Manchester City’s legal dispute with the Premier League has put the £900million funding deal for the EFL at risk.
As The Times revealed on Tuesday, City have launched an unprecedented legal action in a bid to scrap rules that limit how much companies linked to club owners can pay them in sponsorship. Their case will be heard at a hearing starting on Monday and is expected to last a fortnight.
Many rival clubs fear that if City are successful it will have a devastating impact on the competitiveness of the Premier League because teams with the greatest access to sponsorship funds from linked companies will gain a huge advantage in the transfer market. Between ten and 12 clubs have provided letters or witness statements in support of the Premier League’s defence of its rules.
Now The Times can reveal that senior Premier League club sources are also citing
City’s legal claim as one factor in their failure to agree on a deal vital to the financial future of the 72 clubs in the three divisions below the Premier League, despite pressure from the government and a new £6.7billion top-flight domestic broadcasting deal.
They say they are reluctant to commit extra funds to the EFL if the financial rules limiting spending in the Premier League are deemed unlawful. “If we have to spend more to even try to keep pace with clubs like City, we might need to hold on to that money,” one prominent Premier League source said.
As the fallout continued over City’s legal attack on the Premier League, which includes a claim for damages and describes the present system as a “tyranny of the majority” based on “discrimination” towards clubs from the Middle East, The Times can now disclose further details of the civil war in English football’s top flight:
• Some clubs may pursue compensation claims totalling more than £1billion against the English champions if they are found guilty of any or all of 115 Premier League charges for breaches of financial regulations. The clubs have sought legal advice and could pursue what they call “placing claims”, meaning compensation for not finishing above City in the league. The 115 charges are due to be heard at separate hearing in November; City deny any wrongdoing relating to the charges.
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There is an appetite among some clubs for the independent tribunal hearing the case concerning the 115 charges to not only sanction City with a heavy points deduction but also apply rules that enable the league to expel a club from membership. Clubs have no real desire to see City stripped of previous titles (they have been champions eight times since 2011-12), but they do expect an appropriate level of punishment should there be a guilty verdict.
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Clubs are furious with City for launching this claim against the Premier League when, The Times can reveal, in November 2021 City initially approved recommended changes to the same Associated Party Transactions (APT) rules they are now claiming are unlawful and anti-competitive.
Next week’s hearing has huge implications for the English game, with the potential impact extending to EFL clubs still sweating on extra Premier League funding that many consider vital for their own survival. EFL clubs are hoping to receive an extra £150million per season over six years from the Premier League under the so-called “New Deal For Football”, in addition to the existing £110million in solidarity payments and £40million in youth development funding. But the negotiations among top-flight clubs collapsed in March, only a few weeks after City filed their claim against the Premier League on February 16.
Kevin Plumb, general counsel for the Premier League, notified clubs of City’s claim on March 1, and by mid-March it had emerged that they had failed to agree on a new funding package for the EFL. It was reported that as many as ten clubs opposed the new deal for the lower divisions.
It did represent a dramatic shift. In January the Premier League’s chief executive, Richard Masters, had told a parliamentary committee he had been assured that “the vast majority of clubs want to do a deal, provided it’s right for both parties”.
The Premier League’s board then emerged from a meeting on February 29 hopeful that an agreement could be reached. Plumb’s letter landed the next day, however, and by the emergency meeting on March 11 the clubs were said to be hopelessly divided on a new deal.
Indeed it was reported at the time that clubs had argued that they first needed to resolve issues with the Premier League’s Profitability and Sustainability Rules. It now appears the situation with City was central to those concerns.
On Thursday, all 20 Premier League clubs will meet in Harrogate for their annual summer meeting, and it is sure to be tense. Many clubs feel they have to work particularly hard to raise extra revenue, staging music concerts and alternative sporting events in the closed season. At the same time, they question how rules that demand that sponsorship deals are of a fair market value are stifling a club such as City when they recently celebrated a record fourth consecutive Premier League title.
They also note City’s soaring commercial revenue since the Abu Dhabi takeover in 2008. It has risen from about £22million in the season before Sheikh Mansour bought the club to £340million in their most recent audit — just shy of Real Madrid at the top of world football’s money league.
Some clubs suspect next week’s hearing was scheduled for June because City are keen to secure further sponsorship income before the start of next season, while noting that a delay until November for the hearing into the 115 charges means City would have already embarked on another Champions League campaign.
They also point to the fact that City were initially in favour of the sponsorship rules. According to documents seen by The Times, City were among 19 clubs who approved the 17 recommendations set out for new APT rules on November 11, 2021. The one abstention was Newcastle United, who had been the subject of a recent Saudi Arabia-led takeover.
In the meeting that followed on December 14, however, both City and Newcastle United voted against the new APT rules, with the other 18 in favour.
City published an interview with their chairman, Khaldoon Al Mubarak, on Wednesday in which he said he was frustrated by the 115 charges hanging over the club.
In the interview, which was recorded before The Times revealed details of their legal action against the league, he said of the 115 charges: “Of course, it’s frustrating. I think the reference is always frustrating. Having it being talked about the way it’s being talked about, I can feel, of course, for our fan base, for everyone associated with the club, to have these charges constantly referenced.
“We as a club have to respect that there’s a process that we have to go through, and we’ll go through it. It’s taking longer than anyone hoped for but it is what it is. I hope there’s a bit more sensibility in regulating, [that there is] always a balanced approach.
“This is good for all the leagues, be it in England or the rest of Europe. I think you won’t see the same level [of transfer spending] as we’ve seen in the past few years because of the level of regulations that have come into place over the last 12 months.”