Manchester City are pursuing legal action against the Premier League which is a new step in the English champions' battle with the EPL in court. The United Arab Emirates (UAE)-backed club are already due to face 115 charges of breaches of the Premier League's profit and sustainability rules (PSR) but this is a separate matter.
City have now brought their own legal case against the EPL relating to the competition's associated party transaction (APT) rules and this court case is due to start next week on June 10. If the Manchester giants are successful, the Premier League's financial future could be about to significantly alter.
An AGM for EPL clubs is due to meet on Thursday and City's move is likely to now be a key talking point. We break down why that matters and how.
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What are City complaining about?
The UAE-funded club has always been against or not voted on the introduction of policies such as APT rules when Premier League clubs meet. City's sponsorship setup is linked largely to members of the City Football Group (CFG) board with title sponsor Etihad a good example, with jersey and stadium deals carrying the UAE state airline's name. The club is owned by the Abu Dhabi United Group (ADUG) which is a private equity group with strong ties to the country's government.
According to the ADUG, these two are separate, but Mohamed Al Mazrouei was Etihad chairman until August 2021 and was on the City board until early 2022. According to The Athletic that same year, City received over $86.1 million per year from Etihad for those sponsorship rights. City's record Premier League revenue figures for 2022-23 of just over $910 million and nearly half of that was via commercial income which has risen 50% since 2019 and is now almost half of total revenue.
Newcastle United and even Leicester City are also examples of clubs with a single sponsor on jerseys, stadium and even training gear, although the Citzens and the Magpies' state investment links go deeper than the Foxes' and this is why EPL clubs sought to close the loophole of the APT rules. New rules were agreed in February and Premier League chief executive Richard Masters told the clubs that an unnamed club which has since been identified as City was threatening legal action over a breach of competition law in response.
That threat has now been followed through on and a two-week hearing will start next Monday: "The Premier League got to where it is today by being the most competitive league," Manchester City chairman Khaldoon al-Mubarak told City's internal media in his yearly end of term update. "So, I hope there is a bit more sensibility in regulating. A balanced approach is good from all the leagues. There have been a lot of restrictions put in place on swaps and loans, so even that is now much more restricted. That is going to be reflected, I believe, this summer."
City's legal case does not impact UEFA's fair-market value test and the club must comply with those to continue competing in competitions such as the Champions League.
What do APT rules do?
The rules existed before Newcastle's Saudi-backed takeover in late 2021, but a new set of rules were tightened up due to fears over Saudi Arabia's Public Investment Fund (PIF) inflating multiple sponsorship deals to get around the PSR rules. EPL clubs voted to temporary suspension before agreeing on a framework which means any associated-party deals must be subject to a fair market value test. This means that all clubs must prove that their deals are financially justifiable and Newcastle's Sela and Noon deals are examples of that.
Are City alone?
Newcastle and City are logically in the same boat as APT rules ending would enable the Magpies to garner multiple new lucrative deals with Saudi-based companies. So far, Newcastle are at the limit of their means within PSR, so may need to sell at least one player this summer. Increased revenue would enable more investment in the squad and other clubs could follow if it eases their PSR concerns. Most clubs will be keen to see City lose this one though as City's ability to outspend all of their domestic rivals has been a bone of contention for years now.
What is at stake?
City winning this could enable clubs like themselves and Newcastle to immediately gain an advantage in this summer's transfer market through new deals which would bring in greater revenue. Other clubs could also look to bring in new sponsorship of their own while Everton, Nottingham Forest and Leicester City are already facing PSR breach deductions of points.
City losing will not change much immediately and they will still be able to oppose the attempted vote but the fight against the Premier League will be far from over. City remain locked in a battle with the EPL over the 115 charges hanging over them and a double legal defeat could be disastrous for them. There is also the danger that this impacts the European Super League (ESL) idea and perhaps sees new life breathed into it.
So this is not the 115-charge thing?
Not directly, no. However, that is a financial issue too and the outcome of this APT challenge could impact how City move forward. A win for City could be huge in terms of the 115 charges as the defense case would be significantly strengthened. Even if the Premier League wins here, City's 115 charges will still stretch the EPL's legal reach to its limits so scrutiny will be majorly high on all parties here.
"Of course, it's frustrating," added Al-Mubarak. "The referencing is always frustrating. I feel for our fanbase and everyone associated with the club to have these charges constantly referenced. It's taking longer than anyone hoped for but there is a process we have to go through. I've always repeated, let's be judged by the facts and not by claims and counterclaims."
Collateral damage?
Although most considerations at this moment in time focus on the men's team and what it might mean for Pep Guardiola and his players, the impact on the women's operation and community outreach should also be taken into account. City's mega revenue which has been propped up by sponsorship deals also bankrolls the women's team -- 2016 Women's Super League winners -- and also enables the club to have a wide-reaching and impactful community presence. Should serious punishment be taken against City moving forward or the rules be altered to make things more challenging for the Premier League champions, then the chances are that the financial impact would not only be felt by the men, but at all levels.
