The 2023/2024 season may be over, but England’s Premier League is only just heating up as an arbitration hearing a case alleging discrimination commenced on 10 June 2024.

A panel of retired UK judges will hear Manchester City’s legal action against the Premier League which alleges there is “discrimination” against the club following new rules being introduced by the Premier League governing Associated Party Transactions (APT). The rules seek to regulate clubs signing sponsorship deals with companies linked to its owners. Manchester City say the rules are unlawful and are seeking damages for being forced to comply with the new rules.

The dispute is of interest to sporting clubs as it highlights a global trend of growing privatised financial ownership of football clubs.

Background

Since 2008 and following a monumental sale which was reported to be valued at $200 million, Manchester City have been owned by the Abu Dhabi United Group, a United Arab Emirates based private equity company controlled by Abu Dhabi royalty, Sheikh Mansour bin Zayed Al Nahyan.

In October 2021, a majority share of Newcastle United was purchased by Saudi Arabia’s Public Investment Fund for approximately $409 million. Two months later, in December 2021, the Premier League introduced rules restricting APTs.

In December 2023, Manchester City reported its agreement with the chairman of INEOS, Sir Jim Ratcliffe, to acquire a 25% shareholding in the club, with a further investment of $300 million in the club.

In February 2024, the Premier League clubs voted to further restrict APT rules with the Premier League announcing in a statement “a series of amendments to further enhance the efficiency and accuracy of the system.” Part of the new amendments included sanctions to be imposed on clubs if the Premier League found that the clubs had inflated deals with associated parties.

Manchester City is currently facing 115 charges for alleged breaches of the Premier League's financial rules; many of which reportedly relate to alleged inflated sponsorships.

In June 2024, Manchester City commenced action in an arbitration tribunal alleging that the APT rules violate competition law in the United Kingdom, being contrary to the Competition Act 1998 (c. 41). Manchester City filed a 165-page legal document claiming that sponsors with ties to their owners, such as Etihad Airways, should be free to decide how much their sponsorship of a club is worth. It is also reported that Manchester City is alleging that the Premier League has a conflict of interest as it also has sponsors and competes with the Premier League clubs for their money, meaning a conflict arises where the Premier League is deciding fair market value.

Further, it is reported that Manchester City argues that the APT rules have inhibited its ability to acquire talent, making it more expensive to run the business in a manner which means the club may have to raise ticket prices or cut spending in other areas, such as the Women’s Super League. On this basis Manchester City seeks damages for lost revenue as it says the rules limit how much revenue it receives from its APTs.

A framework for ensuring fairness and long term financial stability

APTs are any deals from sponsorships to transfers and payments to players, managers or senior officials, which are completed between a club and an Associated Party.

In March 2024, the Premier League updated its Premier League Handbook for the 2023/2024 season with updated guidance for APTs. The Premier League announced in its Handbook that the rules were to ensure:

• “the long term financial sustainability of Clubs by extinguishing reliance on enhanced commercial revenues received from entities linked to the Club’s ownership”; and
• “fairness among Clubs, so that Clubs are not able to derive an unfair advantage over domestic competitors by increasing revenues or reducing costs via arrangements with entities linked to a Club’s ownership”.

The Premier League has previously prescribed criteria in December 2021 to determine who, or what, qualifies as an Associated Party, being based on “the substance of the relationship and not merely the legal form” to include where clubs and third-party entities “are directly or indirectly controlled, jointly controlled, or materially influenced by the same government, public or state-funded body or by the same party.” The prescribed rules followed concerns raised by the Union of European Football Association (UEFA) and the Premier League that absent these regulations, clubs like Manchester City would be free to pay unprecedented amounts in sponsorship deals to acquire all the best players in the world, and result in non-profit member association clubs becoming uncompetitive.

The tighter rules introduced ahead of the 2023/2024 season provide that Clubs must:

• declare that the APT be fair market value; and
• be submitted to the Premier League for a fair market value assessment and approval.

The Premier League has announced it will consider shareholding, financial interest, pre-existing business and material interest such as familial ties.

The rules also tightened restrictions on multi-club groups, which are groups that own multiple clubs across different leagues. These rules were aimed at responding to increasing concerns that arise where there are player transfers between two clubs under the same multi-club ownership model. UEFA raised concerns with growth in multi-club investment as raising the potential to distort transfer activity where an increasing percentage of transfers being executed within multi-club investment groups at prices that suit investors, rather than at fair values, which would be to the detriment of transfer clubs which receive far less compensation. UEFA also raised concerns about less attractive clubs essentially becoming feeder clubs to top-league clubs raising a monopoly acquiring upcoming players.

Growing concerns over the monopoly on the Premier League

The APT rules were enforced following the Saudi Arabia Public Investment Fund’s acquisition of Newcastle United. This acquisition is said to have triggered an emergency meeting in November 2021 with all 18 Premier League Clubs voting to temporarily block commercial arrangements involving pre-existing business relationships. Newcastle United voted against the APT Rules and notably Manchester City abstained based on the “legal advice that the process was unlawful”.

The rules were prescribed in December 2021.

Several years passed and following more controversy regarding the monopoly of certain premier league clubs due to financial funding, the Premier League held a shareholders meeting where all Premier League clubs, except for Manchester City and Newcastle United, agreed to further amend the APT Rules aimed at clubs accepting sponsorship deals from companies that already have ownership links to the club, or the league.

The Premier League said that it is concerned to ensure a level playing field among the league by preventing clubs from signing sponsorship deals at inflated prices, or escaping cost controls on player dealing, to ensure the competitive balance is not being distorted by state ownership of clubs such as Manchester City and Newcastle United.

Tighter restrictions in action

The APT rules are well in force. With Manchester City recently announcing the club's purchase of Brazilian forward, Sávio Moreira de Oliveira, it has brought to the forefront of the Premier League the question of monopoly by the Abu Dubai United Group across European football leagues. Manchester City heads up a worldwide group of 13 partner clubs, including Spanish Club, Girona, which is similarly majority-owned by Sheikh Mansour bin Zayed Al Nahyan.

The Premier League Club has reportedly sought to purchase Sávio following his stint at Spanish club, Girona. Sávio had been on loan to Girona from French club, Troys, which is also a member of the City Football Group, being a group of European football clubs owned or majority controlled by the Abu Dubai state.

UEFA and the Premier League have not yet ruled on Sávio’s potential transfer to Manchester City.

Multi-club Groups

Manchester City Group is not the only multi-city group that will be targeted by the new APT Rules, and the Premier League is not the only league to implement stricter rules after a report published by UEFA in 2022 regarding multi-club investment in Europe.

In 2022, for the first time on record, UEFA included a subject on private capital investment in clubs and club ownership in their annual report on the European Club Footballing Landscape. UEFA reported multi-club ownership and investment as a fast-growing trend and highlighted the potential to pose a “material threat to the integrity of European club competitions, with a growing risk of seeing two clubs with the same owner or investor facing each other on the pitch.” UEFA reported that at the end of 2022, the UEFA Intelligence Centre identified more than 180 clubs worldwide that were part of a multi-club investment structure, compared with fewer than 100 clubs in 2018 and fewer than 40 in 2012.

In 2023, UEFA reported there were more than 300 clubs that were part of multi-club investment in 2023 which again highlighted the risk of two clubs with the same owner or investor facing each other in the same competition and the risk of creating potential integrity risks at the European level. UEFA reported a trend of sophisticated financial investors, such as investment funds or professional family offices using holding companies ultimately controlled by other entities adding an extra layer of complexity when it comes to who holds the reins at football clubs. Despite this, UEFA reported a slowdown in top-division club takeovers with the number of takeovers at top-division clubs falling to less than half of the level seen in 2022, and UEFA reported this could be indicative of a shifting landscape or the availability of attractive clubs dwindling.

Is this opening a floodgate of similar issues?

The legal action commenced by Manchester City highlights a global trend of growing privatised financial ownership of football clubs and raises a spotlight on the monopoly over top-league football clubs. One of the interesting issues which must be grappled with at the arbitration is the question of whether tighter APT rules and sanctions could be anti-competitive and discriminatory towards multi-club groups. The outcome of the arbitration will likely result in a floodgate of similar issues in other football leagues across the globe due to the sheer number of multi-club groups and football clubs with the same owner or investors. Some big names include Chelsea, Palermo and possibly Newcastle United. Closer to home, they include Melbourne City, being part of the City Football Group, and Melbourne Victory after being acquired by 777 Partners in October 2022.

The action by Manchester City will likely be a test case on the increasing regulation of multi-club groups and privatisation of football clubs and UEFA will likely be required to respond with further restrictions to be imposed across the European Leagues to ensure that anti-competitive conduct is managed whilst maintaining the integrity of football leagues.

The legal action has caught the attention of the public and, as at the time of writing this article, there are over 300 news articles and a growing trend on social media highlighting the public interest in the arbitration.

At the time of writing, there has been no reported outcome from the arbitration. The panel is expected to hand down its decision in late June 2024.