After the arbitration decision between the Premier League and Manchester City, both sides reacted like boxers after a full-distance fight: they raised their arms in triumph and claimed victory for themselves. In a statement, City euphorically welcomed the result and even thanked the “outstanding” members of the arbitration panel for their work and considerations. The Premier League, which also welcomed the decision, expressed the same word.
Both parties had argued about the legality and interpretation of the rules on so-called Associated Party Transactions (APT). These APT regulations stipulate that clubs are only allowed to enter into market-based (sponsorship) agreements with companies that are close to their own owners. The league reviews any contract worth more than £1m. This is intended to prevent unrealistic financial injections for clubs through artificially extrapolated agreements and to guarantee fair competition. Otherwise, the financial rules of the Premier League would immediately become obsolete: the clubs are allowed to record a maximum loss of 105 million pounds within a three-year cycle and shareholders are only allowed to support their own club financially to a limited extent.
The clubs passed the regulations in December 2021 and recently tightened them up. They were a direct response to the takeover of Newcastle United in October 2021 by Saudi Arabia’s sovereign wealth fund. All clubs agreed to the vote – with the exception of Newcastle and Manchester City, which belongs to Sheikh Mansour. He is part of the ruling family of the Emirate of Abu Dhabi and the brother of the head of state of the United Arab Emirates. England’s permanent champion has several contracts with state-owned companies there. That’s why City filed a lawsuit against the regulations; The club considers it “discrimination” and a “tyranny of the majority” against its own dominance, according to a legal document from which the Times quoted in June.
Manchester City’s lawsuit (which has nothing to do with the league’s accusation against City for alleged 130 violations of its own financial regulations) has now largely been rejected by the arbitration tribunal. The ruling, published on Monday and running to 175 pages, was like a punch in the club’s face – because the panel supported the Premier League’s APT system. It argued that there should be the ability to redetermine the value of an APT transaction; otherwise the financial rules would be largely “ineffective”.
It then states at point 213 that the Premier League’s approach to determining an appropriate price – which cannot be an exact science – is “sufficiently robust” to at least reduce incorrect assessments. The tribunal also rejected the claim that the APT rules were “distorting competition” and that possible contract adjustments were something like price distortions. At the same time, the court also rejected City’s allegation that the APT installation was only introduced to curtail the ambitions of clubs owned by investors from the “Gulf region”.
The arbitration tribunal’s fundamental assessments had a specific impact on the handling of three specific cases that City complained about. In each case it was about lucrative contracts with companies (Etihad Aviation Group, First Abu Dhabi Bank and Emirates Palace), all of which are part of the Emirates’ business portfolio. With the first two, City concluded deals that the league did not consider to be in line with the market.
The panel now approved the league’s decisions in principle, but at the same time also repealed them – due to procedural errors: City should have been given more insight into the evaluation processes. Both contracts must now be reassessed. In the case surrounding Emirates Palace – in which the league initially rated the contract above market value and then corrected itself – the club was pleased with the (incidental) confirmation that this was an “unreasonable delay”.
The arbitration tribunal ruled that not taking shareholder loans from other clubs into account was illegal under the APT aspect
The Telegraph commented smugly that the ruling had changed the status quo so little that it was difficult to say how City saw success in this matter. The irony of the verdict is actually that the club received full approval on a relevant point – but doesn’t even benefit from it. City indirectly and rightly criticized the hypocrisy of the competition, which, when making the APT change three years ago, ignored a review of owner loans to the clubs – mostly interest-free and flexibly repayable – to ensure that they were in line with market conditions.
The arbitral tribunal ruled harshly that the APT rules were “unlawful” in view of the fact that shareholder loans were not taken into account (“and for no other reason”). The wonderful point behind this is that around two thirds of Premier League clubs resort to such loans – City is not one of them. City’s championship rival Arsenal, for example, borrowed a total of more than 300 million euros from owner Stan Kroenke at the end of the 2022/23 season. Depending on the interest rate, some clubs would incur double-digit millions in fees per season.
In this case, some clubs – if they had not adjusted their spending behavior – would certainly have exceeded the permitted loss limit, which could have led to points being deducted. The Times pointedly noted that given the creditworthiness of some clubs, the question actually arises as to whether it would even be possible to find a financier on the open market. The Premier League announced in its own statement that it would address the requested APT adjustments regarding a review of owner loans “quickly and effectively”. City is likely to push for this to happen retroactively. The procedural documents show that Arsenal, Manchester United and Liverpool, among others, were supported – City’s toughest rivals.
The extent of the dispute indicates the legal effort that Manchester City in particular is currently making against the Premier League. At one point it is mentioned that City submitted “600 pages” in March in order to somehow push through the Etihad deal, which was ultimately rejected. The legitimacy of the APT rules for enforcing the financial rules now in some ways strengthens the league’s confidence for the other major parallel proceedings with the club. Manchester City, however, provided its fans with a download link to page 164 of the judgment on the club website. This summary includes all points in which City won. However, the overall conclusion of the arbitration court began much earlier.