Legal advice from from Gardner Leader on the unprecedented arbitral proceedings brought by Manchester City against the Premier League

As reported by The Times, Manchester City FC has, in an unprecedented move, brought arbitral proceedings against the Premier League in response to recent changes to the rules relating to transactions between members of the league and their associated parties, writes Tom Hickman from Gardner Leader.

The club is seeking substantial damages for losses arising from the introduction of what it calls “unlawful” and “discriminatory” Associated Party Transaction (APT) regulations.

A two-week hearing is scheduled to start this month.

In 2021, the Premier League introduced the APT regulations to prevent clubs from entering into inflated commercial deals with companies linked to their owner(s).

Such deals have the potential to generate substantial funds for the club, which may be used to buy the world’s best players and so secure an unfair advantage over the club’s rivals.

There has been, however, a perception in some quarters that the regulations were brought in hastily as a response to the Saudi-led takeover of Newcastle United (the owners of which are said to be ‘supporting’ Manchester City although they are not a party to it).

The effect of the APT regulations is that, where a club has a proposal relating to a transaction worth more than £1m from an entity with a perceived link to its owners, the club must prove to the Premier League’s board that the proposed transaction is at a “fair market value”.

This is designed to promote and maintain a fair but competitive playing field for the clubs in the league and to protect the league’s sporting integrity and brand.

Manchester City argue that the regulations are discriminatory to clubs that are owned by individuals or groups that have links to the Gulf region and that sponsors with links to the club’s owners should be free to determine the commercial terms of their deals.

It is their position that the league only has itself to blame for the existence of these types of deals, which were rife during previous eras of domination such as that of Manchester United, and claim that they are being penalised for trying to monetise their brand in the way that various other clubs have done previously.

Manchester City’s owners submit that, by restricting their ability to do deals in this way, the regulations are anti-competitive and in breach of the Competition Act 1998.

The Premier League for its part maintains that the rules are entirely compatible with English law.

It is well-known that Manchester City has been accused of ‘cheating’ the footballing financial system and to date the club has been charged with 115 breaches of the Premier League’s Regulations.

Sixty-eight of those charges were for failing to provide accurate financial information, including details of player and manager payments between 2009 and 2018.

However, if the club’s claim against the Premier League succeeds, this may change the footballing landscape entirely and may well reduce significantly the scope of the charges currently levelled at City.

More fundamentally, it would mean that the wealthiest teams in the league will be able to set the value of their commercial partnerships as high as they wish.

If this were to happen, it is likely that an increasingly enormous gap would open between clubs owned by the ultra-wealthy and the smaller clubs that form part of the league or those newly promoted from the lower divisions.

It would also likely lead to even greater interest in the ownership of Premier League clubs by foreign commercial interests.

Not for the first time in recent years, it is tempting to question whether this is all in the spirit of the game.