Premier League civil war erupts after Man City verdict
Manchester City and the Premier League both claimed victory in their landmark associated-party transaction (APT) legal battle which has exposed a civil war in English football.
Two aspects of the rules – which are aimed at controlling the value of sponsorship deals with companies linked to clubs’ owners – were deemed unlawful by a tribunal.
Yet the league categorically rejects City’s claim of a seismic triumph, conceding only that the ruling showed a “small number of discrete elements” do not comply with competition law. “These elements can quickly and effectively be remedied by the League and clubs,” the league added, with a meeting of shareholders to rectify the rules pencilled in for this month.
Further tensions are now certain, however, as Telegraph Sport understands City will oppose plans within the league to rule out applying fair market tests to shareholder loans retrospectively in the three years since APT rules were introduced. Those with understanding of the club’s position suggest now applying 2021-2024 sponsorship deals to fair market value (FMV) but not shareholder loans in that period would be “discriminatory” and in breach of the arbitration verdict. The likes of City’s bitter rivals Arsenal are among teams to have benefited from such loans in recent years.
Abu Dhabi-owned City launched an unprecedented arbitration claim of “discrimination” over rules governing market value on sponsors and transfers in February. A two-week arbitration hearing was heard in private in June, with up to 60 lawyers combined inside the room.
In contrasting interpretations of a 175-page judgment finally made public on Monday, the league claimed it had “endorsed the overall objectives, framework and decision-making of the APT system” while City also claimed they had “succeeded”.
‘Neither side can declare resounding victory’
A host of legal experts said neither side could declare a resounding victory, however, over initial claims the league unfairly blocked sponsorship deals, including one with Abu Dhabi-based airline Etihad.
Details in the findings expose a major gulf between clubs, however. Witnesses for the Premier League included Manchester United, Liverpool, Arsenal, Tottenham, Brighton and West Ham. Everton, Newcastle and Chelsea provided some support for City, meanwhile, and Nottingham Forest are also said to be sympathetic to the champions’ cause.
The tribunal found decisions by the Premier League to veto two sponsorship deals must be set aside because of improper procedures related to benchmarking.
But the most significant outcome as far as rival clubs will be concerned is City’s successful challenge that loans from club shareholders should have been included in fair market tests. Rivals Arsenal have previously borrowed more than £200 million in shareholder loans, as of the end of 2022-23. However, supporters of City’s cause, such as Everton, could also be affected by the ruling, having secured significant loans from Farhad Moshiri and incoming owner Dan Friedkin over the years. The rules distort competition, the panel argued, because “they permit one form of subsidy… but not another”.
Secret two-week hearing
City’s interpretation of the ruling, shared with them two weeks ago and finally made public on Monday, is that the club and others are now entitled to compensation from the league.
The method of APTs being assessed was unlawful on a procedural basis, the panel found, with clubs denied important information before decisions were made. The ruling means the Premier League’s original assessment of two City sponsorship deals appears to no longer stand.
The league, however, dismissed the prospect of significant loosening of APT rules which would make it easier for clubs to arrange lucrative sponsorship deals with companies closely associated with their owners. There are also no plans to make it easier to buy and sell players between clubs who have the same owners, after regulations were tightened over fears Newcastle could benefit from the arrival of Saudi-based players at clubs also owned by their Public Investment Fund majority shareholders.
Many saw this case as significantly more consequential for the game than the separate 115-charge hearing against City as the verdict affects the future direction of financial regulation.
Telegraph Sport detailed a fortnight ago how a verdict was imminent and, in a signal that the ruling was at least partly in City’s favour, the Premier League then shelved a proposal to amend certain APT rules.
City had argued they were being affected by a “tyranny of the majority” over APT rules and sought “damages for the losses which it has incurred as a result of the unlawfulness of the FMV [fair market value] rules”. The club is understood to have added that rival clubs are looking to “safeguard their own commercial advantages”.
The Premier League’s APT rules were brought in after Newcastle United was acquired by Saudi Arabia’s Public Investment Fund in late 2021, and updated again earlier this year. The regulations were designed to prevent companies related to club owners from using inflated sponsorship deals to boost revenue and so give teams greater leeway to spend on players.
Several City rivals who have been supportive of the Premier League position told Telegraph Sport they were relaxed about the tribunal’s findings.
City were “unsuccessful in the majority of [their] challenge”, the league added.
This case is completely separate to the 115 charges laid against City by the Premier League for alleged breaches of its financial rules between 2009 and 2018. City deny any wrongdoing, and a hearing in that case is ongoing.
04:49 PM BST
Rules around loans from club owners were unlawful
The Premier League’s decision not to include interest-free loans which shareholders lend to clubs in their Associated Party Transaction rules is unlawful, the independent hearing ruled.
Manchester City argued that these loans should be taken into account when determining whether a team has stayed within the Premier League’s Profit and Sustainability rules. The independent panel siding with City on this issue is likely to be one of the club’s most prominent successes within this legal challenge.
The rules distort competition, the panel argued, because “they permit one form of subsidy… but not another”.
Many of the biggest Premier League clubs rely heavily on these loans from their owners. City has received no money from its shareholders in the form of interest-free loans, however its fierce rivals Arsenal owe over £200 million to its owners.
04:29 PM BST
Shareholder ruling could have big ramifications
The main discussion point when the clubs meet to discuss the outcome will undoubtedly be around taking interest-free shareholder loans into account in the APT rules.
Arsenal are among beneficiaries, having borrowed more than £200million ($262m) in shareholder loans, as of the end of 2022-23.
04:27 PM BST
Tribunal rules decisively with City on shareholder loans
Perhaps the most significant element of the ruling is around shareholder loans. These were not counted as part of the APT rules; it was argued that, as they were direct from an owner and transparent, they should be viewed differently from artificially inflating commercial revenues.
Manchester City argued that they were obviously an APT transaction - as they come direct from shareholders - and are either no-interest or low interest bearing, so not at fair market value.
The key context here is that Manchester City have NO debt to their owners, whereas many of their rivals do, including Liverpool (around £70 million) and Arsenal (around £250 million).
And the arbitration ruling sides decisively here with Manchester City. This means the rules will presumably now have to be adapted so that these owner loans are accounted for in the profit-loss calculations or the costs of “fair-market” interest are at least added.
The ruling says: “A difference of treatment between shareholder loans and other APTs is, in our view, an obvious distortion of competition as it permits one form of subsidy. A limitation in the scope of the APT Rules so as to cover only certain APTs is discriminatory.”
04:19 PM BST
Rivals ‘relaxed’ about tribunal’s findings
Several Manchester City rivals who have been supportive of the Premier League position have told Telegraph Sport they are relaxed about the tribunal’s findings.
The league, meanwhile, plans to convene a meeting of clubs this month to vote on amending the rules to comply with the judgment.
For now, the APT rules revert to those that were agreed in November 2021.
03:53 PM BST
Immediate attempts to stop APTs after Newcastle takeover
Verdict also details how an unnamed person emailed the Premier League on behalf of his club and 10 others in an attempt to stop all Associated Party Transactions five days after the Newcastle United takeover in 2021, pending a review of the rules.
It says that there was no evidence previously of “any formal initiative” to make amendments. At a vote the following week, 18 clubs agreed to suspend ATP for around six weeks, pending the formation of a new advisory group. Newcastle and Manchester City were the only clubs who did not vote in favour.
03:49 PM BST
Strong legal muscle involved on both sides
The verdict reveals that Manchester City’s arbitration commenced on January 24, 2024 - after the APT rules first came in - but ahead of when the latest updates were narrowly voted through by clubs in February. The ruling also outlines the weight of legal muscle involved, with three King’s Counsels leading the teams on either side.
City, as they are in currently defending themselves against more than 100 alleged rule breaches, were being led in the arbitration by Lord Pannick KC and Paul Harris KC.
More about their distinguished legal careers here.
03:47 PM BST
Ruling could ‘weaken League’s ability to enforce financial controls’
After reading the ruling, lawyer Tomas Vail, founder of Vail Dispute Resolution said an apparent victory for Manchester City will have a major impact on club commercial dealings.
“This successful challenge from Man City may well open the door for other clubs to seek lucrative sponsorship deals with companies linked to club owners; equally, other sports leagues will also want to know the extent to which they can restrict teams from negotiating deals with associated entities,” he said.
“More long-term, it could weaken the Premier League’s ability to enforce financial controls and ultimately lead to future disputes about the legality of other financial and regulatory decisions in the league, potentially increasing reliance on arbitration.”
03:43 PM BST
Rules can be ‘quickly remedied’
The Premier League claims the elements of the Associated-Party Transaction rules that were deemed to be “unlawful” can “quickly and effectively be remedied by the League and clubs”.
It says the Tribunal’s ruling showed a “small number of discrete elements of the rules... do not, in their current form, comply with competition and public law requirements”.
These include two aspects of the rules that aim to control the value of sponsorship deals with companies linked to clubs’ owners.
It was also ruled that shareholder loans should be excluded from the scope of APT rules and that some amendments made in February by the Premier League should not be retained.
03:30 PM BST
League’s financial battleground laid out in verdict
Interesting to see the background to the Premier League’s financial rules being laid out in the verdict and how it all stemmed from the Portsmouth insolvency in 2009-10 and a desire to limit a club’s losses.
It was basically a free-for-all before then - owners could spend what they liked - and, in terms of averting insolvencies, the rules could claim to have succeeded.
However, the battleground has evolved hugely and “fair” competition is what now really worries some clubs, particularly the fear that hugely wealthy owners could artificially inflate sponsorship deals.
03:26 PM BST
City could claim damages for losses
Sources with an understanding of City’s position said the club believes executives can now claim damages for losses caused by what they describe as “unlawful features of the rules”.
City believe the ruling effectively shows the league had been acting anti-competitively and unlawfully.
They would also invite other clubs to join them in potential lawsuits. Newcastle provided evidence to support City’s case in recent months. Arsenal, United, Liverpool, Spurs and West Ham all provided evidence as part of Premier League’s case.
Senior figures in the game rejected City’s claims of an outright victory. “I would say it is 50/50,” said one respected administrator.
03:15 PM BST
Associated Party Transaction rules explained
APT rules were introduced to address concerns that clubs could agree commercial deals with companies connected to their owners that were far in excess of what they could realistically attract elsewhere. These deals were feared to dramatically increase their spending power within the profit and sustainability framework.
They were updated in February after the Saudi Arabia-backed takeover of Newcastle United – in an era of multi-club ownership, further restrictions were placed around loans and purchases of players between clubs.
They required any club, its players, manager or any “senior official” to run dealings with “associated parties” past the Premier League.
“Associated parties” were considered to be companies or people who have a significant interest in the relevant club, financially or otherwise.
The Premier League’s board would then review each transaction to assess whether it believes they represent a fair market value.
The league handbook states that the rules aimed to ensure both long-term financial sustainability and fairness.
03:11 PM BST
‘Truly risible delusion’
Prior to the arbitration hearing in June, Oliver Brown, Telegraph Sport’s Chief Sports Writer, commented on City’s “tyranny of the majority” claim being “a truly risible delusion”.
He added: “Manchester City’s view of themselves as anti-establishment might just count as the most risible delusion in sport. Here are a club who have gobbled up 12 of the last 21 trophies in English football, including six domestic titles in seven years, all while sitting atop an Abu Dhabi-bankrolled global conglomerate that can boast two teams in the Champions League next season. If this is what outsider status looks like, you shudder to imagine their notion of an elite.
But still a persecution complex permeates every facet of their legal case next week against the Premier League, from their claim to be the victims of “discrimination” to their tone-deaf portrayal of a “tyranny of the majority”. This second wording has seldom had much currency since the 19th century, when there was still concern about a majority imposing its will on a disadvantaged minority through the democratic process. Quite where the disadvantage lies at City, the first club in England to spend more than £400 million on annual wages, is anyone’s guess.”
You can read Oliver’s full comment here.
03:09 PM BST
Premier League: City ‘unsuccessful in majority of its challenge’
The Premier League claims Manchester City was “unsuccessful in the majority of its challenge”.
It said the Tribunal rejected “a range of arguments put forward by Manchester City relating to the framework of the APT rules”. These included City’s argument that the object of the rules were to discriminate against clubs with ownership from the “Gulf region”. It also agreed with the Premier League that if the price of an Associated-Party Transaction is evidently not at fair market value, “competition will be distorted as the club would be benefitting from a subsidy”.
In relation to competition law, the Tribunal made two findings in favour of City, according to the Premier League. These were that shareholder loans should not be excluded from the scope of the APT rules, and that a limited number of amendments introduced to the rules earlier this year should not be retained.
The statement also said that, except in the two respects City won on, the tribunal found that the club’s arguments were “unfounded, including on any alleged inconsistency in approach as between certain types of clubs”.
02:58 PM BST
What was City’s argument?
In February, Manchester City launched an unprecedented claim of “discrimination” against the Premier League. In a 165-page legal document, they argued they were being unfairly targeted by rivals to stifle their success.
They claimed the league’s democratic system of a two-thirds majority vote being able to implement a rule change gave the majority an unacceptable level of control, and called the rules a “tyranny of the majority”. It came after proposals to update the APT rules which govern market value on sponsors and transfers narrowly passed, with 12 of the 20 Premier League clubs voting in favour.
According to their case, they sought “damages for the losses which it has incurred as a result of the unlawfulness of the FMV [fair market value] rules”.
They said rival clubs were looking to “safeguard their own commercial advantages” and that the rules were “deliberately intended to stifle commercial freedoms of particular clubs in particular circumstances, and thus to restrict economic competition”.
02:50 PM BST
Both City and the Premier League claim victories of sorts
In statements published at 2.30pm, both the Premier League and Manchester City were claiming victories of sorts.
The league said it welcomed “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 cost that are not at Fair Market Value (FMV) by virtue of relationships with Associated Parties,” a league statement added.
“These Rules were introduced to provide a robust mechanism to safeguard the financial stability, integrity and competitive balance of the league. The league did recognise, however, that the tribunal did “identify a small number of discrete elements of the Rules which do not, in their current form, comply with competition and public law requirements. These elements can quickly and effectively be remedied by the League and clubs.”
City, meanwhile, said in a statement that 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 statement added.
“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.”
02:46 PM BST
Significant split between Premier League clubs
One striking part of the verdict is the section which deals with the list of witnesses in the arbitration.
For the claimant (Manchester City): Chelsea, Newcastle United, Nottingham Forest and Everton.
For the respondent (the Premier League): Brighton, West Ham, Manchester United, Liverpool, Tottenham and Arsenal.
02:38 PM BST
City: Premier League ‘found to have abused its dominant position’
Following the announcement, Manchester City has released a statement thanking the “distinguished members of the Arbitral Tribunal for their work and considerations”.
It said the club welcomes the tribunal’s findings, and added: “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.”
It said the league was “found to have abused its dominant position” and that the rules were “structurally unfair”.
The tribunal also ruled that the Premier League had reached its decisions in a “procedurally unfair manner” and was “specifically unfair in how it applied those rules to the Club in practice”.
Club statement
— Manchester City (@ManCity) October 7, 2024
02:29 PM BST
Timeline: Manchester City win ‘unprecedented’ legal battle with Premier League
December 2021: “Associated-party” transaction (APT) rules were introduced shortly after the Saudi Arabia-backed Newcastle United takeover. They followed governance previously introduced to ensure “fair market value” in respect of any “related-party” transactions.
February 2024: Proposals to update the rules which govern market value on sponsors and transfers narrowly passed after 12 of the 20 Premier League clubs voted in favour. As two clubs abstained, the threshold of two-thirds in favour was met. The league argued that the amendments would “enhance the efficiency and accuracy of the system”, however Manchester City launched an unprecedented claim of “discrimination” and claimed they had been affected by a “tyranny of the majority”.
June 2024: A two-week independent arbitration hearing took place in private, in which both City and the Premier League outlined their positions. Some sources suggest as many as 60 lawyers were seen in the room.
Today: In a seismic ruling, City win their landmark legal battle with the Premier League as the APT rules regarding sponsorship are branded “unlawful”. The verdict is viewed by clubs as a disaster for top tier chief executive Richard Masters as it will now shift the direction of English football’s future financial governance.
