A vote on Associated Party Transaction (APT) rule amendments was pulled from the agenda at late notice ahead of a Premier League shareholders’ meeting today (Thursday). This comes as Manchester City faces a legal battle with the Premier League over the rules. The Premier League’s decision to withdraw the vote is a significant development in the ongoing saga between Manchester City and the league. This legal case has the potential to drastically impact the future of the Premier League and its financial regulations.
The vote on the databank was removed at late notice and, as a result, nothing relating to APTs was on the agenda today. This unexpected turn of events has sparked speculation about the outcome of Manchester City's legal challenge.
This is because it will crucially shape the future financial governance of the league and the potential competitive balance.
The APT rules are aimed at stopping clubs from signing inflated sponsorship deals with firms that are linked with them, as well as preventing them transferring players for less or more than their market value between teams in the same ownership group.
City’s challenge was brought according to the league’s arbitration procedure, which does not contain any provision to publicly announce its findings.
In June, it was revealed that Manchester City had launched a legal challenge against the Premier League, with the Abu Dhabi-owned club challenging sponsorship rules, while claiming they are victims of “discrimination” from rival clubs.
It is an unprecedented action which could ultimately undermine the competition’s 115 charges against the champions.
Here Telegraph Sport delves into the exact nature of the legal case and whether City can win.
APT safeguards were originally introduced in December 2021 after the Saudi Arabia-backed takeover of Newcastle United. By then, it had already been alleged, initially via the Football Leaks dossier of private emails, that Manchester City had concealed payments made by their owner, Sheikh Mansour, through third parties and disguised them as sponsorship revenue. City denied this.
Protections were brought in by rival clubs with two key themes in mind: to stop clubs using inflated sponsorship deals with companies linked to their owners, and to ensure fair market value on player trading between teams under multi-club ownerships. The Premier League handbook states that the rules seek to ensure “the long-term financial sustainability of clubs by extinguishing reliance on enhanced commercial revenues received from entities linked to the club’s ownership; and fairness amongst clubs, so that clubs are not able to derive an unfair advantage over domestic competitors by increasing revenues or reducing costs via arrangements with entities linked to a club’s ownership.”
Last season, there were repeated attempts by other clubs – opposed by City – to further tighten the restrictions. Since the 2021 rule was introduced, Newcastle have secured major uplifts on sponsorship agreements, including a £25 million-a-year front-of-shirt deal with Saudi events company Sela.
Player dealing was also a source of concern. Eventually, in February, rules – which further restricted loans and purchases between related clubs – were passed on just 12 votes rather than the usual threshold of 14, reduced because of two rare abstentions. The key sticking point was understood to be around the personal liabilities directors have to assume for their clubs breaking financial regulations.
Within a 165-page legal document, City claimed that they are being unlawfully targeted by rivals to stifle their success. The club argues the league’s democratic system of 14 clubs being able to implement rule change gives the majority unacceptable levels of control.
City are seeking “damages for the losses which it has incurred as a result of the unlawfulness of the FMV [fair market value] rules”, the claim states. One potential target that could have been delayed as a result of the rule is winger Savinho, on loan last season at Girona, part of the City Football Group empire.
The rules were “deliberately intended to stifle commercial freedoms of particular clubs in particular circumstances, and thus to restrict economic competition”, the claim, first reported by The Times newspaper, says.
“There is no rational or logical connection between a club’s financial non-sustainability and its receipt of revenues from entities linked to ownerships.”
In his summary of the case, Daniel Gore, a senior associate at law firm Withers, says City are “challenging the contract which exists between the clubs themselves and the league”.
Some clubs believe the first shots have been fired in a war that could ultimately lead to the end of all financial controls.
City will know they are not alone in seeking to loosen constraints. Chelsea and Newcastle both have shirt sponsors with close links to their ownership. Others are desperately hoping the Premier League is successful.
Gore warns the consequences for all clubs could be significant. “These rules provide a shield against an unrestricted sporting arms race between the most-wealthy owners, funnelling money into their club through parties they control and increasing the notional profitability of their club,” the lawyer says.
“If a challenge to the legality of these APTs can succeed then it is not inconceivable that someone might try to challenge the overarching profitability and sustainability rules more generally and this could reverse the moves to ensure that clubs operate within their means – something people may argue has increased the overall competitiveness of the Premier League and reduced clubs going insolvent.”
Launching the legal challenge could weaken the league ahead of the separate major legal battle into more than 100 alleged rule breaches.
Time and resources spent preparing for the case might have impacted the top tier’s legal team preparations for that hearing, which began last Monday. The challenge to the fundamental mechanism of a two-third’s majority vote could also prove significant.
“It is hard to see how effective governance could take place without a threshold such as this, so Man City’s challenge could plunge the Premier League’s governance structure into chaos and make it harder for any decision to take place,” explains Gore. “This move might be seen by some sceptics as Man City trying to manoeuvre the narrative and legal arguments in its favour, ahead of its own defence of the 115 charges.”
Dan Chapman, a sports lawyer and partner at Leathes Prior, said his “immediate instinct”, however, was that an unlawful verdict should “not be of major significance to the 115 charges”.
“If City thought that rules were unlawful to which they were subject over many, many years and were now, only in 2024, raising that, I do not see that would likely be a terribly attractive argument for any regulatory commission hearing the charges based on the laws as they then were,” he adds.
“I can understand if they establish the APT rules introduced in 2021 are unlawful that it would mean anyone charged post-2021 would have something to say about it, but I do not immediately see the direct link between this and the bulk of the 115 charges.
“That said, of course, symbolically, I suppose, if City were to win this case, it certainly gives them a significant moral high ground or PR footing to argue that a lot of the charges that they face, under the historical regulations, would not necessarily be brought under whatever amended regulations emerge from the outcome of these proceedings.”
