cross-posted from: https://lazysoci.al/post/14340013
Summary:
This video talks about Manchester City taking legal action against the Premier League over financial rules. Manchester City argues that some of the Premier League’s Financial rules, specifically the associated party transaction rules, are unlawful and incompatible with UK competition law. These rules require that any commercial deals a club signs with a company linked to its owners must be fair value. Manchester City believes that these rules are unlawful and could have serious ramifications for the future competitive balance of the Premier League.
The hearing on these charges is set for November. However, Manchester City is arguing that if they win the case that starts next week, it would blow a hole in the Premier League’s case at the hearing in November. This is because Manchester City would have successfully argued that the rules are unlawful.
The video also talks about the bigger picture, which is an argument about ownership of Premier League clubs. There are two sides to this argument. One side argues that owners should be allowed to put in as much money as they want into their clubs. The other side argues that financial rules are necessary to maintain competitive balance. The video says that it will be interesting to see how this plays out, as some Premier League clubs are siding with the Premier League and others may want to get rid of the associated party transaction rules.
Original article: https://www.thetimes.co.uk/sport/football/article/man-city-legal-action-premier-league-hearing-7k6r5glhq
Full Article:
Man City launch unprecedented legal action against Premier League Matt Lawton 15 - 18 minutes
Manchester City have launched an unprecedented legal action against the Premier League in a move that has sparked civil war in English football’s top flight.
The dispute, which has become a battle between the most powerful clubs in the country, will be settled after a two-week private arbitration hearing starting on Monday.
The outcome could dramatically alter the landscape of the professional game and have a significant impact on a separate hearing set for November into City’s 115 alleged breaches of the Premier League’s regulations and financial rules. That hearing, expected to last six weeks, could lead to huge fines for the club owners and possibly even relegation for Pep Guardiola’s all-conquering side.
At next week’s hearing, which has provoked bitter divisions between clubs, City will attempt to end the league’s Associated Party Transaction (APT) rules, which they claim are unlawful, and seek damages from the Premier League.
Introduced in December 2021 in the wake of the Saudi-led takeover of Newcastle United, the rules are designed to maintain the competitiveness of the Premier League by preventing clubs from inflating commercial deals with companies linked to their owners. The rules dictate that such transactions have to be independently assessed to be of “fair market value” (FMV).
But within a 165-page legal document City argue that they are the victims of “discrimination”, describing rules they say have been approved by their rivals to stifle their success on the pitch as a “tyranny of the majority”.
If City are successful in their claim — and some rival clubs fear they will be — it could enable the richest clubs to value their sponsorship deals without independent assessment, vastly boosting the amount of money they can raise and therefore giving them far greater sums to spend on players.
City have been dominant on the field during the past decade and have recently won their fourth Premier League title in a row
City have been dominant on the field during the past decade and have recently won their fourth Premier League title in a row
BRADLEY COLLYER/PA WIRE
The league’s other 19 clubs have been invited to participate in the legal action and The Times understands between 10 and 12 have stepped forward, providing either witness statements or a letter detailing evidence in support of the Premier League’s defence against the claim. Those who have provided witness statements may be called by the tribunal to give evidence at the hearing.
As well as the impact it could have on the Premier League as a competition, clubs fear City’s claim could also be key to the outcome of the hearing into their 115 alleged breaches between 2009 and 2023, with sponsorship deals funded by companies linked to Abu Dhabi central to the accusations against them.
It has been alleged that City concealed payments made by their owner, Sheikh Mansour, through third parties and disguised them as sponsorship revenue. Even before the more recent moves by the Premier League to tighten regulation around APTs, there was a requirement under the league’s rules that related party transactions must be of fair market value. If such rules are now deemed unlawful, it could significantly strengthen City’s defence at the hearing later this year. City have denied any wrongdoing relating to the 115 charges.
The Times can confirm that City carried out that threat, filing their claim on February 16, with the Premier League informing its member clubs in March that a date of June 10 had been set for the hearing.
Erling Haaland is one of a series of high-profile moves made under City’s present ownership
Erling Haaland is one of a series of high-profile moves made under City’s present ownership
LUKE TAYLOR/SPLASH
City are suing the Premier League for damages, while arguing that the league’s democratic system of requiring at least 14 clubs, or two thirds of those who vote, to implement rule changes gives the majority unacceptable levels of control. They accuse rival clubs of “discrimination against Gulf ownership”, citing the comments of one particular senior club executive.
City argue that sponsors linked to club owners — City’s are in Abu Dhabi — should be allowed to determine how much they want to pay, regardless of independent valuation. Four of City’s top ten sponsors have ties to the United Arab Emirates, including their stadium and shirt sponsor, Etihad Airways.
Newcastle, who are majority-owned by Saudi Arabia’s Public Investment Fund, have a shirt sponsorship deal with Sela, a Saudi sports rights company. Chelsea have a shirt deal with Infinite Athlete, a leisure company which counts the joint-Chelsea owners Todd Boehly and Behdad Eghbali among its investors.
While The Times knows of at least one club who have submitted a witness statement in support of City for next week’s arbitration hearing, sources believe more than half have sided with the Premier League. The Premier League invited clubs to submit their statements in a letter from their general counsel, Kevin Plumb, on March 1.
Despite having just won a record fourth successive Premier League title, City claim rules introduced 2½ years ago are restrictive and anti-competitive.
City are accusing rival clubs of “discrimination against Gulf ownership”
City are accusing rival clubs of “discrimination against Gulf ownership”
VICTORIA HAYDN/MANCHESTER CITY FC VIA GETTY IMAGES
Their rivals believe that what City are doing will actually destroy the competitiveness of the world’s most popular league, allowing clubs with super-rich owners to spend unlimited amounts of money on their playing squads and infrastructure and nullify Financial Fair Play rules.
Millions are being spent on legal fees to fight this case. One senior club source says the Premier League’s legal bill has more than quadrupled in the past year, from about £5million to more than £20million. They also point to the fact that since February the Premier League’s own legal department has been forced to shift its focus to this claim when it is also trying to prepare for the hearing into City’s 115 charges. “This is clearly a tactic,” the source said.
City have certainly spared no expense in their potentially groundbreaking legal fight. They have appointed three KCs, with Lord Pannick supported by Paul Harris and Rob Williams. A fourth senior barrister who specialises in competition and regulatory law, David Gregory, is also on City’s team.
In their claim, City are seeking “damages for the losses which it has incurred as a result of the unlawfulness of the FMV [fair market value] rules”, in particular for costs resulting from delays, sums they claim were not paid under agreed deals and additional costs, including the club’s inability to generate revenue from delayed or cancelled projects. This, clubs believe, could potentially amount to tens of millions.
Newcastle are majority-owned by Saudi Arabia’s PIF and have a front-of-shirt sponsor with Sela, a Saudi sports rights company
Newcastle are majority-owned by Saudi Arabia’s PIF and have a front-of-shirt sponsor with Sela, a Saudi sports rights company
ANDREW KEARNS – CAMERASPORT VIA GETTY IMAGES
Indeed, City’s claim says the club are seeking a split trial, with the first part focused on the APT rules followed by a second to then determine damages.
In his letter to clubs on March 1, Plumb detailed the nature of City’s legal challenge under Section X of the Premier League rules.
Plumb explained how the Premier League had to secure an order that enabled it to disclose the details of the arbitration to its member clubs and confirm that it was indeed City who had filed a claim. “The purpose of this letter is to provide those further details, within the bounds of the confidentiality of the proceedings, and to confirm the process by which any club may participate in the arbitration,” Plumb states.
He explained to clubs the detail of City’s claim that the rules are contrary to the Competition Act 1998.
Plumb then said the Premier League’s independent legal counsel believes the rules are compatible with English law and that they will fight the legal action.
On February 26 a directions hearing in the arbitration took place, with the tribunal appointed to hear the case giving the Premier League permission to provide a redacted copy of City’s statement of claim to other clubs, because they may be affected by the outcome of the challenge.
The tribunal set a date for the final hearing to take place from June 10 to June 21, with all witness statements due to be submitted by March 28 in line with the deadline for the Premier League’s statement of defence.
Clubs were given the option of either intervening formally in the proceedings, upon receiving permission from the tribunal, or submitting factual evidence on relevant matters.
Lord Pannick is representing the club in the case
Lord Pannick is representing the club in the case
AARON CHOWN/PA WIRE
Within the City claim is a challenge to the voting system upon which the Premier League’s decision-making process has long been built, which requires two thirds of clubs to support a rule change. They say this allows a majority of clubs to exert a “tyranny” that damages the minority.
City also claim the FMV rules are intended to be discriminatory towards clubs with ties to the Gulf region.
The claim says the rules were imposed at the instigation of certain rival clubs reacting to the Saudi takeover of Newcastle, with the aim to “safeguard their own commercial advantages”. They say rivals were seeking to limit deals from companies in the Gulf region, citing a quote from a senior executive from another club.
They claim the rules were “deliberately intended to stifle commercial freedoms of particular clubs in particular circumstances, and thus to restrict economic competition”.
City also complain that, when it comes to negotiating any form of sponsorship agreement, clubs in the north are at a disadvantage to those in London, who, they say, can charge higher ticket prices. However, rival clubs estimate that, based on median ticket prices at the Etihad Stadium and the seven Premier League clubs in London, City are ranked third.
City blame the Premier League for not regulating spending when clubs such as Manchester United were more dominant, arguing they have been prevented from monetising their brand in the way United did. City also say the rules penalise clubs who have “lower-profile sporting histories”.
In their claim, City also dismiss concerns that an inflated sponsorship deal with a company linked to the club’s ownership could be vulnerable to a change of ownership.
“There is no rational or logical connection between a club’s financial non-sustainability and its receipt of revenues from entities linked to ownerships,” City’s claim states. They say companies would honour sponsorships even if the club were sold to new owners.
As one Premier League club source observed, this overlooks the fact it is common for sponsorship contracts to have clauses that mean the terms change under new ownership.
City argue that the Premier League has failed to provide evidence that sponsorship deals with related parties give clubs an unfair advantage or distort the league’s competitive balance.
They also say that the Premier League, as an organisation, is a direct competitor for sponsorship and therefore claim it has a conflict of interest.
Further to that, City question the independence of Nielsen Sports, the data analytics company used to determine the fair market value of sponsorship deals, because it has been retained by the Premier League for more than two years.
City complain that FMV rules discriminate against clubs who form part of a multiclub ownership group, and only apply to commercial deals and not shareholder loans.
Ultimately, City stand accused of breaking financial rules to spend close to £2billion building a team who now dominate the Premier League and in the 2022-23 season won a European and domestic treble.
In their claim, City argue that the present rules will limit their ability to buy the best players and force them to charge fans more for tickets. They say they may also have to cut spending on youth development, women’s football, and community programmes.
Premier League clubs have a scheduled meeting in Harrogate on Thursday.
Manchester City did not respond when contacted for comment. The Premier League has declined to comment. Why are Manchester City taking action against the Premier League?
They want Premier League rules for Associated Party Transactions (APT) scrapped, claiming they are unlawful. APT rules, which were introduced in December 2021 and tightened this year, cover sponsorship and commercial deals with companies connected to the clubs, as well as any player transfers between clubs in the same ownership group, to ensure they are of “fair market value”. If City succeed, any constraints over inflated sponsorship deals would be removed. Victory for City could also have a significant impact on their case concerning 115 Premier League charges for alleged breaches of Profit and Sustainability Rules. What is an APT and why are they important?
In England there are a number of examples of APTs. Newcastle have secured a £25million-a-year front-of-shirt deal with Saudi events company Sela since their Saudi-led takeover, while Chelsea have a shirt deal with Infinite Athlete, a leisure company that counts joint-Chelsea owners Todd Boehly and Behdad Eghbali among its investors. Four of City’s ten main sponsors have links to Abu Dhabi, including the shirt and stadium deals with Etihad Airways.
Until December 2021, the Premier League only viewed commercial deals as “related party transactions” if they were described as such in clubs’ accounts — Manchester City did not declare sponsorship deals such as Etihad’s as related party transactions. The 2021 rules stated that if the Premier League’s board has reasonable grounds to suspect that it is an associated party deal then an independent firm will determine whether it is of fair market value.
From this January, the Premier League made clubs liable to be charged with a breach of the rules if they do not “use all reasonable care” to ensure deals are of fair market value, with the burden of proof on the clubs to show they are.
If constraints over APTs are removed, there are concerns that deals similar to the €200million-a-year deal between the Qatar Tourist Authority and Qatari-owned Paris Saint-Germain announced in 2014 — which Uefa later judged to be not of fair market value — could be replicated in England. What are the 115 charges?
Fifty-four concern a failure to provide accurate financial information 2009-10 to 2017-18. Fourteen are related to a failure to provide accurate details for player and manager payments from 2009-10 to 2017-18. Five concern a failure to comply with Uefa’s rules, including Financial Fair Play regulations, from 2013-14 to 2017-18. Seven are for breaching the Premier League’s PSR rules 2015-16 to 2017-18. 35 are for a failure to cooperate with Premier League investigations between December 2018 and February 2023. The allegations first surfaced because of leaked correspondence published by the German newspaper, Der Spiegel. City have always argued that the material was obtained illegally. What does this mean for City’s charges?
Significantly, next week’s private arbitration hearing comes before the independent hearing for City’s charges, which is due to start in November. Rival clubs are concerned that a successful claim against APT rules could strengthen City’s defence later in the year. It has been alleged that City concealed payments made by owner Sheikh Mansour’s Abu Dhabi United Group through third parties and disguised them as sponsorship revenue. If the tribunal concludes that Premier League rules around fair market value are unlawful — and such regulations existed even before more robust rules were introduced in 2021 — it could open the way for City to launch fresh challenges against the legality of the rules concerning the 115 charges.