Financial Fair Play / Profit & Sustainability - Some Associated Party Transaction Rules Found to be Unlawful in Man City vs. Premier League Case

[Jackie Broon]

I've skimmed though the decision in more detail. Here's some stuff I've gleaned that's not apparent from the summary.

 

The bad:

 

In relation to whether the changes to the rules were unfairly targeted at gulf state own clubs and unfairly made in response to our takeover, they found that was not the case and it was appropriate for the PL to change the rules.

 

They fundamentally found that the PSR and APT are lawful in principle in terms of competition law. This seems to make it unlikely that PSR and APT are going anywhere.

 

The good:

 

The amendments to the APT rules were found to be unlawfully anti-competitive pretty much in their entirety (other than around changes to deadlines for making FMV decisions). The changes in the wording and reversal of the burden of proof from the PL to the club was found to be unlawfully anti-competitive.

 

Basically, PSR and APT are here to stay but Man City did exactly what they set out to do, get rid of the amendments to the rules, and as a bonus they fucked over some of their main rivals with the shareholder loans stuff.

 

[Colos Short and Curlies]

4 minutes ago, Jackie Broon said:

I've skimmed though the decision in more detail. Here's some stuff I've gleaned that's not apparent from the summary.

 

The bad:

 

In relation to whether the changes to the rules were unfairly targeted at gulf state own clubs and unfairly made in response to our takeover, they found that was not the case and it was appropriate for the PL to change the rules.

 

They fundamentally found that the PSR and APT are lawful in principle in terms of competition law. This seems to make it unlikely that PSR and APT are going anywhere.

 

The good:

 

The amendments to the APT rules were found to be unlawfully anti-competitive pretty much in their entirety (other than around changes to deadlines for making FMV decisions). The changes in the wording and reversal of the burden of proof from the PL to the club was found to be unlawfully anti-competitive.

 

Basically, PSR and APT are here to stay but Man City did exactly what they set out to do, get rid of the amendments to the rules, and as a bonus they fucked over some of their main rivals with the shareholder loans stuff.

 

Surely APT and PSR are only here to stay if the shareholder loans is brought into its scope.

 

if that is too unpalatable for the premier league to do then PSR may well go the at of the dodo and they’ll just rely on the UEFA rules doing its job for them, maybe with a spending cap.

 

or alternatively they change the rules to accommodate shareholder loans but raise the PSR losses to allow the change to happen with no detrimental impact this season on those with big loans. A scenario of course that benefits us

[GideonShandy]

Usually don't have much time for Martin Samuel -- the bloke who scoffed at us for "missing a trick" when we appointed Eddie Howe and not Stevie Gerrard -- but this is worth reading.

 

Unlawful, unlawful, unlawful, unfair, unfair, unreasonable, unreasonable. The seven conclusions of the arbitration panel governing Manchester City’s case against the Premier League make for sobering reading. Yet, even sober, the hangover is going to last a very long time.  It is not just Associated Party Transaction (APT) rulings that must now be revisited — this decision made them obsolete and unusable overnight. The whole concept of Profitability and Sustainability Rules (PSR) is also in the bin, now that shareholder loans, too, are to be judged related-party deals.

That is City’s big win, in many ways their payback. Their accusation was that the league and its members acted like a cartel by introducing rules specifically intended to curb the potential of a minority of clubs. They pointed out that many clubs benefited from interest-free shareholder loans. If that wasn’t a related-party transaction, they argued, what was? And because the arbitration was carried out by serious people, who listen to reason and logic, they agreed.

Imagine if every loan given to a club by one of its owners was charged, as is standard, at between 8 and 10 per cent, if it could be obtained at all? We would be looking at PSR failings across the board. And now we are. Wrapped up in legalese is a seismic verdict for football. It doesn’t mean that clubs can do what they want — there will still be financial regulations, although there are precious few right now, however the Premier League may wish to spin it. What it does mean is that these cannot be tailored to negate the growth of Newcastle United, City or any specific club.

On page seven, the panel deal with what is termed “the consultation with clubs which led to the adoption of the APT rules in December 2021” and hears from Jamie Herbert, the Premier League’s director of governance. “Mr Herbert gave evidence that the PL had been considering the need for amendments to the PSR over a period of years. This evidence was challenged by MCFC [Manchester City]. However, it is agreed that there was no evidence of any formal initiative before the Autumn of 2021 to amend the PSRs in the manner in which they were amended in December 2021. In other words, they cooked it up based on what most clubs wanted. There were no commissioned studies, no in-depth research of a type that would suggest change was always on the cards. Herbert talked of discussions about rule changes dating back to 2018. Maybe there were. But clubs talk all the time.

The fact is, these talks suddenly escalated and only became formalised when Newcastle were bought by the Public Investment Fund (PIF) of Saudi Arabia and it was feared they could receive huge investment, becoming more competitive. City argued from their own perspective but the desire to limit competition, the anxiety caused by Newcastle’s takeover, was very much at the heart of this.

“The tyranny of the majority,” City argued, and everybody sneered. It’s called democracy, they chorused. Well, yes and no. First past the post is democracy too, yet the tyranny of the majority is why your vote will never count if you are a Labour voter in a safe Conservative seat, or vice versa. That’s what John Stuart Mill wrote about in On Liberty. The pursuit of majority interest at the expense of a minority faction. So when the PIF bought Newcastle in October 2021 and almost instantly the Premier League began adjusting its rulebook — an email on the subject to the league from a club official specifically mentioned “the Gulf region” and was dated October 12, five days after the takeover — that’s the tyranny of the majority in action. AKA: a carve-up.

And we later read that the panel believed this official when, as a witness, he or she insisted Gulf-owned clubs were not the target. They believed the assertion that this intervention could just as easily have been discussing an “American consortium who had links to lots of American companies”. Except there are already quite a few American consortiums with links to lots of American companies in the Premier League, and the email didn’t mention them. It referenced the Gulf. “The takeover of Newcastle United heightened . . . concerns again and encouraged the clubs to seek action,” the witness admitted. Even so, the same email would have been sent had the worry related to Americans. It’s just that it wasn’t. It was sent five days after a Saudi takeover.

It’s the ruination of football, the destruction of the English game, that will be the argument. No, it’s not. City’s dominance is still scheduled to end pretty much the year Pep Guardiola walks out the door. Once the rules are redrafted, as they surely will be, City won’t be able to just claim what they like in sponsorship revenue. No club will. There will still be fair market value standards that have to be met, unless the system is entirely abandoned, which seems unlikely.

Yet the big change comes because the arbitration panel found that while APT regulations would be legal if applied in a non-discriminatory manner, Premier League rules excluded from the fair market value process some forms of financing by parties connected to a club. It means that in the future, the Premier League would have to regulate all forms of financing provided by shareholders and related parties, including sponsorship deals and loans, but also softer arrangements such as guarantees or equity investments. The calculation would be on the same terms available from a third party unconnected to the club and could even assess whether a club with a poor credit rating — one imagines Everton’s isn’t so hot right now — would be able to find a lender at all.

Equally, who doesn’t love Brighton & Hove Albion? Everyone’s second favourite club. Personal opinion: the best-run in the country. Yet, as of 2023, Brighton held shareholder loans of £302.8million. Charging interest at between eight and ten per cent would put £66-84million on their PSR calculation and will now have to be factored in going forward.

Brighton are a well-run club yet, as of 2023, had more than £300m in shareholder loans

The clue is in the delay. This was a verdict delivered 14 days ago, one that City have been happy to publish since it arrived. The hold up has been at the Premier League’s end. Now they are trying to spin it out further. Clarifications, consultations, all the things a governing body does if it wants to fashion a tight rule book which, as Leicester City found much to their delight, isn’t the Premier League’s style at all. Why? There is another case ongoing involving Manchester City and 115 charges. So the APT decision likely impacts proceedings elsewhere. If the League can bog this down in legal process, they hope it won’t weaken their case against City yet further. The Premier League, its rulebook and executives are facing a firing squad but are now asking to inspect the guns to ensure they fit professional standards. What a shower they are.

It is not so much a can of worms as one of those tins of exploding snakes. If shareholder loans should have been part of the PSR equation all along, Everton and Nottingham Forest may wonder how they, alone, suffered points deductions. The Premier League can’t even simply revert to a time before the APT update, because now calculations around shareholder loans are unavoidable. So there is no simple reset button, no back-to-factory-mode setting. The parameters around PSR will have to be rewritten, if the system is not to be scrapped.

The drawing board does not have a mark on it. Everton, for instance, have £451million in shareholder loans, equating to as much as £104million on their PSR calculation. Arsenal have £258million, working out to a potential addition of £62.5million. At best it collapses the market around English football, at worst it puts some of the league in breach, or with vanishingly small sums to invest in player acquisition. There would be more asterisks attached to the league table than there are presently flying around boardrooms, as owners begin to study the 175-page adjudication and consider its implications. Although not all of them. The idea City are out on a limb is inaccurate too. The club believe they have the support of at least six others in their actions — Everton, Nottingham Forest, Aston Villa, Chelsea, Leicester City and Newcastle. Others may be recruited if the Premier League attempts to keep the rules as they are with the odd tweak and adjustment.

Who will vote for a flawed system that might now impinge, and quite brutally, on finances? Adjust any PSR calculation by tens of millions and see how much is left for investment. And if the rules are unlawful, as stated, how far do we now rewind on PSR calculations involving shareholder loans? How many years must be recalculated? Will there be an amnesty? And what about going forward? At what rate is interest now calculated to alight on fair market value? Would Forest receive the same rate on their £23.4million as Everton would on £451million — if Everton could get such a deal at all?

It’s a mess. Complex, perhaps incalculable. It always was. If Saudi Arabia are trying to get on the map with the Neom City project — estimated cost $1.5trillion — what is it worth to them to bring it to the world on the front of a football shirt or in a stadium naming-rights deal? And how can that investment be measured against Newcastle’s previous sponsors such as Fun88, Wonga or McEwan’s Lager? “This means more” used to be an advertising slogan around Anfield — but sponsorship does, to some companies. And fair market value was always a dubious, debatable concept, for that reason.

Just as profitability and sustainability has always been a counterintuitive aim. Ever since it started, football — indeed all business — has worked on the basis of how much money can be attracted to enhance the chance of glory. It is why there is a National Lottery to fund British Olympic objectives; why Hampshire County Cricket Club have been sold to the owner of the IPL franchise Delhi Capitals.

City’s owners are not the first to throw money at a project and, it is to be hoped, they won’t be the last. Yet PSR behaves as if investment is bad, as if that drive to squeeze every last drop to achieve is actually the problem. Every financial constraint further cements an established elite — and even that wasn’t enough. So new rules were drafted to ward off, and warn off, interlopers.

Yet it was an overplayed hand. It was unlawful, it was unfair, it was unreasonable. And it was three judges, not City, who studied it and saw through it too.

 

[SAK]

@Jackie Broon The burden of proof being switched back to the PL is a big one for me. Disprove a £300m stadium naming rights isn’t FMV for a country that pays nearly the same to a golfer or spends billions on infrastructure projects and wants to advertise that to the world via the club it owns.

[Jackie Broon]

14 minutes ago, Colos Short and Curlies said:

Surely APT and PSR are only here to stay if the shareholder loans is brought into its scope.

 

if that is too unpalatable for the premier league to do then PSR may well go the at of the dodo and they’ll just rely on the UEFA rules doing its job for them, maybe with a spending cap.

 

or alternatively they change the rules to accommodate shareholder loans but raise the PSR losses to allow the change to happen with no detrimental impact this season on those with big loans. A scenario of course that benefits us

 

I doubt the likes of Arsenal would be willing to sacrifice PSR altogether to avoid interest on their loans.

 

I don't know whether UEFA include interest on shareholder loans or not, if not they might also need to consider amending their rules as a result of this.

[Ben]

40 minutes ago, SAK said:

If the PL meeting is to vote in owner loans to be included in PSR calculations as speculated what happens if it fails? For FMV to be lawful owner loans have to be included in the calculations as I understand (correct me if I’m wrong), does that mean APT rules will have to be dropped to stay lawful?

Is the issue not, A. The lack of interest payments on the loans & B. What the money was actually spent on.

 

Bottom line, the 4 clubs in question with the help of a few other tried to change the rules to stop Newcastle. 

 

They obviously rushed the change not thinking that it could have a negative impact on the league, this leads to Man City costing the league £40 million in legal fees and the rules shot to bits. A proper shit show of their own making.

[Colos Short and Curlies]

Reading the Samuel article I don’t see how the rules can/will be changed. There’s too much potential impact/legal battles around what would have happened if the interest was in the calcs 2,3,4 years ago.

 

They have to change /go, I just don’t see how they change

[TheHoob]

Quote

Yet, as of 2023, Brighton held shareholder loans of £302.8million. Charging interest at between eight and ten per cent would put £66-84million on their PSR calculation and will now have to be factored in going forward.

 

 

 

A few of the cuck clubs might have gotten a bit of a shock. 

 

 

Edited 7 hours ago by TheHoob

[jack j]

45 minutes ago, Joelinton7 said:

I don’t like him but actually no, he didn’t say that. 

Aye it's been pointed out to me

Still hate the slimy little cunt with a passion

 

[duo]

2 hours ago, Hudson said:

 

The game has become so corrupt - am convinced as well that VAR is just another tool to control.  

[duo]

18 minutes ago, Colos Short and Curlies said:

Reading the Samuel article I don’t see how the rules can/will be changed. There’s too much potential impact/legal battles around what would have happened if the interest was in the calcs 2,3,4 years ago.

 

They have to change /go, I just don’t see how they change

I don't see how they can't be changed or scraped - it brings some big hitters into breaching PSR now and certainly clips their ability to spend.  If interest free loans have to be added - very few clubs will be able to spend.  As Samuels says the cartel over played their hand and now it's come back to bite them. The more I read the more I am convinced this is huge for us.

[Erikse]

57 minutes ago, Jackie Broon said:

I've skimmed though the decision in more detail. Here's some stuff I've gleaned that's not apparent from the summary.

 

The bad:

 

In relation to whether the changes to the rules were unfairly targeted at gulf state own clubs and unfairly made in response to our takeover, they found that was not the case and it was appropriate for the PL to change the rules.

 

They fundamentally found that the PSR and APT are lawful in principle in terms of competition law. This seems to make it unlikely that PSR and APT are going anywhere.

 

The good:

 

The amendments to the APT rules were found to be unlawfully anti-competitive pretty much in their entirety (other than around changes to deadlines for making FMV decisions). The changes in the wording and reversal of the burden of proof from the PL to the club was found to be unlawfully anti-competitive.

 

Basically, PSR and APT are here to stay but Man City did exactly what they set out to do, get rid of the amendments to the rules, and as a bonus they fucked over some of their main rivals with the shareholder loans stuff.

 

 

Not to be the case that it was "unfairly" targetting? Because it was obviously targeted at us in response to the takeover. That email just confirms it, not that it would be any less obvious without the email.

 

 

Edited 7 hours ago by Erikse

[Jackie Broon]

20 minutes ago, Erikse said:

 

Not to be the case that it was "unfairly" targetting? Because it was obviously targeted at us in response to the takeover. That email just confirms it, not that it would be any less obvious without the email.

 

 

 

 

The judgment found that it was legitimate to change the rules in response to our takeover and the rules not being sufficient at that time to prevent us, and other clubs, from exploiting associated party transactions. It was instigated by our takeover but the arbitration panel found that was acceptable for the PL to do that in the circumstances.

 

 

Edited 6 hours ago by Jackie Broon

[r0cafella]

48 minutes ago, Colos Short and Curlies said:

Reading the Samuel article I don’t see how the rules can/will be changed. There’s too much potential impact/legal battles around what would have happened if the interest was in the calcs 2,3,4 years ago.

 

They have to change /go, I just don’t see how they change

The easiest and most palatable change would be too accept the findings ie shareholder loans need to be calculated with interest and then increase the allowable loses all clubs are allowed. 
 

The problem comes again though because of the new squad cost rules which obviously change all of these calculations. The historic issue of these loans not being included seem like a disaster waiting to happen though but to me one thing is clear. If they want to survive and keep riding the massive gravy train, the cartel behaviour from those big clubs has to stop and they have to get back to finding broad consensus before changing the rules. 

[alexf]

Something that doesn't get talked about much but has been hinted by Eddie on multiple occasions, is this idea that other premier league clubs won't do business with us. 

 

So as we have seen many times with other teams picking up players and doing trades etc that benefit both parties. Eddie has hinted that clubs tend to raise their price when it comes to Newcastle or "don't want to do us any favours". I know this has changed slightly with Forrest but they seem like the only ones.

 

Having read this report about 11 of them conspiring against us, I can totally believe that many of them have bonded together and said don't do business with Newcastle. 

[Zero]

I just got a question, re the shareholders loan. So if it’s deemed to be RPT, and notional interest should be calculated and added to the equation, could the clubs get around it by changing it into capital injection / direct donation to the club?

[McDog]

5 hours ago, TheBrownBottle said:

As ever, they would need a club to challenge them - and if all these rules were truly fundamental breaches of commercial law then I’d have expected Man City to have smashed the PL to pieces.  Instead we’ve got adjudication ruling that APT is in line with commercial law

 

 

 

 

 

I will say though that since the secret rulings of "Prove it clubs", and "Sorry mate, not FMV" without providing a shred evidence of anything is a fairly big thing. The rules as written were, as I read them, a free hand by the PL to turn down whatever they wanted since they had zero burden of proof.

[r0cafella]

10 minutes ago, Zero said:

I just got a question, re the shareholders loan. So if it’s deemed to be RPT, and notional interest should be calculated and added to the equation, could the clubs get around it by changing it into capital injection / direct donation to the club?

Yes they can. The change related to the loans being interest free owners can continue to lend money to the clubs they own however for FFP purposes an interest rate will be calculated. 

[McDog]

3 minutes ago, r0cafella said:

Yes they can. The change related to the loans being interest free owners can continue to lend money to the clubs they own however for FFP purposes an interest rate will be calculated. 

 

 

Isn't there a limit of the amount of cash injection per year though? I honestly don't know.

[r0cafella]

1 minute ago, McDog said:

 

 

Isn't there a limit of the amount of cash injection per year though? I honestly don't know.

Under the current rules owners can top up the FFP allowance by capital injection. The 110m figure you often hear is the amount of allowable losses inclusive of owners capital injection. I can’t remember how much the allowable losses are minus the owner injection though. 

[PauloGeordio]

3 hours ago, duo said:

The game has become so corrupt - am convinced as well that VAR is just another tool to control.  

It absolutely is! 

[Cf]

The thing I don't get is why capital injection/loans are allowed to be considered income in the first place for the purposes of PSR. 

 

Surely the overarching point of it all if we take it at face value is they want clubs to be self sustaining and not reliant on owners having pots of money that they could one day withdraw. 

[Cf]

I assume there won't be any great rush to change the rules because of how much rushing it last time has bit them in the arse.

 

Even if the loan interest isn't applied historically it surely now has to be included in this year's calculations. Next summer could be funny if the likes of Arsenal and Brighton are scrambling to sell players to stay compliant. 

[r0cafella]

22 minutes ago, Cf said:

The thing I don't get is why capital injection/loans are allowed to be considered income in the first place for the purposes of PSR. 

 

Surely the overarching point of it all if we take it at face value is they want clubs to be self sustaining and not reliant on owners having pots of money that they could one day withdraw. 

They aren’t included in PSR calculations. The owner allowance just increases the FFP spending cap. Certain owners want their clubs to be “self sustaining” that’s true where as others couldn’t care less I guess it’s the schism within the owners. I’m not sure football could be purely asset based either nor should hey be billionaires playthings but the horse bolted long ago. 

[r0cafella]

23 minutes ago, Cf said:

I assume there won't be any great rush to change the rules because of how much rushing it last time has bit them in the arse.

 

Even if the loan interest isn't applied historically it surely now has to be included in this year's calculations. Next summer could be funny if the likes of Arsenal and Brighton are scrambling to sell players to stay compliant. 

Yeah, they will convene next week and work it out. It’s important to remember the cartel only needs 14 votes to change rules as long as said rules are lawful we are all left sucking our thumbs.  
 

I think too much water has passed under the bridge for these clubs to all work together as they used to come to a solution which works for everyone, we will likely sell the cartel get together horse trade with gravy train riders and continue along the path of gate keeping. 
 

Also, I don’t see a world whereby the interest being captured on ownerships loans have a negative impact on anyone as they can just write them off or tank them depending on PSR position.  Brightons PSR position is still probably good and selling players is what they do so no worries at all. 
 

Arsenal are fully owned by Kronke so he can write off the loans to himself no issue.