In a major legal victory for Manchester City, the Premier League’s rules governing commercial deals between clubs and related companies have been declared unlawful. This ruling, which could have widespread consequences for the entire league, arose after City was blocked from agreeing sponsorship deals with Etihad and First Abu Dhabi Bank (FAB).

An independent panel of three retired judges concluded that the Premier League’s rules did not account for interest-free loans from club owners, which made them unlawful. This decision allows City, majority-owned by Abu Dhabi, to pursue significantly larger sponsorship deals with associated companies and potentially seek compensation from the Premier League.

This ruling has alarmed many of City’s Premier League rivals, as around £1.5 billion of the league’s total £4 billion in borrowing comes from such shareholder loans. Clubs like Arsenal, which relies heavily on shareholder loans, could now find themselves at risk of breaching Profitability and Sustainability Rules (PSR) if these loans are factored into future calculations.

The disputed rules were introduced in December 2021 to prevent clubs from inflating sponsorship deals with companies linked to their owners. These rules, known as Associated Party Transaction (APT) regulations, required deals to be independently assessed for “fair market value.” However, City argued that the rules were discriminatory, aimed at curbing the influence of Gulf-owned clubs like theirs.

While the panel dismissed some elements of City’s claims, it ruled that certain aspects of the APT rules were procedurally unfair and in breach of competition law. As a result, the blocked sponsorship deals with Etihad and FAB were set aside, marking a significant win for City.

This decision has far-reaching implications, prompting the Premier League to call an emergency meeting with all 20 clubs to discuss potential rule changes. For City, this victory comes amid ongoing legal battles, including 115 separate charges related to financial breaches. The club could still face serious penalties, including fines and potential relegation, if they lose that case.

For now, City celebrates a legal triumph that may reshape the financial landscape of the Premier League.

What Now for Premier League Clubs?

Following Manchester City’s legal victory, clubs like Liverpool and other Premier League rivals now face significant uncertainty regarding how sponsorship deals and financial regulations will be enforced. With the APT rules declared unlawful, there could be a shift in how clubs structure their commercial arrangements, particularly those relying on shareholder loans or associated party transactions.

Clubs like Everton and Nottingham Forest, may now question why they alone faced points deductions. With Everton carrying £451 million in shareholder loans, potentially adding £104 million to their PSR calculation, and Arsenal with £258 million in loans, the financial landscape for many clubs has become precarious. The ruling could force a complete rewrite of the PSR system, as simply reverting to pre-existing rules is no longer viable. Clubs relying on shareholder loans may find themselves struggling to meet compliance, leaving little room for player investment. Meanwhile, Manchester City’s challenge to the rules has gained support from clubs such as Everton, Nottingham Forest, and Chelsea, indicating broader dissatisfaction with the current system. The Premier League now faces a complex challenge in rewriting these rules, as any adjustments to PSR calculations could dramatically impact the league’s financial balance.

This ruling opens the door for clubs with wealthy owners, such as City, to secure more lucrative deals, potentially widening the financial gap in the league. As a result, clubs like Liverpool may need to reassess their own strategies for compliance with Profitability and Sustainability Rules while also ensuring they can remain competitive in an increasingly financially liberal environment. The upcoming Premier League meeting will likely focus on how to revise these regulations, leaving clubs in a state of flux until new guidelines are established.

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