Everton have blasted the decision to order them to pay a reported £40m after losing a landmark legal battle with Burnley over the latter’s relegation from the Premier League in 2022.

The Merseyside club said they were “surprised and angered” by the verdict from a Premier League independent disciplinary commission that Everton’s breaching of spending rules denied Burnley a fair chance of avoiding a costly drop out of the top flight.

“Everton has appealed the decision and is clear in its belief the ruling is fundamentally flawed in both law and fact,” the club said.

“The club does not recognise the findings of the panel in determining Burnley’s relegation from the Premier League in May 2022 was caused by a sporting advantage gained by Everton due to a breach of Profit and Sustainability Rules, for which a substantive sporting sanction has already been received.

“This ruling sets a dangerous and unworkable precedent for English football, given it is constructed on a principle that a club can be in breach of financial rules at any point in a financial year.

“Everton believes the panel’s ruling misrepresents the clear evidence presented by its legal representatives and that an appeal will be successful.”

Industry observers believe the verdict could encourage more clubs to seek financial redress from rivals found guilty of rule breaches.

Possible implications for Manchester City case

It may yet have ramifications for Manchester City, whose wide-ranging dispute with the Premier League remains unresolved, and Chelsea, who controversially escaped with a fine after admitting breaches relating to the previous ownership.

“This decision is a watershed moment in Premier League financial regulation,” said James Philippsohn, an associate at Quillon Law. “By successfully applying ‘loss of chance’ principles, Burnley have opened a litigation pathway that transforms PSR breaches from a sporting sanction into a civil liability event.

“The significance of this decision lies in the willingness to award substantial damages based on a lost opportunity, a principle that could have far-reaching consequences where regulatory breaches are alleged to have caused financial harm.

“The £40m award will focus minds considerably, and all eyes now turn to the Manchester City proceedings, where the aggregate compensation exposure across multiple claimant clubs could dwarf anything previously seen in domestic sports law, should City be found to have been in breach of the rules.”

Fred Snowball, litigation, arbitration and investigations partner at Macfarlanes, said the decision “underscores the risks for clubs found to have breached the Premier League’s rules”.

He added: “Clubs not only face points deductions and fines. They also face compensation claims from other clubs adversely affected. Everton have, as expected, confirmed they are appealing the decision.

“The outcome of that appeal could have broader implications, particularly for the pending charges against Manchester City. City’s charges relate to far more alleged breaches over a much longer period than the Everton case, so the claims from other clubs if the decision goes against City could be very significant.”

Background to Burnley claims against Everton over relegation

Everton broke the top flight’s profitability and sustainability rules in 2021-22 but were not charged until late 2023. Their 10-point sanction was reduced to six on appeal in 2024.

Burnley argued that, had the punishment been applied to the season in which it took place, Everton would have been relegated instead of them. 

Everton finished the campaign 16th in the Premier League, four points above Burnley, who were closest of the three relegated teams to retaining their top-flight status.

According to reports, the Lancashire club’s legal team used the “loss of chance” principle, arguing that Everton’s rule breaches deprived Burnley a fair shot at staying up.

In such cases, the damages awarded typically involve multiplying the money at stake by the chance of success. Burnley’s award includes interest, The Lawyer reported.

Burnley have been promoted and relegated again twice in the four seasons since, while Everton have retained their Premier League status and changed ownership.

The last successful instance of a relegated club suing a survival rival came in 2009, when West Ham agreed a settlement of around £20m with Sheffield United after breaking rules over the fielding of ineligible players.