The results of an arbitration hearing between Manchester City and the Premier League over the competition’s associated party transaction rules (APTs) have been revealed. It is the first of two highly anticipated decisions affecting both parties and, more broadly, English football as a whole.
What does the arbitration deal with?
In February, the Premier League tightened its APT policy. These rules govern any transactions or financial agreements between a club and those directly related to its ownership. Such transactions include those made by Manchester City and corporations like the Etihad Aviation Group, which, like City, has an ownership structure related to the state of Abu Dhabi. The City filed a legal challenge to the amended rules. City’s case was broad and challenged the league’s governance model, alleging that the voting rules, which require a two-thirds majority to pass, condemned clubs to the “tyranny of the majority”. This challenge, like many others, was rejected. The City was successful in contesting two aspects of the rules.
Where did the City win?
The main success was due to restrictions governing loans provided by shareholders to clubs. Under Premier League rules, these loans have not been submitted to fair market value assessments in the same way that sponsorship deals are. The Premier League claims that any club could obtain such a loan, so the practice was not anti-competitive. The City maintained that it was anti-competitive (i.e., not all owners can make loans) and distortive in its effects. The arbitral panel of judges concurred.
Why does this matter?
In terms of the City’s interests, there is little difference. However, several other Premier League teams (perhaps as many as nine) have been aided by owner loans at lower rates than those available on the open market. These clubs will have to change their ways, and it is possible that they could face legal action due to their past activities. More broadly, this decision section is significant because it demonstrates that the City has dealt a blow to its criticism of the league as a rule-maker and regulating body. The same is true for City’s second victory, which involved the league’s requirement for improved openness when making FMV determinations. Because the league failed to provide information to City promptly, two major City sponsorship deals with Etihad and First Abu Dhabi Bank that were previously rejected as not attaining FMV have now been “set aside,” requiring them to be appraised again.
Does this signal the end of APT rules?
No. A wide range of further City challenges were dismissed. The judges on the panel determined that there was no evidence that the regulations lacked transparency (unlike Uefa’s rules governing new competitions in the European Super League case). They determined that they did not distort competitiveness or player trade. In reality, the panel concluded that there was sufficient evidence to justify the league’s decision to tighten its rules. The Premier League believes its regulations can be modified quickly to reflect the findings of the ruling.
So, who won this battle?
Both sides publicly claim victory, which could be accurate, albeit for different reasons. City’s allegations against the Premier League were extensive and serious. The arbitral panel mostly rejected them. The league’s fundamental ideas based on this part of governance were also validated. So it’s a Premier League triumph. However, the City demonstrated that the regulations were unconstitutional, albeit in minor ways, and that the league’s processes needed to be adequately administered.
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This latter issue is expected to be reiterated in the second, more serious, case involving City’s 130 allegations of breaking Premier League regulations. The perception that the league is not on top of its game and is making unforced errors has been reinforced, adding to the instability in and around the competition. This is also a win for a serial champion who has openly stated that it does not feel the Premier League should have the control it now has. Whatever happens next, one thing is certain: lawyers will be in high demand.
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