Premier League clubs have approved changes to the league's Associated Party Transactions (APT) rules, in what is a blow to Manchester City's dispute against them.
The rules relate to how much revenue teams can bring in from sponsors related to their owners.
City are majority owned by Newton Investment and Development, the investment vehicle of Sheikh Mansour, the vice president and deputy prime minister of Abu Dhabi.
Previously, an arbitration panel had found aspects of the rules unlawful, which the current Premier League champions insisted renders the entire thing “void” until further guidance was offered.
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However a vote held on Friday, November 22 saw reportedly as many as 16 of the 20 English top flight sides opt in favour of updates to the rules, with City and Aston Villa the only two clubs vocal enough to be confirmed as voting against.
So, will this have any impact on the separate case that went before an independent panel last month concerning City's alleged 115 breaches of Premier League rules?
What happened in the Premier League APT vote?
Multiple sources are reporting that the vote, which needed 14 of the 20 Premier League clubs to vote in favour of APT rule updates in order to pass, resulted in 16 votes in favour.
Manchester City and Aston Villa's public comments on the situation meant many believe they were two of the four that voted against.
Talksport reports that the identity of the four votes against is believed to be: City, Villa, Nottingham Forest and Newcastle United.
The Premier League explained in a statement: “The amendments to the rules address the findings of an Arbitration Tribunal following a legal challenge by Manchester City to the APT system earlier this year.
“The Premier League has conducted a detailed consultation with clubs - informed by multiple opinions from expert, independent Leading Counsel - to draft rule changes that address amendments required to the system.
“This relates to integrating the assessment of Shareholder loans, the removal of some of the amendments made to APT rules earlier this year and changes to the process by which relevant information from the League’s ‘databank’ is shared with a club’s advisors.
"The purpose of the APT rules is to ensure clubs are not able to benefit from commercial deals or reductions in costs that are not at Fair Market Value (FMV) by virtue of relationships with Associated Parties.
"These rules were introduced to provide a robust mechanism to safeguard the financial stability, integrity and competitive balance of the League.”
Premier League APT rules: the backstory
APT rules were first introduced in December 2021, two months after Saudi Arabia's Public Investment Fund completed its majority takeover of Newcastle United.
Updates introduced in January of this year put the burden of proof on clubs to show that their sponsorship deal represented fair market value (FMV). The panel agreed with the club's assertion that elements of these amended rules were contrary to UK competition law.
The panel comprised of Sir Nigel Teare, Christopher Vajda KC and Lord Dyson, ruled that City's proposed new sponsorship deals with Abu Dhabi's national carrier Etihad Airways and First Abu Dhabi Bank, were unfairly blocked.
That did not mean, however, that these sponsorships would necessarily be waved through at the levels City hoped. The panel found against the Premier League in terms of procedural unfairness in these instances, rather than directly disputing its benchmarking analysis.
This aspect of APT rules was always expected to form a central plank of the case. The element relating to shareholder loans is more unexpected and potentially far more significant.
City successfully argued that the Premier League's APT rules were unlawful as they did not take interest-free loans from shareholders into account. Several owners in the Premier League use this a means to inject money into their clubs.
The loans typically have a flexible repayment date and are low-interest or interest-free. The relevant passage from the panel's verdict is below.
We refer again to the Written Opening Submissions of the PL which state that 'owner funding, like state aid, is subsidisation. That is particularly so when other sources of external funding are not permitted.' We agree with that statement.
The whole point of the PSR is to ensure that no club is able artificially to inflate its income or reduce its costs. In our view, having regard to the economic and legal context and the objective of the APT Rules, to permit owner funding via shareholder loans that are not at FMV, while subjecting other forms of funding to the FMV test, is a clear distortion of competition between clubs.
The distortion of competition occurs regardless of whether the distortion arises from a non-FMV transaction with an owner or a related party. Thus, we conclude that the shareholder exclusion amounts to a sufficient degree of harm for it to be categorised as a restriction of competition by object.
Everton led the way with £451m in owners debt in 2022/23 (as per the Swiss Ramble), with Brighton (£373m), Arsenal (£259m) and Chelsea (£146m) next on the list
If these loans were assessed at commercial rates for Profit and Sustainability Rules (PSR) calculations, it would leave several clubs potentially in breach.
What does this mean for Man City's 115 case?
On the face of it, not a lot, given these are two entirely separate cases.
The hearing over allegations City breached multiple financial rules over a nine-year period before failing to cooperate with the Premier League's investigation began in London earlier this year.
The 115 case is about whether City brazenly flouted rules it signed up to, whereas the APT case has seen the club attempt to redraw current and future rules in a more favourable manner.
Ultimately, this is all supposition at best. The bare facts are that these are two separate cases and the one that can inflict potentially seismic damage upon the Premier League's serial champions is yet to be decided.
