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MANCHESTER CITY are locked in another war of words – after BOTH sides claimed victory in a landmark legal battle.
City had attempted to overturn new rules relating to “Associated Party Transactions” – funding through sponsorship of companies owned by club bosses.
GettyIn a major rebuttal of the Prem case, three senior Judges including a former Master of the Rolls have now ruled that the Prem’s Associated Party Transaction rules meant City were “unfairly blocked” from inking two major deals.
Lord Dyson and his colleagues ruled that current regulations, which do not include loans from major shareholders to clubs having to be part of the APT calculations, are “unlawful”.
They also agreed that the element of the rules that prevented City from responding to Prem decisions over what was the “Fair Market Value” of two proposed sponsorship deals was “procedurally unfair”.
But a number of City’s other claims against the Prem and its rulebook “failed”, including that the League had wrongly applied its regulations.
It left the battle lines being drawn even deeper between the two feuding sides – with the case into City’s alleged “115” breaches of Prem rules still being heard in a Central London venue.
City were understood to be triumphant at what they believed was a huge victory, with suggestions that the outcome was a massive blow for the credibility of the League.
Yet Prem bosses issued a lengthy statement in which they insisted that the REAL winners were based at offices near Paddington, not at the Etihad.
A Prem spokesman said: “The Tribunal endorsed the overall objectives, framework and decision-making of the APT system.
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“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.”
City were furious when League bosses pushed through the rules, strengthening oversight of commercial deals, at a fractious meeting of the 20 “shareholder” clubs in February.
The rules aimed to block clubs bypassing financial controls by earning “unfair” amounts from sponsorships by companies linked to an owner, or by signing a player for below market value from a club in the same ownership group.
In the tightest vote on record, the new rules were approved on a vote of 12 in favour and six against, with two clubs abstaining, meaning they passed with the bare minimum majority.
That came despite clubs being informed that one member – which swiftly became clear was City – had threatened legal action under the League’s rules allowing an Arbitration appeal.
That panel, headed by former Master of the Rolls Lord Dyson, sat to hear submissions in June.
City argued that the new rules were anti-competitive, had been deliberately aimed at them by rivals and were both flawed and politically driven, while also questioning the cost of enforcement.
Man City vs the Premier League: Q&A
By Martin Lipton
BOTH Manchester City and the Premier League were claiming a win after their legal scrap over Associated Party Transactions.
SunSport sifts the claims to try to explain the latest issues.
What was the case about?
City were furious that Prem bosses brought in new tougher regulations – by the smallest possible majority under League rules – in February. They were aimed at blocking clubs bypassing financial controls by earning “unfair” amounts via sponsorship from a company with the same owners, or selling players on the cheap to teams under the same ownership umbrella.
Why were City so upset?
The Etihad club argued that the rules were illegal and had been deliberately aimed at them by rivals and were both flawed and politically driven. They also branded the “two thirds support” rule that has been part of Prem regulations since its inception as a “tyranny of the majority”
This was an Arbitration Tribunal – explain that?
Under Prem rules, any club has the right to ask for Arbitration if they are unhappy about the regulations or due process. The three retired judges heard evidence in June and their full ruling was distributed to the 20 Prem clubs on Monday afternoon.
And what did they say?
Depending on who you listen to, they either totally vindicated one side or the other. The actual answer is that there were “wins” for both City and the Prem. But it’s your choice which ones meant more.
OK, what were City’s wins?
Maybe the most important one in terms of the repercussions. That both the new rules and the previous version – brought in after Saudi Arabia’s PIF bought Newcastle in 2021 – were “unlawful” as they exclude shareholder loans to clubs in any APT calculations. City also won over their claims that the rulebook prevented them from responding to Prem decisions over whether two proposed deals with Abu Dhabi companies represented “Fair Market Value”, access to the “databank” of comparable deals and the time it took for decisions to be reached.
That sounds pretty big. So what about the Prem’s side?
The key finding as far as the League is concerned is that the Tribunal backed the concept of APT rules as well as the Fair Market Value tests. Additionally, City’s challenges to the actual decisions on the two proposed deals “failed”. Prem bosses insist the “rulebook has been found to comply with competition and public law standards and is an effective and necessary system”.
Is that it, then?
Of course not. That shareholder loan issue is a big deal, given that it is believed owners have loaned around £1.5bn at low or preferential rates across the Prem. Those loans will almost certainly have to be calculated at commercial rates now, unless the owners convert them into shares. But the League is convinced the main thrust of the rules remains valid.
And what will be the impact on the “115 charges” case?
Probably nothing. That is an allegation of breaking the rules, while this matter was City questioning whether one small element of the current rulebook was legitimate. But City are using the same legal team, headed by £10,000 per hour Lord Pannick KC. And the stakes on the bigger case are a great deal higher.
The judges concluded the rules were unlawful because they did not take into consideration interest-free loans which shareholders lend to clubs.
Of the £4billion borrowing across the Prem, £1.5bn is in loans from club owners and shareholders.
And if regulations are changed to make these loans included in a profitability and sustainability calculation, many clubs could find they are in breach.
That includes City’s title rivals Arsenal, who have borrowed more than £200million from shareholder loans.
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