Three predictions about the APT case at Man City

Manchester City’s hearings into 115 alleged breaches of Premier League financial rules have only just begun, but the outcome of another landmark case will soon be announced.

City have taken action against the Premier League over its related party transactions (APT) rules, which were introduced in December 2021 after Saudi Arabia’s Public Investment Fund bought Newcastle United.

The APT rules prevent clubs from entering into excessive sponsorship deals with parties linked to the owners – or parties associated with them – and ensure that transfers between teams within a multi-club structure are made at a fair market value.

The league’s handbook states that the APT rules aim to “ensure the financial sustainability of clubs in the long term by ending dependence on higher commercial revenues from companies linked to the club’s ownership and ensuring fairness among clubs”.

But City clearly disagrees. According to a 165-page legal document that The timesCity described the APT rules as “tyranny of the majority” and “discrimination” and demanded damages for “losses suffered as a result of the illegality of the rules”.

Three possible outcomes of Man City’s APT case

Perhaps the most significant aspect of this case is that Manchester City is taking legal action against the Premier League, not the other way around.

Given that the Premier League effectively consists only of its 20 member clubs and shareholders, this can be seen as an attack against many other top clubs who voted for APTs and against the competition as a whole.

As football finance expert Dr Rob Wilson explains, there are three possible outcomes in this case: a City win, a Premier League win, or a mixture of both.

“I guess if you look at both ends of the spectrum, City could win their challenge, which would allow APTs to take place in the Premier League, which I think is anti-competitive,” says Wilson I“A football club should be able to survive financially without artificial financing by generating its own revenues and commercial deals.”

“If the Premier League wins, that will be good news for them and the members who voted for APT – it will help the competitive integrity of the league because you shouldn’t be getting clubs to invest through connected parties.”

“I suspect they will probably agree to disagree and that the Premier League will go to its members to re-draft the APT regulations.”

Since this is a private arbitration and not a court hearing, this is entirely possible. Since this is a private arbitration, the result does not have to be made public, although this seems highly unlikely.

An “agree to disagree” deal will likely allow the rules to be changed and voted on by Premier League clubs. 14 clubs would need to support the changes for them to be adopted.

In that case, says Wilson, “Manchester City will say we have forced the Premier League to rethink its approach to APT and that gives us hope for a freer and more open competition.”

“The Premier League will be able to say we will change the rules in line with current events and issues, just as the football ecosystem needs to work.”

“I suspect that’s the most likely outcome – neither side loses, which is usually the point of a mediation process. I’m pretty sure they’ll end up somewhere in the middle.”

How the APT case against Man City affects the 115 charges

Although City’s two ongoing legal proceedings are not directly linked, there are connections.

Read more

“Some of the allegations that have been made against City, when boiled down to the bare bones, are transactions routed through connected parties and then paid to City, possibly excessive sponsorship payments or unregulated APTs,” Wilson explains.

Many of the 115 charges against City relate to alleged incidents that would now breach APT rules, although allegations of deception and misinformation relating to financial reporting further complicate the case.

However, if the hearing concludes that the APT rules are illegal, as City claims, it could put the UAE-based club in a stronger position and allow it to avoid serious penalties for some of its alleged financial misdeeds.

“I don’t think it would have a direct impact on the case itself, other than that it could affect what might happen next,” Wilson says.

“City could be found guilty, but then the next version of the APT regulations could allow them to do what they are accused of, legitimately through the regulations. City would get pretty pissed about that.”

What Man City’s APT case means for the Premier League

Although the 115 charges against City are considered the football legal case of the century, it is fair to say that their APT challenge could be just as significant – if not more so.

Allowing APTs without restrictions could fundamentally alter the balance and competitive spirit of the league, allowing teams and owners to artificially inflate their expenses by investing through related parties.

Wilson says Newcastle would clearly benefit due to its ownership of the PIF, but some of the league’s biggest clubs could also benefit massively from regulatory changes.

“Chelsea and Manchester United may think we can invest more,” Wilson adds. “The biggest danger is that if that happens and some of these big clubs start really throwing money around, it will have a hugely distorting effect on transfer fees and salaries, which would be disastrous for the league and its finances.”

“The Southamptons of the world will either try to compete and go bankrupt, or they will not be competitive because they choose not to invest and they will be relegated. That is why APT is so important as a concept, because you have to limit what the clubs can potentially bring in.”