In depth: who ACTUALLY won the Manchester City case

The Premier League and Manchester City are both claiming victory after judgment was handed down this week over the legality of the Associated Party Transaction (APT) rules. But with all the spin and finger-pointing, who actually won?

Manchester City, represented by Freshfields and a three-silk counsel team including Lord Pannick KC, launched proceedings against the Premier League in February. The club claimed that the League, defended by Slaughter and May, had introduced APT rules that are illegal and anti-competitive.

The arbitration, which was expedited to be heard at the start of June, took place over two weeks behind closed doors at the International Dispute Resolution Centre. It took place in front of a three member tribunal made up of former High Court judge Sir Nigel Teare, former Supreme Court Justice Lord Dyson and Monckton Chambers’ Christopher Vajda KC.

The proceedings are separate from the disciplinary case brought by the Premier League against the club over 115 alleged rule breaches (the 115 charges), which began at the same venue last month. Reports suggested that an outcome in favour of City could have affected some of the charges it faced.

The APT rules concern how much companies linked to club owners can pay in deals to the team. Any commercial deals entered into between clubs and companies linked to their owners need to be of “fair market value.” In other words, what the deal would be worth if the two parties were not linked.

This all matters because the rules aim to stop the richest clubs from inflating such deals and spending more on players in an effort to ensure the Premier League remains competitive. The rules were introduced following Newcastle’s takeover by Saudi Arabia’s Public Investment Fund (PIF) in 2021. Clubs narrowly voted to tighten up rules in February 2024, proving controversial with several clubs, including Manchester City.

As The Lawyer revealed in June, Newcastle United, Everton and Chelsea all supported Manchester City’s case in some way.

What the two sides say

The Premier League, defended by Blackstone’s Andrew Hunter KC and a competition team from Brick Court, said this week it “welcomes” the decision, which found the APT Rules were “necessary in order for the League’s financial controls to be effective.”

However, Manchester City issued its own statement claiming victory: “The Club has succeeded with its claim: the APT rules have been found to be unlawful and the Premier League’s decisions on two specific MCFC sponsorship transactions have been set aside.”

The Premier League dismissed these points as “a small number of discrete elements of the Rules which do not, in their current form, comply with competition and public law requirements.”

In a bombshell letter to clubs on Monday night, Manchester City’s general counsel Simon Cliff accused the Premier League of “misleading” the public with inaccuracies in its statement. In the letter, seen by The Lawyer, Cliff argued the tribunal had “declared the APT rules to be unlawful. MCFC’s position is that this means all of the APT rules are void, and have been since 2021.”

He also warned further challenges could follow if the Premier League pursued a “knee-jerk reaction” to updating the rules. He did not specify who might bring these.

The Premier League has unsurprisingly rejected that it misled clubs and stood by its statement.

The claims

Manchester City sought a declaration that the APT rules are unlawful. As The Lawyer reported in June, City challenged the rules under both competition and public law. It argued that the APT rules breached two chapters of the Competition Act (chapters 1 and 18), while under public law, it claimed that the rules are not procedurally fair.

City also wanted the tribunal to set aside two of the Premier League’s previous decisions that had found that the club’s APTs were not made at fair market value. The first was in relation to a sponsorship agreement between the club and the First Abu Dhabi Bank. The second was in relation to a sponsorship agreement between the club and Etihad Aviation group, the parent company of the airline Etihad.

The two sides together submitted more than 280 pages of statements of case and defence and 150 pages of skeleton arguments. A list of some 20 issues was submitted to the Tribunal before closing arguments. Both sides relied heavily on the judgment given by the Court of Justice of the European Union last December over the proposed European Super League competition.

The decision

Competition law

Manchester City made a range of allegations that the APT were in breach of competition law. The tribunal found in favour of Manchester City on two grounds. However, it did not find that the APT rules are, in principle, in breach of competition law.

The tribunal found that loans given by club shareholders should not be excluded from the APT rules, as they currently are. In other words, shareholder loans should be subject to the same rules as other APTs. Ironically, as the Premier League points out, City actually voted in favour of excluding shareholder loans in 2021, along with all but one of the Premier League’s 20 clubs. Newcastle United abstained.

Secondly, it found that a number of changes made to the APT rules in February were in breach of competition law. These changes were highly technical. In essence, amendments in the rules would make it more difficult for a club to meet the fair market value test. However, they only related to the APT rules since January, rather than since the original rules introduction in 2021.

The tribunal found these changes constituted a breach of competition law. Man City’s other competition law challenges failed.

Public law

Manchester City made a range of public law challenges to the APT rules, arguing they were procedurally unfair. It failed on all but one of its challenges under public law. This concerned how the League considers whether a transaction is at fair market value. When it carries out this process, it reviews “comparable transaction data” to make its decision. City successfully argued it is unfair that clubs are unable to comment on this data before the League makes its decision.

It is also worth noting that the club argued that the League was discriminating against Gulf ownership, a point that the tribunal dismissed.

The Etihad transaction

The club sought to overturn the Premier League’s decision that the Etihad Aviation group’s sponsorship of the club was not at fair market value. The club challenged this decision on four grounds:

• • that the League had erred in principle in applying the APT rules;
  • that it had not acted with procedural fairness;
  • that it had “reached a decision which could not have been reached by a reasonable Board which had applied its mind properly to the issues to be decided”; and
  • that the length of time taken to reach the two decisions did not comply with the rules.

On three of the above four grounds, the tribunal ruled in the Premier League’s favour. Notably, it found it was reasonable for the Premier League to believe that these transactions were not at fair market value.

It did, however, find that although the League had acted mostly with procedural fairness, it should have given Man City the opportunity to respond to analysis of the transaction. It should also have provided the club with certain aspects of data that it held in relation to part of the transaction.

The First Abu Dhabi Bank transaction

The tribunal found essentially the same outcome as for the EAG transaction. It ruled that the League had breached the rules by taking too long by about three months to reach its decision on the transaction.

There was a third transaction that Manchester City had not tried to overturn, but had claimed that the Premier League had taken too long to decide on. The tribunal found that the League had indeed taken too long by about two months to reach this decision, but that decision will not be reconsidered.

The impact of the ruling

Most of City’s allegations failed, and it only won on the question of shareholder loans and some technical aspects of how fair market value is defined. Nevertheless, for the technical aspects, the decision will make it easier for clubs like City to prove that their APTs are at fair market value, but it will only raise the bar to where it was prior to February when the rules were amended.

The shareholder loans point appears not to directly advantage Manchester City, but rather could disadvantage other clubs like Arsenal and Liverpool, who have large loans from their owners. However, The Lawyer understands that the Premier League does not intend to change the rules to retrospectively include loans that have already been given. Apart from anything else, it would open the League to further challenges from those clubs that it is unfair to retrospectively change the rules on them. Whether City might then challenge this approach, which some have suggested, is another matter.

It is a similar story with the public law challenges. City failed on all challenges but one, successfully arguing it should be able to comment on “the comparable transaction data relied upon by the Premier League” before it determines fair market value. This result will certainly make it easier for clubs like City to make their case to the Premier League over what makes a transaction “fair market value,” as it will be able to make a case over the helpfulness of such comparable transactions.

The League has said it will be easy to update the APT rules by way of club vote to comply with these technical and procedural issues that the tribunal pointed out. City argues that all the rules are now unenforceable and it is for the tribunal in a subsequent hearing to decide this, not the Premier League’s 20 clubs.

Both the Etihad and First Abu Dhabi Bank transactions will need to be reconsidered by the Premier League. The Premier League has said that this information has already been given to Manchester City and it has been asked to give its opinion in relation to that information. The Premier League will then need to make the decision over that transaction again. It seems it will be a tricky ask for City to convince the League to change its mind on the basis of the new information the League has now provided to City, but it is possible.

So who actually won?

The Premier League clearly won the overwhelming majority of points. However, it is not uncommon for claimants in a dispute to bring a series of challenges against the other side, knowing that only some have to stick to get a win.

The relevant question is, why did City bring the challenge? What did it hope to achieve? The secrecy with the proceedings means it is difficult to know. If City brought the claim to ensure that shareholder loans are counted as APTs, to reverse some of the changes to the rules made in February, and to make the process by which the League defines fair market value more procedurally fair, then the club won.

However, the public narrative that has hung over this case is that, if City wins, sponsorship deals could be agreed without a fair market value assessment.

The Times’s Matt Lawton reported back in June that: “If City are successful in their claim… 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 argue that sponsors linked to club owners…should be allowed to determine how much they want to pay, regardless of independent valuation.”

So if City hoped the tribunal would declare that the fundamental concept of the APT rules is unlawful and so sponsorship deals can be agreed without a fair market value assessment, then it probably lost.

But that might not be the end of the story. The club may still try to argue that the the breaches found undermine the rules as a whole.

Indeed, Simon Cliff’s letter to clubs on Monday night suggests that this is the approach City is trying to pursue. He said that by virtue of the rules being unlawful in any way, they are entirely “void and not capable of enforcement.” It is plausible that this will form part of their 115 charges argument. The Premier League disagree, arguing that these are “discrete” points easily remedied that do not threaten the overall function of the APT rules.

The Lawyer has spoken to senior competition and sports silks and partners on this point.
A senior competition silk said it will depend on what is known as the “blue pencil test,” namely can a blue line be put through the offending sentences to fix them according to the tribunal’s decision and not fundamentally change the rules in the process. In other words, are the three points on which City won enough to invalidate the entire APT rules.

Clearly City will argue that they are. Given that these three points appear not to affect the purpose of the rules and are, according to the League, easily fixable, this may be an uphill battle. Some of the lawyers we spoke to disagreed with City’s view. Others didn’t offer an opinion, saying that it will be a judgement call. This could well be a matter for a further hearing. It is likely that the tribunal will decide itself whether it or the clubs should make this call.

As is often the way with cases like this, if you want to know who really won, wait for the costs decision.