'Both sides can claim victory' - Man City legal case explained

Manchester City are the Premier League champions

Manchester City's legal case against the Premier League over rules on commercial deals involving clubs' owners has come to an end with a tribunal delivering its verdict.

Two aspects of the club's complaints about the associated party transaction (APT) were upheld - but many of them were not.

This case is not directly related to the Premier League disciplinary commission which will hear 115 charges against City for allegedly breaching its financial regulations, some of which date back to 2009.

BBC Sport, with the help of two legal experts, has a look at some of the ramifications.

What was the ruling?

The tribunal - in a 175-page document - ruled that shareholder loans should not be excluded from the scope of APT rules and that some amendments made in February by the Premier League should not be retained.

Those rule changes involved amendments to the definition fair market value (FMV), and shifting the burden of proof to a club to show a transaction is at FMV.

It also found that the Premier League had taken too long to make a decision on some of the values of City's sponsors.

However, crucially, it ruled against Abu Dhabi-backed City's attempts to overhaul the APT rules, agreeing that the rules were necessary.

Who 'won' the legal case?

"I think it’s one of those odd situations where both sides can claim victory," said Simon Leaf, partner and head of sport at law firm Mishcon de Reya.

"Man City can claim victory in the sense that they have been proved right, that yes, generally speaking the rules have been found to be unlawful.

"On the other side, the Premier League will say that these are two very narrow elements of the rules."

Yasin Patel, a barrister practising sports law at Church Court Chambers, said: "Call it a stalemate if you want.

"Ultimately both parties will walk away from here thinking they've got a bit of a bloody nose.

"The Premier League have to look back at the changes of the rules in February that they'd incorporated in the first place, to try to stop things like what’s been happening in terms of sponsorship deals.

"Manchester City would have been hoping that ultimately they could force a few more victories. But in a way it's not gone as far as that."

But Patel added: "The Premier League won't be completely disgruntled and Manchester City will feel quite pleased with the fact they've got some victories."

Who are the losers?

"It’s probably Man City's rivals that are the biggest losers here," said Leaf, who co-authored a chapter on financial regulation in the book 'Football and the Law'.

"What the panel have confirmed is that by not including shareholder loans in the make-up and the consideration of the APT transaction as part of the APT rules, that's how the rules didn't comply with the law.

"Ironically the rules that Man City were looking to challenge didn't go far enough in the fact that they excluded these shareholder loans.

"What that means is that the clubs that are indebted to their owners, their shareholders, they will be scratching their heads and wondering what to do next.

"Actually it will now be harder for those clubs to comply with the rules going forward once those rules are changed."

BBC News sports editor Dan Roan said: "The panel's ruling that the exclusion from the rules of interest-free loans from owners to their clubs, has led to concerns that clubs could now be hit with additional costs that they were not anticipating.

"This could mean some are in danger of breaching profit and sustainability rules. The suggestion is that such loans will now be subject to commercial market rates of interest.

"That could have major ramifications for those clubs that owe tens (or even hundreds) of millions of pounds to their owners."

Will this have an effect on the '115 charges'?

This case is not directly related to the hearing into Manchester City's 115 charges for alleged breaches of the Premier League's financial rules, which began last month.

City were charged and referred to an independent commission in February 2023 following a four-year investigation.

It is alleged City breached the Premier League's financial rules between 2009 and 2018.

"I don't think this will have too much of a direct impact but this will probably give Manchester City a slight bounce because they've been found to be correct in a couple of narrow areas," said Leaf.

"But equally, I think the Premier League will be relieved, especially after the recent Leicester decision where their rulebook was heavily criticised by an esteemed panel."

He was referring to Leicester's successful appeal against an alleged breach of Premier League financial rules - which means they are set to avoid any punishment.

Leicester successfully argued that because their 2022-23 accounting period ended on 30 June, they were not longer bound by Premier League rules - because they had just been relegated to the Championship - and so could not be found in breach.

Leaf added: "The fact that the majority of the Premier League's rules have been found to be lawful and OK will probably come as a relief to them."

BBC Sport's chief football news reporter Simon Stone said: "The fierce manner in which City have responded to the verdict, allied to the knowledge they are currently fighting the substantive issue of 115 financial breaches, suggests they have spotted a weakness in the Premier League’s regulations which they will look to exploit as far as they can."

Could Man City claim damages?

Simon Stone, BBC Sport chief football news reporter

Manchester City could be eligible to claim for damages on earnings lost as a result of the tribunal's findings.

On page 163, it outlines 'declaratory relief, injunctive relief and damages' can be sought.

This, potentially is a financial problem for the Premier League depending on whether City pursue a claim – which they have indicated they will - and what the size of it is.

Will football see more legal cases?

Former Premier Legaue player Lassana Diarra recently won a case against Fifa

This is the second high-profile football case in the past few days.

The European Court of Justice ruled for former France midfielder Lassana Diarra and against Fifa is a long-running battle.

Diarra's legal team challenged some of Fifa's rules after the termination of his contract with Russian club Lokomotiv Moscow in 2014 - and his subsequent difficulties in joining Belgian side Charleroi.

There could be changes to the transfer market as a result.

It also comes just weeks after Leicester's successful case against the Premier League.

"What we're seeing increasingly at the moment is competition law being used as a sword rather than a shield," said Leaf.

"People are using competition law in a way to go after the governing bodies and the regulators and really try to challenge the rules.

"Expect to see more of that. We even saw it last week in the Diarra case again, another completion law case."