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An escalating legal fight between the Premier League and its dominant champions, Manchester City, has laid bare simmering tensions among football clubs about the rules that limit spending on players in the sport’s richest competition.
City, which is owned by a member of the Abu Dhabi royal family and which has as its main sponsor the emirate’s state-backed airline Etihad, has challenged rules governing associated party transactions — commercial deals between a club and an entity deemed to have links to its owners.
News of the move follows a season in which two Premier League clubs, Everton and Nottingham Forest, were docked points for exceeding permitted losses, while Leicester City faces the prospect of being punished for similar offences when it returns to the division this summer.
For the growing number of professional investors involved in English football, capped spending is seen as vital to creating a sustainable business model and a thriving competition. Many clubs believe the mechanisms in place are not working but they are deeply divided on what should be done about it.
Some owners feel that the league’s rules have gone too far and disproportionately penalise ambitious clubs seeking to narrow the gap with the elite. Others argue that without tighter regulation, clubs will keep losing money while state-linked teams such as Manchester City, which recently notched up a record fourth consecutive Premier League title, become ever more unassailable on the pitch.
The split over spending rules adds to a list of challenges facing Premier League chief executive Richard Masters and chair Alison Brittain, who are also dealing with the prospect of a new independent football regulator, pressure to send more money down to lower leagues and a slowdown in the domestic market for broadcast rights that has powered revenue growth for the past 30 years.
At the league’s annual meeting this week in Harrogate, clubs agreed to trial two new approaches to financial regulation. The squad cost rule will limit spending on players to 85 per cent of revenue, while “anchoring” will link the amount any club can spend to the income of the bottom-ranked team. Both will be tested next season in tandem with existing profit and sustainability regulations.
This year’s AGM took place two days after news broke that City had launched its legal challenge. The club claims that the current APT rules are anti-competitive and says the system requiring 14 of the league’s 20 clubs to agree on rule changes amounts to a “tyranny of the majority”, according to details of the legal complaint first reported by The Times.
Neither the league nor the club has commented on the matter.
The move to challenge the rules through an arbitration system, unprecedented since the Premier League was formed more than 30 years ago, comes ahead of a separate hearing in the autumn on 115 charges laid against City by the league last year. Among the accusations is that the club declared inflated sponsorship deals in order to spend more on players. City denies the charges.
In a video interview published on City’s website on Wednesday, chair Khaldoon Al Mubarak said the allegations were “always frustrating”.
“We, as a club, have to respect that there’s a process we have to go through and we are going through it,” he added. “It is taking longer than anyone hoped for, but it is what it is.”
A top executive at a rival Premier League club warned that if successful, City’s complaint would create a two-tier system within the Premier League, with a small group of teams free to soak up cash from related sponsors and vastly outspend rivals. “It’s time for the league to wake up,” the person said.
One senior figure in English football said City’s legal move appeared to be a long shot attempt to undermine the league’s entire financial rule book ahead of the autumn hearing, at which an independent commission will decide whether City breached regulations over a nine-year period. A shareholder at another rival club viewed City’s challenge as an effort to “weaken the Premier League’s resolve” ahead of the case.
Several Legal experts and football executives said they did not expect City’s case against the league to be successful.
Premier League rules are dictated by its clubs, and the current regime was agreed by a vote in 2021 — largely to prevent Newcastle United from being flooded with sponsorship money from Saudi companies after its takeover by the country’s Public Investment Fund. “This is more about bluster and headlines”, said one sports lawyer.
A board member at a top tier club welcomed the fact that the dispute was coming out into the open, and said the league’s push for new financial rules over the past two years had been slowed repeatedly by the fear of exactly this kind of legal challenge.
“They’ve been threatening to do this forever”, the board member said. “This is a step too far.”
