Manchester City and the Premier League both claim victories after the APT ruling
Manchester City and the Premier League both claim victories after a ruling on the league’s Associated Party Transaction (APT) rules was published.
The ruling states that the Premier League’s APT rules and amendments, which were introduced in December 2021 and February this year respectively, are “unlawful” and breach UK competition law because they deliberately exclude shareholder loans – when a club borrows money from its ownership group, usually interest-free.
This case is separate from City’s defense of more than 100 charges against them for alleged breaches of the Premier League’s Profitability and Sustainability Rules (PSR), which they deny.
In this case, City claimed that the league’s APT rules – which aim to regulate clubs by using sponsorship deals with companies linked to their owners to increase revenue streams and make room for greater spending – were unlawful and conflict with competition law. The league insisted that the rules were fully compatible with the law.
A statement from City on Monday outlined that the Premier League had “abused its dominant position” by the tribunal. City also pointed out that the panel has ruled that two league decisions on the club’s sponsorship deals – relating to Emirates Air Group and First Abu Dhabi Bank – should be set aside.
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The Premier League, meanwhile, said it “welcomes” the ruling. The league admitted that the ruling identified “a small number of individual elements” of the APT that do not comply with competition law, but claims that it “endorses the general objectives, framework and decision-making of the APT system.” .
The Premier League added that the tribunal had deemed the APT Rules “necessary” as a means of ensuring the effectiveness of the league’s Profitability and Sustainability Rules (PSR), “and thus the sporting integrity and sustainability in the Premier League to support and deliver”.
City have won the last four Premier League titles (Naomi Baker/Getty Images)
The Premier League says it will continue to use the APT system “taking into account the findings” of the tribunal. It added that the elements that do not comply with competition law can be resolved “quickly and effectively”.
The ruling was made by a three-member arbitration panel and came after City challenged the competition’s APT rules. The case was heard in June.
A change to the current APT rules was due to be discussed at a Premier League shareholders meeting on Thursday, but was removed from the agenda beforehand.
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A key part of Monday’s ruling concerned the issue of shareholder loans.
The tribunal decided that in addition to sponsorship agreements, shareholder loans should also be taken into account in the APT rules. Many of these loans are interest-free, which benefits the club because they then owe a smaller amount. Arsenal, for example, has borrowed more than £200 million ($262 million) in shareholder loans by the end of 2022-23.
Historically, interest-free shareholder loans have been excluded from APT rules, which City said was unfair. Their argument is that this distorts profitability and sustainability (PSR) calculations because an interest-free loan cannot be a fair market value. The tribunal agreed with them.
In theory, this means that if interest-free shareholder loans are included in PSR, many clubs will have to rebalance their books to avoid a breach.
Arsenal owe more than £200 million to their owner, Stan Kroenke (right) (Glyn Kirk/AFP via Getty Images)
In June, a 165-page legal filing was seen by the British newspaper The times showed City claiming they had been “discriminated against” as a result of the league’s APT rules, claiming they amounted to a “tyranny of the majority”. Premier League rules require a majority of fourteen clubs to agree to the introduction of new rules.
Premier League clubs voted in favor of temporary measures regarding APT in October 2021. That came after the Saudi Arabian Public Investment Fund (PIF) took control of Newcastle United earlier that month. In December 2021, it was ruled that clubs must submit all sponsorship deals worth more than £1 million ($1.26 million) to the Premier League to decide on the possibility of an APT – despite opposition from City and Newcastle.
These rules were then tightened in February 2024 following another vote among clubs, who voted in favor of a framework under which all APTs are subject to a fair market value test, meaning any deal would have to be financially justified for all parties.
There were previously concerns that owners could use multiple companies under their jurisdiction to enter into sponsorship deals that would artificially inflate their own revenues and circumvent PSR rules.
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However, the APT rules saw Newcastle subject its sponsorship deals with PIF-linked events company Sela and e-commerce company Noon to market value tests.
It also applies to any sponsorship deals between City and other groups linked to the club’s City Football Group (CFG) ownership. City have always voted against or abstained from introducing APT rules at Premier League meetings.
In 2022-2023, City recorded record Premier League revenues of £712.8 million (now ¢953 million), of which almost half – £341.4 million – was commercial revenue.
Much of City’s revenue came from companies linked to CFG. Etihad, the state airline of the United Arab Emirates, is the main sponsor of both City’s shirt and stadium.
Etihad Airways has been City’s main shirt sponsor since 2009 (Stu Forster/Getty Images)
Leicester City is also involved in the APT rules. Their CEO and chairman, Aiyawatt Srivaddhanaprabha, also controls the King Power company, which is the main sponsor of the club’s shirt, stadium and training kit.
However, City and Newcastle’s close ties to state investment give them a wider network of related businesses – which is why rival Premier League clubs have mobilized to close the loophole.
UEFA also has its own market value test. City’s lawsuit does not address these laws and the club will still have to comply with them in European competition.
The Athletic will bring you a full breakdown of the decision and its implications in the near future.
(Top photo: Visionhaus/Getty Images)
