Breaking down Manchester City’s court battle against the Premier League: Understanding City’s legal challenge

Manchester City is taking legal action against the Premier League, marking a new step in the English champions’ legal battle with the EPL. The United Arab Emirates (UAE)-backed club is already expected to face 115 charges of breaching the Premier League’s Profit and Sustainability Rules (PSR), but this is a separate matter.

City have now opened their own legal case against the EPL relating to the competition’s Associated Party Transaction (APT) rules and this court case is due to begin next week on June 10. If the Manchester giants are successful, the financial future of the Premier League could be about to change significantly.

An Annual General Meeting for EPL clubs is scheduled for Thursday and City’s move is now likely to be a major point of discussion. We outline why this is important and how.

What is the city complaining about?

The UAE-funded club has always been against or not voted on the introduction of policies such as APT rules when Premier League clubs meet. City’s sponsorship setup is largely linked to City Football Group (CFG) board members, with title sponsor Etihad being a good example, with shirt and stadium deals bearing the name of the UAE’s state-owned airline. The club is owned by the Abu Dhabi United Group (ADUG), a private equity group with strong ties to the country’s government.

According to ADUG, the two are separate, but Mohamed Al Mazrouei was chairman of Etihad until August 2021 and was on the city council until early 2022. According to Atlético that same year, City received over US$86.1 million per year from Etihad for these sponsorship rights. City’s record Premier League revenue for 2022-23 is just over $910 million and almost half of that has come from commercial revenue, which has increased by 50% since 2019 and now represents almost half of total revenue.

Newcastle United and even Leicester City are also examples of clubs with a single sponsor on shirts, stadium and even training equipment, although the Citzens and Magpies’ state investment links run deeper than those of the Foxes and this is why EPL clubs sought to close the gap in APT rules. New rules were agreed in February and Premier League chief executive Richard Masters told clubs that an unnamed club, which has since been identified as City, was threatening legal action for breaching competition law in response.

That threat was followed through and a two-week hearing will begin next Monday: “The Premier League got to where it is today by being the most competitive league,” Manchester City chairman Khaldoon al-Mubarak told City’s internal media in your statement. annual end-of-term update. “So I hope there will be a bit more sensitivity in regulation. A balanced approach is good across all leagues. There have been a lot of restrictions placed on trades and loans, so even that is now much more restricted. That will be reflected, I believe, in this summer.”

City’s legal process has no impact on UEFA’s fair market value test and the club must comply with them to continue competing in competitions such as the Champions League.

What do APT rules do?

The rules existed before the Saudi-backed takeover of Newcastle at the end of 2021, but a new set of rules was tightened due to fears that Saudi Arabia’s Public Investment Fund (PIF) would inflate several sponsorship deals to circumvent the rules of the PSR. EPL clubs voted for the temporary suspension before agreeing a framework that means any deals with associated parties must be subject to a fair market value test. This means that all clubs must prove that their deals are financially justifiable and Newcastle’s Sela and Noon deals are examples of this.

Is the city alone?

Newcastle and City are logically in the same boat as the end of the APT rules would allow the Magpies to secure several lucrative new deals with companies based in Saudi Arabia. So far, Newcastle are at the limit of their possibilities within the PSR, so they may need to sell at least one player this summer. Increased revenue would allow for more investment in the squad and other clubs could follow suit if it eases their PSR concerns. Most clubs will be keen to see City lose this one, as City’s ability to outspend all of their domestic rivals has been a bone of contention for years.

what is at stake?

City’s victory could allow clubs like them and Newcastle to immediately gain an advantage in this summer’s transfer market through new deals that would bring in greater revenue. Other clubs may also look to bring in new sponsorships of their own, while Everton, Nottingham Forest and Leicester City already face point deductions for PSR breaches.

City’s defeat won’t change much immediately and they could still oppose the attempted vote, but the fight against the Premier League will be far from over. City continue to fight a battle with the EPL over the 115 charges against them and a double legal defeat could be disastrous for them. There is also a danger that this will impact the idea of ​​the European Super League (ESL) and perhaps give it a new lease of life.

So this isn’t the 115 charges thing?

Not directly, no. However, this is also a financial issue and the outcome of this APT challenge could have an impact on how the city moves forward. A victory for City could be huge in terms of 115 charges, as the defense’s case would be significantly strengthened. Even if the Premier League wins here, City’s 115 charges will still stretch the EPL’s legal reach to its limits, so scrutiny will be extremely high on all sides here.

“Of course it is frustrating,” Al-Mubarak added. “The reference is always frustrating. I feel like our fan base and everyone associated with the club have these accusations constantly referenced. It’s taking longer than expected, but there is a process we have to go through. I’ve always repeated, we are going to be judged by the facts and not by claims and counterclaims.”

Collateral damage?

While most considerations at this point focus on the men’s team and what it could mean for Pep Guardiola and his players, the impact on the women’s operation and community outreach must also be taken into consideration. City’s mega revenue, which has been supported by sponsorship deals, also funds the women’s team – winners of the 2016 Women’s Super League – and also allows the club to have a community presence of wide reach and impact. Should a serious punishment be handed down to City in the future or the rules be changed to make things more challenging for the Premier League champions, then the chances are that the financial impact will not just be felt by the men but at all levels.