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|AC Milan's CEO Marco Fassone (C) as he leaves the Court of Arbitration for Sport. (Photo: AFP/Fabrice Coffrini)|
UEFA banned Milan from playing in next season's Europa League citing the club's failure to meet the "break-even requirement," which bars clubs from taking on debt to fund daily operations.
But the Court of Arbitration for Sport ruled that "some important elements have not been properly assessed," by UEFA judges.
The court agreed with UEFA's assessment that the club was in breach of break-even rules but found that the "current financial situation of the club was now better following the recent change in the club's ownership."
"The decision ... to exclude AC Milan from the UEFA Club Competition was not proportionate," a CAS statement said.
CAS referred the case back to UEFA as requested by AC Milan, whose executives argued their appeal at the Lausanne-based court on Thursday.
The court "considers that the (UEFA's) Adjudicatory Chamber is in a better position than the CAS Panel to issue a new proportionate disciplinary measure on the basis of the current financial situation of the club," the statement said.
AC Milan have spent a troubled 15 months since they were bought by Chinese businessman Li Yonghong from Silvio Berlusconi in April 2017.
The takeover was partly funded by a high-interest loan of €300 million (US$348 million) from American hedge fund Elliott Management.
When Milan failed to make a repayment at the start of July, Elliott moved to take over, a process which is due to be ratified by club shareholders on Jul 21.
The Chinese owners spent more than 200 million euros on players last summer and that, combined with the terms of the Elliott loan, triggered the interest of UEFA.
At the end of June, UEFA ruled that Milan were in breach of "the break-even requirement."
AC Milan's managing director Marco Fassone has blamed the club's woes on Berlusconi.
But the Chinese ownership of the club was also clouded by questions over the source of Li's wealth. In October The New York Times claimed that "virtually nobody" in China had ever heard of him.
Elliot, now in full control, has pledged to inject Ú50 million (US$59 million) to bring financial stability to the seven-time European champions.
"Elliott is pleased that we were able to support AC Milan at the CAS and that our intervention was able to achieve a positive result for the club," the group said in a statement.
"Playing in Europe is part of the heritage of AC Milan and to have been excluded would have been a shame. We will now work hard to rebuild the credibility of the club with UEFA and show that we can succeed on the pitch while respecting UEFA FFP rules.
"Today's legal victory is an important first step in the rehabilitation of AC Milan."