Manchester City have claimed a major victory over the Premier League after rules regarding commercial deals were deemed to be unlawful.
In a landmark ruling to a case that is separate to the 115 charges the English champions are facing, it was ruled that City were unfairly blocked from agreeing two huge sponsorship deals earlier this year.
This is due to governance declaring that commercial deals between clubs and companies related to the club’s ownership must be of fair market value.
City had launched legal action against the Premier League earlier this year over associated party transaction (APT) rules, on the grounds they were anti-competitive.
That was in response to the Premier League rejecting a new sponsorship deal the club had lined up with Etihad in 2023, as well as another agreement with an Abu Dhabi-based bank.
An independent panel made up of three retired judges deliberated on the matter. And they concluded that the rules set out by the Premier League were unlawful because they did not take into consideration interest-free loans which shareholders lend to clubs.
It means that Abu Dhabi-backed City have opened the door to striking significantly higher sponsorship agreements with associated parties than previously allowed.
It also means that they’ll be able to pursue compensation and costs from the Premier League for abusing its position.
In addition, other top-flight clubs could now seek damages should they believe that they have been impacted.
The panel states that, of the £4billion in total borrowing across the Premier League, £1.5billion is in loans from club owners and shareholders.
City had argued that such payments were unfair and not at market value because they were interest-free and, in some cases, did not have to be repaid at all.
This decision will spark huge concern among a number of Premier League clubs, including Arsenal, who rely heavily on such loans, as it is likely to lead to rules being changed.
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Manchester City’s statement
The full statement from Man City as Premier League champions celebrate legal ruling against the top-flight:
Following today’s publication of the Rule X Arbitral Tribunal Award, Manchester City Football Club thanks the distinguished members of the Arbitral Tribunal for their work and considerations and welcomes their findings:
– The Club has succeeded with its claim: the Associated Party Transaction (APT) rules have been found to be unlawful and the Premier League’s decisions on two specific MCFC sponsorship transactions have been set aside
– The Tribunal found that both the original APT rules and the current, (amended) APT Rules violate UK competition law and violate the requirements of procedural fairness.
– The Premier League was found to have abused its dominant position.
– The Tribunal has determined both that the rules are structurally unfair and that the Premier League was specifically unfair in how it applied those rules to the Club in practice.
– The rules were found to be discriminatory in how they operate, because they deliberately excluded shareholder loans.
– As well as these general findings on legality, the Tribunal has set aside specific decisions of the Premier League to restate the fair market value of two transactions entered into by the Club.
– The tribunal held that the Premier League had reached the decisions in a procedurally unfair manner.
– The Tribunal also ruled that there was an unreasonable delay in the Premier League’s fair market value assessment of two of the Club’s sponsorship transactions, and so the Premier League breached its own rules.
If rules are changed and commercial loan rates are included in these arrangements, it could lead many clubs to find that they are in breach of profit and sustainability rules.
Associated party transaction rules were introduced in December 2021 following Newcastle United‘s takeover from Saudi Arabia’s PIF, before being further amended this year.
The rules were introduced to maintain the competitive nature of the Premier League by stopping clubs from inflating commercial deals with companies linked to their owners.
Both parties published the 175-page ruling from the arbitration panel, with the Premier League maintaining that the tribunal rejected the majority of City’s challenges and “endorsed the overall objectives, framework and decision-making of the APT system”.
A statement from the Premier League read: “The Premier League welcomes the Tribunal’s findings, which endorsed the overall objectives, framework and decision-making of the APT system. The Tribunal upheld the need for the APT system as a whole and rejected the majority of Manchester City’s challenges. Moreover, the Tribunal found that the Rules are necessary in order for the League’s financial controls to be effective.
“The decision represents an important and detailed assessment of the APT Rules, which ensure clubs are not able to benefit from commercial deals or reductions in costs that are not at Fair Market Value (FMV) by virtue of relationships with Associated Parties. These Rules were introduced to provide a robust mechanism to safeguard the financial stability, integrity and competitive balance of the League.
“The Tribunal did, however, identify a small number of discrete elements of the Rules which do not, in their current form, comply with competition and public law requirements (more information below). These elements can quickly and effectively be remedied by the League and clubs.
“In the meantime, the Premier League will continue to operate the existing APT system, taking into account the findings made by the Tribunal.
“While the Arbitration process is confidential, the Premier League and the Club have agreed to make public a redacted copy of the decision, withholding only confidential and commercially sensitive information. ”
While this is being claimed as a huge win for Man City in their battle with the Premier League, they are still facing a fight with the league over 115 charges relating to financial breaches.
City – whose latest title was their sixth in seven years – were charged by the Premier League in February 2023, having been accused of breaking Financial Fairt Play rules around 100 times over nine years from 2009 to 2018.
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Their alleged offences have coincided with the club blossoming into the dominant force of English football.
Since then, the investigation hasn’t concluded but Everton and Nottingham Forest have been punished for lesser offences.
The Premier League have argued that City’s case is different because of the depth, scale and complexity of the charges, and the hearing is expected to take ten weeks.
Pep Guardiola’s side deny every count against them.
A range of penalties could be levied at the reigning champions should they be found guilty of any or indeed, all of the charges.
A hefty fine or a points deduction would seem most likely, but City could also be expelled from the Premier League.
Other possible punishments from the Premier League include a transfer ban, which Chelsea experienced in 2019.
In similar fashion, spending limits could be slapped on City, who have spent £1.53 billion on players over the last ten years, or they could even face the threat of relegation.
Matt Lawton, who broke the story for The Times on Monday later joined talkSPORT and admitted the is ‘civil war’ between the Premier League and its clubs, and between some of the clubs themselves.
“Right now the Premier League is in civil war,” he told Hawksbee and Jacobs.
“It’s very messy, this is not a good place.
“While we’re enjoying watching the football on a Saturday and Sunday, there’s a lot of friction here.
“Eight or nine clubs gave evidence in this particular case in support of the Premier League. The clubs are divided.
“It’s a messy situation and the consequences of this are the shareholder loans – if you are Arsenal with over 200 million quid worth of shareholder loans this is a worrying development.”
