Manchester City have paraded their triumphs in the arbitration with the Premier League like they might be the Champions League trophy, although as one wades through the 175-pages of the judgment it feels more like a story of what they did not win rather than what they did.
The Premier League’s financial controls – and the rules that underpin them – have taken a buffeting but they have stood firm. Challenge after challenge to the crucial component, the associated-party transaction (APT) laws, were judged by the tribunal to have failed. That key rule, which prevents owners using inflated sponsorship deals to inject equity disguised as commercial revenue into their club stands. The funny money has been stopped at the gate.
What is striking throughout is that over and again, the judgment acknowledges that for effective controls to exist – currently the profit and sustainability rules – then so too must APT rules. In all, City’s legal team won three rounds of this heavyweight bout, but there were many more that they lost. So little has changed as a result of the arbitration it is hard to discern what victory might look like for the club.
The list of City’s arguments rejected by tribunal goes on and on
City argued that the APT rules could not possibly value different sponsorships for different entities accurately. That was rejected by the tribunal. The club argued that the Premier League using APT rules to adjust the value of compliant commercial income was akin to price fixing. That was rejected by the tribunal. The club argued that the APT rules unnecessarily delayed the payment of commercial considerations while the Premier League examined its compliancy. That was rejected by the tribunal.
The club argued that the APT rules, passed directly after the Saudi Arabia-led consortium bought Newcastle United in 2021, were introduced to curtail the ambitions of those clubs owned by states or individuals in “the Gulf Region”. That was rejected by the tribunal. City argued that the APT rules did not set out a clear criteria, and a right of review. That was rejected by the tribunal. The list goes on and on.
Some of it felt surreal. At one point, City even argued that it had lost a commercial deal to a potential partner that eventually chose to sign an agreement with the Premier League itself. It was part of the club’s submission on distortion of competition. City claimed that it had been in “advanced negotiations” with one partner only to be left at the proverbial altar for the Premier League instead.
The tribunal pointed out that any commercial deal between the Premier League and a third party can be vetoed by the clubs. Also, it noted, for the purposes of the record – although one might have assumed the point was self-evident – that the Premier League “is not a football club” and all its income from commercial agreement is distributed equally to its clubs. It rejected City’s argument that the Premier League itself should be subject to APT rules.
What did City get for their enormous legal bill? Well, their counsel successfully argued that shareholder loans should be subject to APT rules in the future, although that may not be the volcano that some seem to hope. The rules will not be backdated. From the moment that these additions are made, PSR likely only has around nine months to run until it is replaced by the new so-called squad costfinancial controls. Interest on shareholder loans is not currently planned to be included.
Some of the APT decisions relating to the deals with Etihad and the First Abu Dhabi Bank were set aside temporarily on a procedural basis to do with the disclosure from the Premier League’s central database of commercial deals. But that was the only reason for doing so, and those deals will still have to pass the APT tests that they have so far failed.
In both the Etihad and First Abu Dhabi Bank deals, City had challenged the Premier League decision that they were not struck at fair market value. In both cases the panel said the Premier League was right to do so.
The February amendment to the APT rules, the panel ruled, will have to be annulled – principally over the wording. But what does that mean? As things stand, not much at all. The Premier League said in a statement it can be “quickly and effectively… remedied”. It is understood that even Chelsea’s hotels sale from one part of its ownership group to the other, a dubious PSR manoeuvre, predated the amendment. That too will remain unaffected.
If nothing else, the judgment is a fascinating insight into the scale of the legal challenge that City bring to the table. Complaint after complaint. Report after report. On the Etihad deal alone, in March this year, City’s lawyers submitted supplementary reports and four further valuations. “They ran,” the panel reported, “to some 600 pages.” Mai Fyfield, the Premier League non-exec director dealing with the issue, admitted at one point that she was “getting up extremely early” to keep up with her reading alone.
What was it all for? Hard to ignore the epic hearing currently underway between the Premier League and the same club in the dispute centre by St Paul’s. Alink on City’s website page announcingthe arbitration’s findings invited the reader to click through to page 164 of the judgment, and page 164 alone. It was the final page – before the appendix – and the one which chronicled City’s wins. The tribunal’s conclusions started three pages early – page 161 – and not all of that, or indeed the many that preceded it, made for such euphoric reading for the club.