Lord Moynihan:

Moved by Lord Moynihan

7: Clause 3, page 3, line 15, leave out “influence or”

My Lords, in moving Amendment 7, I will also speak to Amendment 28, which refer to the owners’ and directors’ test, which goes far beyond the regulatory requirements in sport—in FIFA, UEFA, the FA and the Premier League. It would require an additional test to be made to determine a potential owner of a football club, and that additional test is one of influence. My amendment seeks to leave out reference to the “influence” a person can have over the activities of a club in being considered for a licence to operate as a professional football club in England, to create clarity in the Bill.

In trying to understand what “influence” means, we are immediately referred to paragraph 15(1) of Schedule 1, where, in keeping with the financial regulation, we are once again somewhat left in the dark:

“The Secretary of State must prepare and publish guidance about the meaning of significant influence or control for the purposes of this Schedule”— in other words, for the purposes of the test. As such, as we scrutinise the Bill before us, we have no certainty as to the meaning of “significant influence”, yet its impact on the Premier League and on EFL clubs could prove far-reaching.

In Committee, I took the example of Newcastle to seek clarity from the Government by working through a specific case. Newcastle is majority-owned and financially controlled by the Saudi sovereign wealth fund, the PIF. The PIF became the majority shareholder and de facto owner of the club, with 80% of the shares acquired, in October 2021. The chair of the PIF is the Crown Prince Mohammed bin Salman, the son of Saudi Arabia’s King. MBS, as he is known, runs the Saudi Government.

For once, there is a clear distinction between this Bill and the one inherited from the last Conservative Government. In the Conservative Bill, there was a protection against the Government-appointed regulator investigating whether MBS, the Crown Prince and chair of the PIF, was a fit and proper person to exercise control over Newcastle through the chairmanship of the PIF. This Government then deleted the very protection which the previous Conservative Government put in the Bill that required the regulator to have regard to the foreign and trade policy objectives of the Government. This removal was a direct consequence of UEFA’s insistence to the Prime Minister that such protection politicises sport.

Sadly, I assure the House that, for anyone who has read this Bill, the answer to Newcastle fans is that, unlike under the Premier League or UEFA rules, the Crown Prince is open to investigation by the regulator, and the Minister was clear on that question. That is exactly what the Government intend the regulator to do, because they have removed the one protection it had. The regulator in the Bill has full rights to use his or her many powers to investigate and opine over the suitability, or otherwise, of any owner who exercises a degree of influence over any club, including Newcastle United. That is just one example. Such detailed and intrusive due diligence risks being replicated across the Premier League unless the Bill is amended as I propose.

The Secretary of State will write the guidance that determines what significant influence or control means, yet there is no requirement for the Secretary of State to consult anyone on drafting that guidance. We can speculate what the definition might be by looking at other legislation where the same phrase is used, but there is no guarantee that the Secretary of State will follow the same approach on this Bill as has been taken for other legislation. So, it is not worth relying on the Companies Act guidance, because there is no requirement for the Secretary of State to follow that guidance. The Premier League rulebook requirements about acquisition of control are significantly narrower in scope than this Bill. In fact, I could find no example of any legislation regarding any sport anywhere in the world that is so intrusive as to have the phrase “significant influence over”, as a criterion for ownership.

Without any doubt, the Crown Prince is an owner in the context of the Bill, an owner who exercises influence over the activities of the club as defined in proposed statute and regulation. I understand that, since December, it has been made clear to the Government that any proposal to put the Crown Prince through the detailed due diligence would be resisted. After all, it does not exist in any other sport worldwide, so it would be the first time any country had legislated to that extent for the ownership of a professional club. It would potentially lead to the PIF revising its proposals for a substantial investment in the Newcastle area, or so that is said in the world of sport. I hope that the Minister can dispel that rumour and confirm that nothing of the sort has been said to anyone in Number 10 or DCMS. It would also help the House to know, if the Saudi Crown Prince is to be excluded, whether all state entities are to be excluded from the influence test.

This is the most far-reaching direct political intervention in the running of any sport in the history of this country —a country which once gave the world rules and regulations for sport to be universal, autonomous and self-regulating, in the context of the discussion with the noble Lord, Lord Pannick. It is a historic irony that it should now be our Government to be the first Government to take control of sport. Existing Premier League ownership tests are already onerous, as they should be. The influence test only creates uncertainty, militates against growth and has the potential to be deeply damaging to English football without generating any benefit. I beg to move.

My Lords, I shall speak to my substantial Amendment 45, together with the consequential Amendments 42, 43 and 44. I have followed the Bill closely from the stand—it has been televised on every occasion it has been debated.

My amendment seeks to delete the unnecessary and counterproductive Clause 27, which is prematurely engaged at the very earliest stages of a potential sale and purchase agreement between the seller of a football club and perhaps a number of purchasers. By deleting Clause 27, notification will be engaged only once the parties have reached a conditional agreement and heads of terms and a single preferred bidder has emerged. At that point, Clause 28 would be engaged as in the Bill.

Football is a game of dreams, and some dream so hard that they want to own their own club. In a small way, I am one of those people. Back in 1932, my grandfather was an Olympic athlete, and he was known as Flying Fuller. Back then, he answered a small advertisement in the Eastern Daily Press and acquired 250 shares in the Norwich City Football Club. When he passed away 40 years ago, I inherited those shares. I have enjoyed attending the annual general meetings and generally being a keen observer of how the business of football operates ever since.

From that 40-year perspective, I can tell noble Lords how clubs change hands, and it is not how the Bill contemplates. The Bill anticipates that, at some point, someone dreams big and they need to submit themselves to the IFR so that an army of Rachels can measure them up for the sheepskin coat, which is the particular uniform that owners of football clubs tend to wear. Forget for a moment that time might be of the essence, that they might be subject to an HMRC winding-up order or that there might be other cash flow issues; even before the seller can open the books, the purchaser needs to have been vetted by a civil servant.

How have we come to this place? This is not how deals work. Unless the books are opened, how could the purchaser even know whether the deal was feasible? Then, unless the purchaser was qualified, the seller could not open those books for fear that person was a charlatan. Noble Lords can see the jeopardy here.

Quite simply, the new law, and Clause 27 in particular, would prevent buyer and seller being put together. This Bill purports to stop clubs going bust, but the actions of the Bill would ensure that they did.

As I look back and reflect on the ownership of our club in Norwich, during my small slice of ownership, I recall how Norwich City Football Club was owned by Robert Chase, a local builder. When the wind blew out of his sails, it needed somebody with deeper pockets to take over, but nobody came forward. By and by, a man called Geoffrey Watling, who owned a local taxi firm, came forward to act as midwife, and he held that club while he hawked it around. Here was a modest man with a deep interest in the community. He understood what the role of the football club can and should be, and he put himself in harm’s way when nobody else would step up to the plate. All Norwich fans thank him for what he did. The main stand, even today, is named for him. Eventually, Delia Smith, the famous TV chef, together with her husband Michael Wynn-Jones, acquired the shares of the club in a story that was beautifully told in the Times about three weeks ago. It must have been a very expensive taxi ride for them both, and no two people could have done more to act in the public interest and save our club.

Last week the club entered a new phase with a new owner, Mark Attanasio, taking a leading role. We hope he can bring us to past glories. By all accounts, he is a worthy custodian of our club. I would rather have Delia’s blessing than Rachel’s.

The purpose of telling these tales is that had there been a regulator operating under Clause 27, Robert Chase would have thrown in the towel long before he did. Kind-hearted Geoffrey Watling would not have been allowed to step in as midwife, because he would have failed Clause 37(4). He only owned a taxi company; he had no qualifications. You would have to question why a husband and wife team from Suffolk would put themselves in harm’s way to own Norwich City Football Club in Norfolk, similarly failing Clause 37(4), because being a cook is not necessarily the requisite qualification for club ownership. Put simply, as a result of Clause 27, our club would have folded; it would have prevented these deals before they even started. With the best of intentions, Labour is creating a doom loop for clubs in trouble—a vortex from which few will be able to escape. The consequence of Clause 27 is to condemn a club in trouble to extinction.

My amendments would not prevent the IFR eventually certifying someone under Clause 28, but it would stop the snuffing out of hope at Clause 27. Of course, it is regrettable that only faceless bureaucrats can allow you to don the sheepskin coat in the first place. In my view, the regulator should not be allowed at this early stage to prevent clubs doing different and taking those calculated risks—the rolling of the dice.

Football is not just embellished by the great players—the Beckhams and the Ronaldos. It is decorated by the local characters, people like the Roberts, the Geoffreys, the Delias and the Michaels. We should be encouraging them to dream. Labour is at risk of turning our national game into the dull men’s club—a system where local people are prematurely discouraged from standing up for their communities, and big business and remote shareholders with fat lawyers are preferred. This is in direct conflict with the two key outcomes set out in Clause 1, where the economic and social well-being of local communities are key objectives.

I was with Delia on that infamous “Let’s be ‘avin’ you” rant 20 years and two weeks ago. It passed into our legend and our lexicon. It is part of the colour of the game and our nation, yet this is exactly the sort of thing that will be lost if we do not attract and cherish the community-minded people. For the sake of anyone who loves our game, do not make it even harder than it is to get to the start line. Let us abandon Clause 27 and just rely on Clause 28, at which point the deal’s certainty is greater.

My Lords, I return to Amendment 7 in the name of the noble Lord, Lord Moynihan, seeking to leave out “influence or”. There are in fact two references to “influence” in Clause 3. Clause 3(2)(b)—the one that the noble Lord, Lord Moynihan, focuses on—mentions

“a higher degree of influence”,

and Clause 3(2)(c) mentions “a degree of influence”. Is there any assistance in the Bill as to what is meant by either of those concepts? They seem very vague indeed to me.

In paragraph 15(1) of Schedule 1, on page 83, there is an obligation on the Secretary of State—the noble Lord, Lord Moynihan, referred to this—to

“prepare and publish guidance about the meaning of significant influence”,

but that is a different matter. Significant influence is plainly distinct from

“a higher degree of influence” or “a degree of influence”. I am not suggesting that the Minister provides guidance now, but it may be a matter that can be addressed when the Bill goes to the other place. There really needs to be some assistance provided to the regulator and others as to what these vague concepts mean.

My Lords, we are on the same lines as the noble Lord, Lord Pannick, on the degree. Naturally, the removal of

“a higher degree of influence” seems to be watering down the regulatory powers of the regulator. That is a very dangerous road to go down. I would like to hear what the Minister has to say about that. If Amendment 7 were pushed to a vote, we would not support it.

My Lords, I thank my noble friend Lord Moynihan for the forensic way he set out the case for his Amendment 7. The example with which he illustrated it—one he has used throughout the passage of this Bill—is certainly one that captured my attention, coming from Whitley Bay. It is causing some concern across Tyneside and among Newcastle United’s many fans across the world. I would be failing in my Geordie duty if I did not take this opportunity to wish the team the best of luck for the Carabao Cup this weekend.

I understand that the Minister cannot speak for a regulator that is to be independent and that does not yet exist, but I hope she will be able to say a bit about the implications of the Bill, such as the one that my noble friend Lord Moynihan set out. It clearly has some very serious consequences, not just for Newcastle in the example he has given but potentially for other teams in the future. I look forward to hearing what she says.

I want to say a little about my two amendments in this group, Amendments 46 and 47. As we said in Committee, among the many changes the Government have made to the Bill, compared with the Bill that the previous Government brought forward in the previous Parliament, was one we understand the case for. In the earlier version of the Bill, there was a provision stating that the regulator must have regard to the Government’s foreign and trade policy when making determinations for the owners’ test. This is an example of a concern that UEFA raised. That has been reported publicly, and the Government were very clear when they made the change to the Bill now before us that it was in response to concerns by UEFA that this undermined the independence of the regulator and that if it was to have regard to the Government’s foreign or trade policy, it would be too close to the Government’s view, in the eyes of UEFA.

I can understand the rationale for making that change, but in Committee I expressed some concerns about the unintended consequences of that and the potential loopholes. I gave the example that if there were to be two potential foreign owners of a club, one from a friendly nation and one from a nation with which this country does not enjoy friendly relations—we can all think of some examples that would spring readily to mind in the troubled world we face today—we would all be clear on which way we would like to see the independent regulator come down, even if the Government are not able to direct it, or if it is not able to have regard to the Government’s foreign policy.

My Amendment 46 would insert a provision highlighting

“whether the individual is reasonably believed to be, or have been, involved in terrorism related activity”.

I am sure that noble Lords would not want such a person to be an owner or director of one of our prominent football teams.

Amendment 47 sets out a number of agencies—the National Crime Agency, the Security Service, the Serious Fraud Office and others—that the new regulator may consult in carrying out its test. I have watered down my amendment from Committee to say “may consult”, not “must consult”, in the hope that this will find some greater support from the Government. I understand the reasons for the change that they have made to the Bill, but I do hope that the noble Baroness will be able to look at these ways in which we might be able to tighten up the potential for a loophole, so that we can avoid seeing the sorts of people that none of us want to see taking control of English football clubs.

My Lords, I thank the noble Lords, Lord Parkinson, Lord Moynihan and Lord Fuller, for tabling their amendments, as it provides me with the opportunity to restate the Government’s position on these points and provide some clarification. I join the noble Lord, Lord Parkinson, in wishing Newcastle good luck in their forthcoming match. We can agree on some things in your Lordships’ House.

I start with Amendments 7 and 28, in the name of the noble Lord, Lord Moynihan. Before I go into a bit more detail, I would like to clarify whether incumbent owners or officers could be tested. Indeed, they can be tested. The regulator can test incumbent owners or officers where it has grounds for concern about their fitness or, for owners only, the source of their wealth—but, I repeat, only where there are grounds for concern. It is vital that we have a strong definition of an ultimate owner in order to give transparency to fans and hold owners to account. The Government are intent on providing the regulator with the tools to identify the ultimate owner as accurately as possible.

On the point from the noble Lord, Lord Moynihan, point on precedent, this is why the Bill’s drafting takes its lead from the precedent of other Acts using “influence or control”, including the Companies Act’s “persons with significant control” regime, and the economic crime Act’s “beneficial owners” regime. We are confident that we have the correct definition to achieve the Bill’s aim. It ensures that an individual who exerts significant influence over a club, more than that of any other owner, can still be identified as the ultimate owner even if they do not have formal legal control. In fact, without this definition, ultimate owners could circumvent regulation. It is fundamental that clubs have suitable custodians in order to secure the future of clubs and, most importantly, to protect the game that fans hold so dear. For these reasons, I hope that the noble Lord can understand the importance of the definition.

I turn now to Amendment 28. As I outlined in Committee, I agree that it is important that the industry has certainty as to what the regulator will consider significant influence by owners. That is why the Secretary of State’s guidance will be produced in good time in order to give this clarity. I want to make it clear that the Bill’s provisions that define “owner” in Clause 3 and Schedule 1 come into force on the day the Bill becomes an Act. That means that the obligation for the Secretary of State to produce this guidance comes into force on that day.

We have taken on board the valuable points the noble Lord raised in Committee. After looking at this again in detail, we stand by our position that the intent of this amendment is met without needing to change the Bill. We do agree that, before guidance is produced, clubs should not be expected to identify those who meet the definition of an owner by exercising significant influence or control. I would therefore like to provide greater reassurance that the scenario the noble Lord is concerned about should not be an issue. I can commit that the Secretary of State’s guidance will be produced before clubs are required to identify their owners who meet the definition of having significant influence or control to the regulator.

In response to the point from the noble Lord, Lord Pannick, on why we have not defined “significant influence and control” on the face of the Bill and are putting it in guidance instead, this approach is based on precedent. As I mentioned, the Companies Act also sets out the definition of “significant influence or control” in guidance rather than legislation. The Secretary of State’s guidance will give clarity to owners about who meets the definition.

Turning now to Amendments 42, 43, 44 and 45 in the name of the noble Lord, Lord Fuller, I think it was a bit cheeky and that one should take a slight exception to the notion that Delia Smith is just a cook. I would argue that she is, through her professional career, arguably also a highly successful businesswoman. Leaving that point aside, however, the requirement to notify is there for a reason. Keeping unsuitable owners and officers out is a core part of the regulator’s regime. We want the regulator to block these individuals from entering the system, and not to have difficult, costly battles to remove them after the fact. So it needs to know who a club’s respective new owners and officers are before they buy or join the club. Put simply, the regulator needs to be able to gather the information that it needs to test them and work with them and the club to ensure that they submit a proper application in good time. It will help the regulator prepare to act quickly when it receives the application.

Clause 27 plays another important function. If a person has, for whatever reason, become an owner or officer of a club without the regulator first having found them suitable, they still have to notify the regulator as soon as possible after the event. Without this provision, there could be untested, unsuitable individuals in the system that the regulator was unaware of.

I move now to Amendment 46, in the name of the noble Lords, Lord Parkinson and Lord Markham. We agree that it would not be right for money related to terrorism to find its way into our clubs. The Bill, as already drafted, already stops that through its provisions on serious criminal conduct. Serious criminal conduct includes offences listed in Section 41 of the Counter-Terrorism Act 2008. That is an extensive list of terrorism-related offences, ranging, to name a few, from membership of a banned organisation to encouraging terrorism to offences related to funding terrorism. Serious criminal conduct, including these terrorism offences, is considered under the ODT “source of wealth” and “honesty and integrity” tests. The club licensing regime lets the regulator block funding that is connected to serious criminal conduct. That is why we are confident that the Bill appropriately and thoroughly deals with terrorism-related activities.

Finally, I turn to Amendment 47, also in the name of the noble Lords, Lord Parkinson and Lord Markham. I am pleased to have another opportunity to highlight the information-sharing agreements that the regulator can and will use to its advantage. I absolutely agree that the regulator may need to work closely with other organisations and stakeholders when exercising its wider functions. I am grateful to the noble Lord for the discussions we have had on this point.

The Bill establishes a gateway for the regulator to share information with a range of organisations, including HMRC, the National Crime Agency and the Serious Fraud Office. It also creates a specific gateway for HMRC to share information with the regulator and empowers the Secretary of State to create other such gateways by regulations, as needed. The regulator may already consult whoever it needs to in order to make robust decisions. The regulator will seek information and expertise from relevant organisations to help it to stay live to both national and international concerns. The shadow regulator is already building a strong relationship with the NCA and law enforcement to ensure that the regulator is in a strong position to gather and receive the information it needs. We are confident that the Bill adequately empowers the regulator to gather such information. For the reasons I have set out, I would be grateful if the noble Lord could withdraw his amendment.

I turn first to the noble Lord, Lord Goddard, and his comment that by accepting this amendment, we would be watering down the regulation. On the contrary, if you look at the regulatory requirements of FIFA and UEFA, the FA, the Premier League or any of the other national governing bodies in football in Europe—which I have done—it is not a matter of watering down. This makes a much more intrusive additional layer of regulation which does not exist in any of the other countries. I simply put it to the noble Lord that there must be a reason for that. There is a good reason why, to the detailed regulation which exists in FIFA, UEFA, the FA and the Premier League, it is unnecessary to add this additional layer.

My noble friend Lord Parkinson on the Front Bench mentioned the exchange that took place over the clause having regard to foreign and trade policy objectives of the Government. It was a classic example of when UEFA said “Jump” and the British Government’s position was “How high?” I fear that if you take the FA out of the equation, which has happened now, we will see far more work for lawyers in the future than the noble Lord, Lord Pannick, anticipates. His point, however, on this amendment was perceptive and accurate. If the legislation is not changed this evening, it is incumbent on the Secretary of State at a future opportunity to make it absolutely clear in his consideration, which he will undertake, to make sure that there is clarity on that.

As far the Companies Act is concerned, I simply say to the House that there is no requirement whatever for the Secretary of State to take it into consideration when opining on this subject. If there is, it should be written into the Bill. Once again, as I have mentioned before, there are 31 different areas where we are going to wait to hear the detail of the competitions, the clubs and exactly what “influence” means—this is all for the future. This is in many respects a shell Bill, but using “influence” over has the impact that I have mentioned in the example of Newcastle, and I am very concerned about it.

I ask the Minister to write to me if she would, because I appreciate that she will not have had time to respond to the concerns that have been expressed with regard to the owners of Newcastle, not just with regard to the club, but to the response to this Bill when enacted in their investment in the Newcastle area, over and beyond their financing of the club. As I understand it, those rumours that are circulating are well grounded, but the Minister will no doubt be able to tell me. This is meant to be a growth Bill: all regulators are meant to grow the businesses that they regulate, but I fear that this will have exactly the opposite effect, and I think Newcastle may be on the receiving end of that. If we do not change the Bill to remove the “influence” over as a key criterion of control, we will have made an error, and for that reason I wish to test the opinion of the House.

Ayes 203, Noes 257.

Amendment 7 disagreed.

Schedule 2: The Independent Football Regulator