[ad_1]
Manchester City and the Premier League are both claiming victories after a ruling regarding the league’s Associated Party Transaction (APT) regulations was published.
The ruling states that the Premier League’s APT rules and amendments, which were introduced in December 2021 and February of this year respectively, are “unlawful” and in breach of UK competition law as they deliberately exclude shareholder loans — when a club borrows money from its ownership group, usually interest-free.
This case is separate from City’s defence of more than 100 charges against them for allegedly breaching the Premier League’s profitability and sustainability rules (PSR), which they deny.
In this case, City claimed that the league’s APT rules — which aim to regulate against its clubs using sponsorship deals with companies linked to their owners to inflate revenue streams and allow room for greater spending — are unlawful and against competition law. The league insisted that the rules were fully compatible with the law.
A statement from City on Monday outlined that the Premier League “was found to have abused its dominant position” by the tribunal. City also pointed out that the panel has ruled two of the league’s decisions on the club’s sponsorship deals — relating to the Etihad Air Group and First Abu Dhabi Bank — should be set aside.
GO DEEPER
City vs the Premier League – explaining the 115* charges and how long the case will take
The Premier League, meanwhile, said that it “welcomes” the ruling. The league admitted that the ruling identified “a small number of discrete elements” of the APT which do not comply with competition law but claims it “(endorses) the overall objectives, framework and decision-making of the APT system”.
The Premier League added that the tribunal had deemed the APT rules “necessary” as a means of ensuring the efficacy of the league’s Profitability and Sustainability Rules (PSR), “thereby supporting and delivering sporting integrity and sustainability in the Premier League”.
City have won the last four Premier League titles (Naomi Baker/Getty Images)
The Premier League says it will continue to operate the APT system, “taking into account the findings” of the tribunal. It added that the elements that do not comply with competition law “can quickly and effectively” be fixed.
The ruling was delivered by a three-person arbitration panel and came after City challenged the league’s APT rules. The case was heard in June.
An amendment to the current APT rules was set to be discussed at a meeting of Premier League shareholders on Thursday but was removed from the agenda ahead of time.
GO DEEPER
Why this latest Manchester City legal row feels different
A key part of Monday’s ruling related to the issue of shareholder loans.
The tribunal decided that as well as sponsorship deals, shareholder loans should also be taken into account by the APT rules. Many of these loans are interest-free, which benefits the club because they will subsequently owe a smaller amount. Arsenal, for example, have borrowed more than £200million ($262m) in shareholder loans, as of the end of 2022-23.
Historically, interest-free shareholder loans have been excluded from the APT rules, which City claimed was unfair. Their argument is that this distorts the profitability and sustainability (PSR) calculations because an interest-free loan cannot be a fair market value. The tribunal agreed with them.
In theory, this means that if interest-free shareholder loans are included within PSR, many clubs will have to rebalance their books in order to avoid a breach.
Arsenal owe more than £200m to their owner, Stan Kroenke (right) (Glyn Kirk/AFP via Getty Images)
In June, a 165-page legal submission seen by British newspaper The Times showed that City argued they have suffered “discrimination” as a result of the league’s APT rules, alleging they amounted to a “tyranny of the majority”. Premier League rules dictate that a majority of 14 clubs must agree to new regulations being implemented.
Premier League clubs voted through temporary measures relating to APT in October 2021. That came following the Saudi Arabian Public Investment Fund (PIF) taking control of Newcastle United earlier that month. In December 2021, it was ruled that clubs must submit all sponsorship deals worth over £1million ($1.26m) to the Premier League to decide on the possibility of an APT — despite opposition from City and Newcastle.
Those rules were then were strengthened in February 2024 following another vote among the clubs, who voted in favour of a framework that sees all APTs subjected to a fair market value test, meaning that any deal would have to be financially justifiable for all parties.
There had previously been concerns that ownerships could use multiple companies under their jurisdiction to strike sponsorship agreements that would artificially inflate their own revenue and circumvent PSR rules.
GO DEEPER
City are taking legal action against the Premier League – what does it all mean?
The APT rules, though, ensured that Newcastle have had their sponsorship agreements with PIF-linked events company Sela and e-commerce company Noon subjected to the market value tests.
It is also applicable for any sponsorship agreements between City and other groups with links to the club’s City Football Group (CFG) ownership. City have always voted against or abstained against the introduction of APT rules at Premier League meetings.
In 2022-23, City posted Premier League record revenues of £712.8m (now ¢953m), of which almost half — £341.4m — was commercial income.
Much of City’s revenue came from companies with links to CFG. Etihad, the state airline of the United Arab Emirates, is the lead sponsor for both City’s shirt and stadium.
Etihad Airways has been City’s primary shirt sponsor since 2009 (Stu Forster/Getty Images)
Leicester City are also implicated by the APT regulations. Their chief executive and chairman Aiyawatt Srivaddhanaprabha also controls the King Power company, which is the lead sponsor of the club’s jersey, stadium and training kit.
However, City and Newcastle’s close links to state investment offer them a more extensive network of related companies — which is why rival Premier League clubs mobilised to close the loophole.
UEFA also has its own fair-market value test. City’s legal case does not address those laws and the club will still have to comply with them in European competition.
The Athletic will bring you a full breakdown of the decision and its implications in the near future.
(Top photo: Visionhaus/Getty Images)
[ad_2]
Source link
