Man City taking legal action against Premier League over league's rules regarding valuations of sponsorships; under regulations introduced in 2021 all deals with companies associated with clubs' owners must be independently assessed to be of 'fair market value'
Thursday 6 June 2024 07:15, UK
The majority of Premier League clubs support the current Associated Party Transaction (APT) rules, Sky Sports News understands.
Manchester City are taking legal action against the Premier League over the current APT rules - and Sky Sports News has learned:
City are attempting to end the Premier League's APT rules which cover commercial and sponsorship deals with companies owned or associated with the same club's owners. Man City's legal claim says the rules are contrary to UK business law.
As things stand, those rules dictate transactions have to be independently assessed to be of fair market value. The Premier League is determined to keep its rules, Sky Sports News has been told.
Man City are also claiming significant compensation for what they feel has been a set of rules that has damaged their revenues and restricted their business dealings in the past.
But the concern of the majority of clubs, from the sources Sky Sports News has spoken to, is that if payments aren't restricted, there would be no limit to how much a rich owner could invest in their club. That, in turn, would mean there would be no limit to how much they could spend on players.
Sky Sports News has been told it is very unlikely this issue will be on the agenda for the Premier League AGM in Harrogate on Thursday, although it is likely to be the hot topic of discussion among executives outside the formal meeting room.
Usually, the current level of support for a rule means it would be impossible for Man City - or the small number of other clubs that support them on this issue - to overturn it with 14 clubs needing to vote in favour of a rule change for it to be passed into the PL handbook.
However, if Manchester City were to be successful in their claim that the rule is unlawful, they would not need the usual 14 votes, and the rule would have to be scrapped.
In Manchester City's legal documents, they condemn the opposition as the "tyranny of the majority" and contrary to business law. City's case will be heard by a private tribunal, expected to last two weeks, which will begin on Monday.
The Premier League and Manchester City have not commented.
Under the existing APT rules, any commercial revenue that a club receives from a company with a connection to the club's owners must be independently assessed to be of "a fair market value". The rules are designed to stop rich owners from sidestepping existing Profitability and Sustainability Rules (PSR) by artificially inflating a club's income.
The Abu Dhabi United Group - the majority owner of Manchester City - is primarily a private equity company, but it has business interests in a wide range of sectors worldwide. In Manchester alone, it is thought to have investments in almost £1bn worth of property and higher education assets.
Some of those businesses have been hugely beneficial to the local area - for example, in conjunction with Manchester City Council, they have helped fund up to 6,000 affordable houses in the city.
But their Premier League rivals fear that, if the APT rules were to be scrapped, City and other big clubs could arrange sponsorship deals with other companies in the Abu Dhabi United Group worth huge sums of money.
If that were allowed as legitimate "income", it would mean a huge increase in the amount those clubs could spend on players, without falling foul of PSR.
Should City's lawyers be successful, it could have a huge impact on the 115 charges the Premier League has brought against the current Champions for breaches of the financial rules. Those charges are due to be heard by an independent tribunal in the autumn.
Sky Sports News chief reporter Kaveh Solhekol:
"What is being reported is unprecedented. We've got a situation where a Premier League club, Manchester City, the champions of the Premier League, are basically suing the Premier League.
"What City are going to argue at this arbitration hearing, which will start on Monday, is that some of the league's financial rules are unlawful and they are incompatible with UK competition law. The rules they are talking about are the Associated Party Transaction rules.
"These were brought in in 2021 and they are designed to make sure that if a club signs a commercial deal with a company that is linked to its owners that it has to be a fair value, and that is checked to make sure that it is of fair value.
"So, if you are the owner of a Premier League club and you have another company, say an airline or an energy company, and you want to get that company to sponsor your club - because that is a good way of bringing revenue into your club - that deal has to be checked by independent auditors to make sure it is of fair value.
"You cannot just make up a number and say the deal is worth £100m, £200m or £300m as a way of bringing money into your club. It has to be of fair value.
"But City are going to argue that these rules are unlawful and obviously, this could have big, serious ramifications for the future competitive balance of the Premier League."
Manchester City were first charged in February 2023 with breaking financial fair play rules around 100 times over a nine-year period, which starts in 2009 and goes on until 2018.
Allegedly, they did not fully disclose the financial remunerations that were made to one of their managers over a four-year period. The suggestion is that there was a secret contract so one of the managers was getting paid much more than officially stated.
The Premier League also allege Man City didn't comply with UEFA's financial fair play rules over a five-year period. They also allege that Man City have not fully co-operated with the Premier League's investigation.
The Times report claims the hearing into City's alleged 115 breaches, all of which the club denies, will be heard in November. Read more about the charges in full here.
Sky Sports News chief reporter Kaveh Solhekol said: "The charges and this case are two separate things.
"The 115 charges have been brought by the Premier League against Man City for allegations that they have broken the league's financial rules over 12 or 13 years.
"The hearing into those charges is set for November but obviously, a lot of those charges are also to do with sponsorship deals, deals that were done with companies that are connected to the owners of Manchester City.
"So, if Man City win this case, which starts next week, that would blow a big hole in the Premier League's case at the hearing in November about the 115 charges because Man City would have argued successfully next week that some of these rules are unlawful and incompatible with UK competition law."
