Man City launch legal action over financial rules

Manchester City are challenging Premier League rules about sponsorship deals signed with companies linked to clubs

Manchester City are due to face the Premier League in a legal battle over the organisation’s commercial rules next week.

BBC Sport understands an arbitration hearing surrounding the legality of the league’s associated party transaction (APT) rules, which determine whether sponsorship deals are financially ‘fair’, has been set for 10-21 June.

In February, BBC Sport reported the Premier League was being threatened with legal action over changes to its rules.

It has been disclosed to the remaining Premier League clubs that City are the club in question, with the league offering the remaining 19 members the opportunity to make witness statements as part of the case.

Neither the Premier League nor Manchester City have responded to requests for a comment on the case.

What are the rules that City are challenging?

The rules regarding APTs are aimed at clubs signing sponsorship deals with companies linked to their owners.

They were tightened following a vote by Premier League clubs in February.

It means that any such sponsorship deals have to be at a fair market value and not artificially inflated. If there were no such rules then clubs could agree sponsorship deals as high as they wanted with no challenge, which would increase the amount they could spend under Profit and Sustainability rules (PSR).

At the time, the Premier League said the move would "enhance the efficiency and accuracy of the system".

PSR rules permit clubs to lose a maximum of £105m over three years.

Did all the clubs support the rule change?

No. The rule changes - raised initially amid concerns surrounding Newcastle’s takeover by the Saudi Arabian Public Investment Fund - were first voted on in November and were rejected.

Although the February vote received the required minimum 14 votes to be passed, it is understood the vote among shareholders was not unanimous.

Is this linked to City’s 115 charges?

Technically no. This action is a direct consequence of the Premier League tightening its rules around APTs.

However, it does come a matter of months before a Premier League disciplinary commission will hear 115 charges against City for allegedly breaching its financial regulations, some of which date back to 2009.

Some of those charges relate to amounts paid to City by sponsors linked to Abu Dhabi.

The club have always strenuously denied the charges and say they are supported by a "body of irrefutable evidence".

What have City said?

The Times says it has seen a 165-page legal document in which Premier League champions City claim they are victims of "discrimination", that the amended rules were approved by rivals to "stifle" their success on the pitch, and call it "a tyranny of the majority".

The paper also reports that in addition to the challenge to the rules, City are also claiming damages.

How big a deal is this?

The legal challenge to the Premier League's commercial rules cannot be overestimated in terms of importance.

Quite apart from the fact it has put member clubs on different sides, by definition, if City win, the concept of the Premier League being able to analyse commercial deals for 'Fair Market Value' would be undermined.

That would mean associated parties - companies with links to clubs - could put in sponsorship deals as high as they wanted with no challenge, thus raising the amount available to spend under PSR rules.

Beyond that, it would call into question the validity of some of the rules, albeit historic, under which City are being charged by the Premier League in the case that is scheduled to take place in the autumn.

In addition, City are challenging the Premier League rule that 14 clubs have to agree to something before it can be made into a regulation - scrapping VAR at Thursday's annual meeting for instance.

The outcome will be fascinating. The fact the hearing will last two weeks and is taking place in private means it is not entirely clear when - or how - we will find out what has happened.