Osborne Clarke- Joachim Piotrowski , Simon Neill and Jeremy Summers
United Kingdom/ June 26 2024
A successful challenge could pave the way for lucrative sponsorship deals
particularly for clubs with wealthy owners
In recent weeks, Manchester City has initiated a legal challenge against the Premier
League’s Associated Party Transaction (APT) rules, with arbitration proceedings expected
to last two weeks. Manchester City alleges that the APT rules are unfairly discriminatory,
anti-competitive and represent a “tyranny of the majority”. The arbitration commenced on 21
June and occurred in private.
What are APT rules?
At a high level, an APT is a commercial deal between a club and an entity linked to the club;
for example, through shared ownership. The Premier League’s APT rules, introduced in
2021 following Newcastle United’s takeover by a Saudi-led consortium, have two main
objectives. They aim:
to ensure the long-term financial stability of clubs by reducing reliance on enhanced
commercial revenues from linked entities; and
to promote fairness among clubs by preventing them from gaining an unfair
advantage over rivals through revenue inflation or cost reduction via arrangements
with linked entities.
In practical terms, clubs must submit each APT to the Premier League’s board of directors
for a “Fair Market Value (FMV) assessment, which ensures that the transaction reflects the
value that would be agreed upon by knowledgeable and willing parties in an arm’s length
transaction under normal market conditions. The aim is to prevent clubs from receiving
income at levels not available to their competitors on the open market by inflating
commercial deals with associated entities.
If a transaction is deemed by the board to exceed the FMV, the club must either terminate
the transaction or return the excess to the counterparty (the excess being the difference
between the actual consideration being received by the club and the FMV as determined by
the board).
Manchester City’s complaint
The UK newspaper, The Times, has reviewed a leaked 165-page legal document submitted
by Manchester City, detailing its claim, which argues that the club is victim of
“discrimination” and that the APT rules were “deliberately intended to stifle commercial
freedoms of particular clubs in particular circumstances and thus to restrict economic
competition”.
Manchester City has complained of a “tyranny of the majority,” which likely references the
Premier League’s voting system that allows rule changes affecting all clubs to be
implemented with the agreement of 14 out of the 20 Premier League clubs. Manchester City
is seeking damages for losses claimed to have been incurred due to the alleged
unlawfulness of the APT rules, particularly concerning the FMV assessment.
This challenge, which will be heard in the autumn, comes against the backdrop of 115
charges made against the club by the Premier League, largely related to alleged financial
misconduct. While the APT rules challenge is not directly related, Manchester City hopes to
build momentum and control the narrative leading into the autumn hearing.
While some clubs hold a more moderate position, seeking reform rather than complete
abolition of the APT rules, The Lawyer has reported that it is understood that most of the
Premier League clubs are broadly siding with their league. That said, there are no
indications that any Premier League club has directly intervened in the case or is due to
appear as a party in the arbitration (other than Manchester City).
If Manchester City is successful and the APT rules are declared unlawful, they could be
removed from the Premier League’s rulebook. This would allow clubs to negotiate
commercial deals with associated entities without the need for a FMV assessment.
Osborne Clarke’s comment
Manchester City’s strained relationship with the Premier League is well known among
football fans and sports lawyers alike. The specific allegations and precise legal bases for
Manchester City’s claim in the document referenced by The Times are not (yet) in the public
domain. However, it is likely that Manchester City will be relying on Chapter 1 of the
Competition Act 1998, which prohibits agreements that have as their object or effect the
prevention, restriction or distortion of competition. Manchester City are likely to argue that
the APT Rules constitute an anti-competitive agreement among Premier League clubs,
contrary to the Chapter 1 prohibition.
Premier League clubs are keenly awaiting the outcome of the arbitration proceedings. If
Manchester City’s challenge is successful, it could pave the way for lucrative sponsorship
deals, especially for clubs owned by wealthy commercial owners or with links to oil-rich
states. Other professional sports leagues should closely monitor this challenge, as a
successful outcome for Manchester City could mean that league bodies need to ensure
they do not impose commercial restrictions on teams’ abilities to negotiate deals with
associated entities.
