https://www.thetimes.com/sport/football/article/man-city-victory-as-premier-leagues-sponsorship-rules-declared-unlawful-0mp6kb7m0
Man City victory as Premier League’s sponsorship rules declared unlawful
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Two deals with Etihad and First Abu Dhabi Bank deemed to have been ‘unfairly blocked’ in landmark decision which will spark huge concern among rival clubs
The key facts
Rules deemed unlawful because they did not take into consideration interest-free loans from shareholders to clubs
Likely change in the regulations could lead to City striking more lucrative deals and seeking damages from the Premier League
Clubs with high levels of borrowing now in danger of breaching of Profitability and Sustainability Rules
Arsenal, City’s title rivals, have borrowing of more than £200million made up entirely of shareholder loans
Premier League’s stance was backed by Arsenal, Manchester United, Liverpool, West Ham United, Brentford, Bournemouth, Fulham, and Wolverhampton Wanderers
Manchester City have inflicted a potentially damaging defeat on the Premier League after the rules governing commercial deals between clubs and related companies were declared unlawful.
In a landmark decision that could have huge ramifications for England’s top flight, it was ruled that City were unfairly blocked from agreeing two huge sponsorship deals earlier this year.
It opens the door for the English champions, majority-owned by Abu Dhabi, to strike significantly higher sponsorship agreements with associated parties than previously allowed — including with Etihad, their stadium and shirt sponsor — and to pursue compensation and costs from the Premier League for abusing its position. Other clubs could also now seek damages should they believe they have been impacted.
An independent panel of three retired judges concluded that the rules were unlawful because they did not take into consideration interest-free loans which shareholders lend to clubs. The decision will spark huge concern among a number of City’s Premier League rivals — who rely heavily on such loans — and is likely to lead to the rules being changed.
The panel states that, of the £4billion in total borrowing across the Premier League, £1.5billion is in loans from club owners and shareholders. If the rules are altered and commercial loan rates are now applied to these interest-free loans and have to be included in a club’s profitability and sustainability calculation, many clubs could find they are in breach of Profitability and Sustainability Rules (PSR).
City had argued that such payments were unfair and not at market value because they were interest-free and, in some cases, did not have to be repaid at all. For a club such as Arsenal, with borrowing of more than £200million made up entirely of shareholder loans, that is a potentially seismic development.
Associated Party Transaction (APT) rules were introduced in December 2021 in the wake of the Saudi-led takeover of Newcastle United, and further amended in February this year.
The rules were designed to maintain the competitiveness of the Premier League by preventing clubs from inflating commercial deals with companies linked to their owners. Transactions are independently assessed to ensure they are of “fair market value”.
The Times revealed in June that City had launched unprecedented legal action against the Premier League and argued that the APT rules were contrary to the Competition Act 1998.
While some elements of City’s claim were dismissed, the 175-page partial final award, which has been seen by The Times, found that:
• Some of the new rules brought in by the Premier League earlier this year, which include placing the burden of proof onto clubs to show that deals are of fair market value, are unlawful
• The rules are also unlawful because they do not take into account interest-free loans that shareholders use to inject funds into their clubs
• Both the original and amended rules are procedurally unfair because a club is not given access to comparable deals the Premier League can use to determine fair market value.
If they appeal and lose then can Richard Masters' position still be considered tenable? The PL have already spaffed an exorbitant amount of money up the wall on legal bills for frivolous cases.
