An outsider in its own league: AS Monaco unlikely to benefit from the French government’s support amid the Covid-19 crisis

More than a month after the Covid-19 pandemic put professional football in France on hold for an indefinite period, with each passing day the outlook looks gloomier for football clubs. The two primary broadcasters of the French first football division (Ligue 1) have publicly announced that they will not fulfil their next payment obligation with regards to broadcasting rights. With the championship unlikely to resume, the football clubs now turn their focus to damage control and seeking any financial relief they can get, including from the French government.

Among professional football domestic leagues, Ligue 1 has a unique feature: one of its clubs is located in another sovereign state. AS Monaco, which has long been criticised for benefiting from the advantageous tax policy of the Principality of Monaco, is now facing a backlash as it is unlikely to benefit from the French Government’s crisis support measures. In light of its specific financial model, this could prove damaging to the long-term ambitions of the club.

Favourable tax treatment: a foreign club in a domestic championship

AS Monaco has been affiliated to the French football federation since its creation, notwithstanding its corporate location in the Principality of Monaco. Unlike its French competitors, it benefits from the Monegasque tax and social contributions regime. In a nutshell:

  • the club benefits from lighter social security contributions (35-40% of an employee’s gross salary compared to the 55-60% that the French clubs have to pay); and
  • the non-French players do not pay income tax. This has proved in itself to confer a considerable advantage for signing world-class players, such as Radamel Falcao and James Rodriguez.

These benefits have always been contentious. This was illustrated in 2013 when the French Football Professional League (LFP) decided to amend its rules to include the obligation for a club competing in French professional leagues to have its registered office in France. The ensuing dispute ended in a compromise, whereby AS Monaco agreed to pay €50 million to the LFP to be allowed to keep its registered office in Monaco, despite the contemplated amendment.

The settlement between AS Monaco and the LFP was appealed by seven professional clubs, including PSG and Olympique de Marseille. The matter eventually reached the supreme administrative court in France, the Conseil d’État, which declared both the contemplated amendment and the settlement between the LFP and AS Monaco illegal. Though Sport’s Code requires a club to manage its professional activities through a company subject to the provisions of the French commercial code (Article L.122-1), the Conseil d’État ultimately ruled in favour of AS Monaco by declaring that such requirement did not go so far as to compel each professional football club to have its registered office in France. Therefore, AS Monaco was able to keep its registered office in the Principality without further payment to the LFP.

Out of reach: the only Ligue 1 club not to benefit from most of the French government’s support

The French government has taken a series of economic support measures in response to the Covid-19 pandemic. For professional clubs, the key measure to date is the loan guarantee scheme activating more than €300 billion of financial support for companies affected by the crisis. Under this scheme, any French professional club is eligible for a State-guaranteed commercial loan for an amount up to three months of its total turnover. In theory, this could compensate all income lost as a result of the league suspension during the pandemic. Furthermore, French banks have agreed to postpone all outstanding loan repayment obligations of all debtors for six months at no extra cost.

However, this exceptional loan guarantee scheme is available only to companies incorporated under the laws of France. While its league rivals may seek such financial relief, AS Monaco must instead rely on the Monegasque government’s measures. The Principality has also committed to exceptional financial support measures (including paying off all interests payable by Monegasque borrowers on new credit lines during the pandemic and a €50 million guarantee on loans payment defaults), but such measures do not compare with the financial support offered by the French government.

Another key measure announced by the French government is the deferral of payment deadlines for all taxes and social security contributions. To date, the Monegasque government has limited its equivalent action to a three-month deferral of payment on VAT. While social security contributions are lighter in Monaco, AS Monaco may end up being the only “French” club paying them.

However, AS Monaco does exceptionally benefit from the partial unemployment regime implemented in France through an agreement between the two countries. Under this regime, the clubs continue to pay 70% of their gross salary to their employees and are compensated in full by the French State (up to a maximum of €4,850 per month). However, in light of the high wages paid to elite footballers, this measure has a limited effect on football clubs. All of this means that AS Monaco may face greater hurdles in trying to stay financially afloat than most of its domestic competitors, due to its inability to benefit from the same economic support measures.

Financial models: the curious case of AS Monaco at stake

AS Monaco’s financial model relies on two main sources of income: transfer revenues and TV rights. In 2018-2019, these sources amounted to 82.9% of the club’s total turnover (55.7% for transfer revenues and 27.2% for TV rights). In 2017-2018, they represented an even higher 93.2% of the club’s income (with 71.8% coming from transfer revenues). In comparison, the average share of transfer revenues among Ligue 1 clubs is 25% of their total turnover. With its model being heavily reliant on income from transfers, AS Monaco may find itself more exposed to the crisis than its domestic competitors, given that transfer windows are now uncertain and clubs worldwide are increasingly cash depleted and potentially less willing to spend such sums on players.

Furthermore, the suspension, and possible eventual cancellation of the championship will have a considerable negative impact on the clubs’ revenues. Canal+ and beIN Sport, together responsible for all domestic broadcast revenues for Ligue 1 this season, are refusing to pay their April bills (and are unlikely to pay their next quarterly bills in June unless the championship resumes before this time). This corresponds to withholding 37% of this year’s national broadcasting revenues for the Ligue 1 clubs.

It is also highly unlikely that AS Monaco will be able to turn to its fan base to compensate for this loss in revenue. The club has ranked dead last in attendance figures over the last four years, and its ticketing revenues represented less than 1% of its total turnover last year. Monaco remains a small town with fewer than 40,000 inhabitants. The presence of strong regional rivals OGC Nice and Olympique de Marseille means that AS Monaco is unable to benefit from the interest in football along the densely populated French riviera.

In the end, the very characteristics which made AS Monaco so enticing for foreign players – and frustrating for domestic rivals – may backfire on the club. The combination of a crisis-sensitive financial model and its ineligibility to benefit from the French government’s support measures, means that the club will likely need to rely on its owners to mitigate the potentially disastrous consequences of the Covid-19 pandemic on the club’s key revenue streams.