Tribunal Makes Ruling On Manchester City’s Case On APT Rules

An Arbitration Panel has ruled that the Premier League will continue using its Associated Party Transaction (APT) Rules, following a legal challenge initiated by Manchester City FC. The decision marks a significant ruling regarding the application and legality of the APT system.

The Premier League welcomed the Tribunal’s findings, which affirmed the purpose, framework, and decision-making behind the APT Rules. The Tribunal upheld the overall necessity of the APT system, rejecting most of Manchester City’s arguments, while also acknowledging that the Rules are essential for the League’s financial oversight to be effective.

This ruling provides a detailed evaluation of the APT Rules, which aim to prevent clubs from gaining unfair financial advantages through commercial deals or cost reductions that are not at Fair Market Value (FMV) due to relationships with associated parties. The system was introduced to protect the financial stability and competitive fairness of the Premier League.

However, the Tribunal did identify a few minor elements of the Rules that do not comply with competition and public law standards. These elements, which can be easily adjusted by the League and clubs, do not affect the broader application of the APT system.

Despite some required revisions, the Premier League will continue to operate the APT framework while considering the Tribunal’s conclusions. Although the Arbitration process remains confidential, a redacted version of the decision will be made public, with only sensitive information being withheld.

Competition Law

Manchester City challenged the legality, structure, and implementation of the APT Rules in their entirety. The Tribunal dismissed the majority of these challenges, affirming that the APT Rules serve a legitimate purpose and were designed to ensure the effectiveness of the Profitability and Sustainability Rules (PSR), which maintain the integrity of the League. The Tribunal highlighted that the PSR could not function effectively without the APT system, particularly its ability to reassess transactions.

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Significantly, the Tribunal noted that the previous system, which relied on identifying related party transactions in audited accounts, failed to control APTs adequately. The transition to a system that evaluates transactions at the time of occurrence was deemed necessary.

What the Tribunal upheld

The Tribunal agreed with the Premier League that if the price of an APT is not at FMV, it would distort competition as the club would effectively receive a subsidy. It also found that the APT Rules provide clear criteria for determining FMV and that the assessment process is transparent, defined, and non-discriminatory.

The argument that the APT Rules were intended to discriminate against clubs with Gulf region ownership was rejected by the Tribunal.

However, two of Manchester City’s claims were supported by the Tribunal which include the exclusion of Shareholder loans from the APT Rules should not be maintained. The Tribunal also found that amendments made to the APT Rules earlier in the year, including the removal of the word “evidently” and shifting the burden of proof to clubs, could lead to inappropriate restatements of APTs. These elements must be revised to comply with competition law.

Manchester City also questioned the procedural fairness of the APT Rules, both in their structure and in their application to specific transactions involving the club. The Tribunal largely ruled in favor of the Premier League, noting that the APT Rules were the product of careful negotiation among clubs, and the use of an independent assessor ensured fairness in the FMV process.

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The Tribunal rejected Manchester City’s claim that they should have unrestricted access to the Databank during FMV assessments and dismissed concerns of bias within the League’s Regulatory Team.

However, the Tribunal did rule in Manchester City’s favor on one issue which is: The Premier League Board must provide clubs with Comparable Transaction Data used in FMV assessments before making final determinations, not just at the appeal stage.

Application of the Rules to Manchester City Transactions

The Tribunal also reviewed two specific Manchester City commercial transactions, which had been found by the Premier League Board to be evidently not at FMV. The Tribunal dismissed most of Manchester City’s challenges, affirming that the Board had conducted the assessments thoroughly and applied the appropriate legal standards. However, the Tribunal did note that certain information should have been provided to Manchester City earlier in the process, which has since been rectified.

While the Tribunal acknowledged that the FMV assessments could have been completed more quickly, it recognized that delays were due to operational constraints that have since been resolved.

As a result of the Tribunal’s findings, the APT Rules will be updated to include assessments of Shareholder loans and correct the recent amendments to ensure full compliance with competition law. Otherwise, the APT system remains a vital component of the Premier League’s financial oversight, safeguarding the integrity of the League’s Profitability and Sustainability Rules.