“Abramovich’s actions have consequences too”: Chelsea Football Club’s Day of Legal Reckoning

There is an old adage that, every time you go to a ballgame, you have the chance to see something that you’ve never seen before. For sports and historical observers alike, something is happening in London that nobody has ever seen before.

Yesterday, the UK government announced sweeping sanctions against several Russian oligarchs, as part of “efforts to isolate [Vladimir] Putin and those around him.” One of those sanctioned was Roman Abramovich, longtime Putin associate, one of the richest people in the world, and—at least for now—the owner of Chelsea Football Club, currently one of the best soccer teams in the world. The unprecedented government sanctions freeze Abramovich’s assets and prevent him from entering the UK.

Abramovich likely saw the writing on the wall, announcing last week that he was putting Chelsea up for sale and placing the club under the “stewardship” of Chelsea’s charitable foundation. Since taking control of Chelsea almost 20 years ago, Abramovich’s spending turned the club from Premier League also-rans to a global powerhouse—the Blues are defending champions of Europe and perennial title contenders in England. Now, if the club is sold, it looks like that money will go somewhere else. According to Nadine Dorries, UK Secretary of State for Digital, Culture, Media, and Sport: “If the club is sold, Abramovich will not benefit.”

Yesterday's sanctions effectively put Chelsea under government control. The club is now being run pursuant to a special license, with strict limits on spending. Chelsea is allowed to pay players and staff and play matches; at the time of writing, the men’s team are taking on Norwich in the Premier League, while the women’s team faces West Ham in the Women’s Super League. Season ticket holders and those who purchased single-game tickets before yesterday are allowed to attend games. But the club is not allowed to sell new tickets or merchandise. As of this morning, Chelsea’s shirt sponsor, telecommunications company Three, suspended its deal with the club, citing the government sanctions. Other sponsors presumably will follow suit.

The government’s action raises a host of other practical, legal, and contractual issues to monitor. For instance, Chelsea is prohibited from signing new players, extending the contracts of current ones, or transferring players under contract to other teams. The transfer market value of Chelsea’s global superstars could be skewed should the club get into (deeper) financial trouble). CFC is allowed to fulfill contractual obligations by paying the players, but there will soon be much less money coming in. As it stands, Chelsea is only allowed to spend a fraction of what it would likely take to travel to and host upcoming Champions League and Premier League matches.

The decision will also likely involve a trickle-down effect for those who rely on club-related income, like vendors and other business partners. A quick sale would seem to benefit all parties, which gives rise to interesting deal-making dynamics: does the situation lead to a quick below-market sale, given the club’s possible lack of leverage; or does it spark a bidding war for the chance to take control of one of world football’s premier institutions. Time will tell, but expect sports owners and wealthy concerns from all over the world to kick the tires on a potential deal.

One thing is certain: Chelsea Football Club is entering a new era. Blues fans, who have asked to be involved in any sale of the club, will be hoping the club remains Champions League regulars, rather than the mid-table side of the 1990s and early-2000s. The UK government and neutral observers alike will be hoping for a quick resolution to Abramovich’s mercurial tenure in the Premier League.

Ben Shrader is a partner at Hart McLaughlin & Eldridge in Chicago, where he serves as Chair of the Chicago Bar Association Sports Law Committee. You can reach Ben at [email protected], connect with him on LinkedIn, or find him on Twitter @BenShrader.