The Premier League is facing a major crisis after losing a legal battle with Manchester City over its 'unlawful' sponsorship rules, a verdict that could have far-reaching consequences for all clubs.
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The dispute began in 2023 when Manchester City challenged the league's regulations on sponsorship deals, which were introduced following the Saudi-led takeover of Newcastle United. These rules, known as Associated Party Transaction (APT) regulations, were in effect from December 2021 to November 2024 and aimed to prevent clubs from inflating sponsorship deals with entities linked to their owners.
However, an independent tribunal has now ruled that the APT rules were entirely unlawful, siding with Manchester City. This decision could open the door to significant compensation claims and potentially destabilize the league. The tribunal found that the rules failed to apply fair market value tests uniformly, particularly regarding shareholder loans, which are common at clubs like Arsenal and Liverpool.
The legal battle escalated after Manchester City's proposed deals with Etihad Airways and First Abu Dhabi Bank were blocked under the APT rules. City argued that the regulations were unlawful, and the tribunal agreed, identifying three specific issues that rendered the rules invalid. Despite attempts by the Premier League to amend the rules, City's legal team warned against rushed changes and accused the league of misleading its members about the severity of the situation.
In November 2023, clubs voted to amend the APT rules by a majority of 16-4, but City has since launched another legal challenge against these revised regulations. The same tribunal is expected to rule on their legality soon, and if they are also deemed unlawful, the league could face further chaos.
The fallout from this verdict could be substantial. Clubs that believe their competitive performance was harmed by decisions made under the previous APT system may now pursue compensation claims. Additionally, the Premier League may be forced to cover not only its own legal costs but also Manchester City's, with the combined bill estimated at nearly £20 million.
Premier League CEO Richard Masters informed clubs of the situation via email, acknowledging that the previous APT rules are "void and unenforceable" but downplaying the impact, stating that new rules are now in place. However, the tribunal's ruling raises questions about the future of these new regulations and whether they will withstand further legal scrutiny.
The APT rules were initially introduced to address concerns about inflated sponsorship deals from companies linked to club owners, particularly following Newcastle United's takeover. Critics argued that such deals could allow clubs to bypass financial regulations and spend excessively on players and wages. Manchester City, represented by prominent legal figures, sees the tribunal's decision as a complete vindication of its position.
The tribunal's final ruling, detailed in an 18-page document, concluded that the three unlawful aspects of the APT rules could not be separated from the rest, rendering the entire system invalid. Attention now turns to City's latest legal challenge, which, if successful, could allow clubs like City and Newcastle to negotiate significantly larger sponsorship deals, further shaking the foundations of the Premier League's financial regulations.
This case is separate from the ongoing investigation into Manchester City's alleged breaches of financial rules, which involves 115 charges and remains unresolved. The outcome of that case could add another layer of complexity to the league's current turmoil.
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