Manchester City and the Premier League both claimed victory on Monday after an Arbitration Panel released its judgement on a legal challenge against Associated Party Transaction (APT) rules.
Associated Party Transactions relate to sponsorship deals between a club and other companies which may be linked, such as City and the United Arab Emirates’ Etihad Aviation Group.
The case, which is unrelated to hearing into the 115 charges for allegedly breaching the Premier League’s financial rules, saw City claiming “discrimination against Gulf ownership” and that the rules were “unlawful.”
The club said it had “succeeded with its claim,” though the Panel only upheld two of City’s complaints, in relation to shareholder loans and how Fair Market Value (FMV) is assessed; all other challenges failed.
City’s bid to get the APT and FMV system completely changed was rejected, with the Panel saying it was a crucial to the Premier League’s profit and sustainability rules.
On one count, the Panel said that the rules are “unlawful … because they exclude from their scope shareholder loans.” This brings into the picture millions of interest-free loans which have been issued to clubs by wealthy backers. Everton, Brighton & Hove Albion, Arsenal and Chelsea are all reported to have enjoyed loans running into hundreds of millions of pounds.
City, meanwhile, have no such debts and argued that it was unfair that other clubs could gain a financial advantage by discounting such loans from FMV assessments, which may determine interest should be paid.
The second count covered how the Premier League determines FMV when assessing an APT. The Panel ruled that it was “unlawful” that a club is unable to comment on the data used by the Premier League before a decision is reached, that the procedure was unfair, that City were not given the opportunity to challenge the judgement and it took too long.
The Panel also said it was unfair to place the burden of proof on the club when demonstrating Fair Market Value, and this should fall on the Premier League.
The Premier League had rejected two APTs, with Etihad and First Abu Dhabi Bank, with those both now set aside. The APTs will have to be reassessed when the Premier League has looked again at how it applies its APT rules.
However, the major win for the Premier League was that APTs as a concept were supported. Had the Panel said the system was completely unlawful it would have enabled City, and other clubs under similar state ownership such as Newcastle United, to make sponsorship deals to any valuation.
“The Premier League welcomes the Tribunal’s findings, which endorsed the overall objectives, framework and decision-making of the APT system,” the Premier League said in a statement. “The Tribunal upheld the need for the APT system as a whole and rejected the majority of Manchester City’s challenges. Moreover, the Tribunal found that the Rules are necessary in order for the League’s financial controls to be effective.
“The decision represents an important and detailed assessment of the APT Rules, which ensure clubs are not able to benefit from commercial deals or reductions in costs that are not at Fair Market Value (FMV) by virtue of relationships with Associated Parties. These Rules were introduced to provide a robust mechanism to safeguard the financial stability, integrity and competitive balance of the League.”