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 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.
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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.
An independent panel made up of three retired judges deliberated on the matter. And they concluded that the rules 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, meaning that it is likely to lead to rules being changed.
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.
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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.
However, this latest development could open up an almighty can of worms for the Premier League.
While some elements of City’s claim were dismissed, the 175-page partial final award handed the champions a huge victory.
Manchester City’s statement
Manchester City’s statement
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.
The Premier League have also claimed victory in their own statement.
They wrote: “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. ”
