Cap Year in which they are charged by the 2018/19 Regulations…

The ‘connected party’ in this case is Saracens chairman – Nigel Wray.

So where to for Saracens legally? The review can only be on the basis that there has been an error of law, the decision is irrational or that there has been some procedural unfairness.

Saracens’ legal team will most likely argue that ‘co-investments’ do not constitute ‘any equivalent entity’. The gist of the argument is that as investments, the players could have potentially lost as well as gained money and that they do not meet the legal requirement of a trust.

If Wray is right and there is a PRL precedent, then the decision could potentially be overturned. If it isn’t overturned, then we could learn what precedents Wray was referring to, which could open its own bag of worms.