European Court Tosses Loan Penalties Against Soccer Teams

(CN) – Europe’s second-highest court handed a victory Thursday to two debt-ridden Spanish soccer teams, invalidating orders that forced them to pay back millions of euros to a state bank that guaranteed loans for them.

The state bank of the regional government of Valencia, Spain issued guarantees in 2009 and 2010 for associations tied to three Spanish professional soccer teams, Valencia CF, Hércules CF and Elche CF.

Barcelona’s Messi celebrates after scoring against Sevilla in a 2018 soccer match between Barcelona and Sevilla, both in La Liga, at the Sanchez Pizjuan stadium in Seville, Spain. (AP Photo/Miguel Morenatti)

Valencia CF, whose players are known as Los Che, roughly translated to blokes, plays in the soccer-crazy country’s top division La Liga and boasts 50,000 season ticket holders with another 20,000 on a waiting list.

Elche CF plays in Spain’s Segunda División and Hércules CF competes in what is called Segunda División B. Teams move up or down the divisions based on their wins and losses.

After fighting its way up to La Liga, Elche FC in 2015 was the first team in the history of Spanish professional soccer to be relegated to Segunda due to new regulations that punished teams for excessive unpaid taxes.

Despite its popularity, Valencia CF has also struggled financially. In 2008, its debt load had grown to more than 400 million euros ($446 million) and it sold off its top three players in 2010 and 2011.

After Valencia’s state bank guaranteed loans for the three clubs to help them stay afloat, and wound up paying off the loans, the European Commission ruled in July 2016 the guarantees constituted unlawful state aid.

It ordered the clubs to repay the state bank. Valencia CF was told to repay 20.3 million euros ($22.6 million), Hércules 6.1 million euros ($6.8 million) and Elche 3.68 million euros ($4.1 million).

The clubs appealed to the European General Court, the European Union’s second-highest court. It invalidated the commission’s order regarding Hércules in March 2019, and followed up Thursday with a decision in favor of Valencia CF and Elche CF.

The court found that the European Commission had erred by finding that the loan guarantees were illegal state aid because it wrongly assumed that no commercial banks would act as guarantors for the clubs.

In a three-page press release announcing the ruling, the General Court also found the commission improperly assessed the value of shares Valencia CF and Elche CF put up as security for the guarantees as “close to zero.”

A copy of the ruling was not available in English.

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