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City win legal battle with Premier League

A legal; ruling is seen to favour Manchester City over the Premier League, although the league also sees it as a victory losing on just some points of detail and says it will continue with business as usual: https://www.premierleague.com/news/4144828

The key facts are:

·         Rules deemed unlawful because they did not take into consideration interest-free loans from shareholders to clubs

·         Likely change in the regulations could lead to City striking more lucrative deals and seeking damages from the Premier League

·         Clubs with high levels of borrowing now in danger of breaching Profitability and Sustainability Rules

·         Arsenal, City’s title rivals, have borrowing of more than £200million made up entirely of shareholder loans

·         Premier League’s stance was backed by Arsenal, Manchester United, Liverpool, West Ham United, Brentford, Bournemouth, Fulham, and Wolverhampton Wanderers

Manchester City have inflicted a potentially damaging defeat on the Premier League after the rules governing commercial deals between clubs and related companies were declared unlawful.

In a landmark decision that could have huge ramifications for England’s top flight, it was ruled that City were unfairly blocked from agreeing two huge sponsorship deals this year, with Etihad and First Abu Dhabi Bank.

The Premier League will now invite all 20 clubs to an emergency meeting next week to discuss the extent to which it will need to change its rules as a consequence of the judgment (which suggests it is not small beer).

The legal decision opens the door for the English champions, majority-owned by Abu Dhabi, to strike significantly higher sponsorship agreements with associated parties than previously allowed — including with Etihad, their stadium and shirt sponsor — and to pursue compensation and costs from the Premier League for abusing its position. Other clubs could also now seek damages should they believe they have been impacted.

An independent panel of three retired judges concluded that the rules were unlawful because they did not take into consideration interest-free loans which shareholders lend to clubs. The decision will spark huge concern among a number of City’s Premier League rivals — who rely heavily on such loans — and is likely to lead to the rules being changed.

The panel states that, of the £4billion in total borrowing across the Premier League, £1.5billion is in loans from club owners and shareholders. If the rules are altered and commercial loan rates are now applied to these interest-free loans and have to be included in a club’s profitability and sustainability calculation, many clubs could find they are in breach of Profitability and Sustainability Rules (PSR).

City had argued that such payments were unfair and not at market value because they were interest-free and, in some cases, did not have to be repaid at all. For a club such as Arsenal, with borrowing of more than £200million made up entirely of shareholder loans, that is a potentially seismic development.


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