Manchester City continue fight with Premier League over APT rules

Manchester City are continuing to challenge the Premier League over their Associated Party Transaction (APT) rules despite previous tribunal findings and changes voted in to the rules.

The club are challenging the Premier League's attempts to fix problems and inconsistencies that were shown up by City's previous legal action when 3 out of 24 arguments they put forward were accepted as valid.

The Premier League responded by amending the original APT rules to address the issues raised, and these changes were voted through by a 16 to 4 majority of Premier League clubs in November of last year.

But City's lawyers are still not satisfied, claiming that the tweaked rules continue to 'discriminate' against them, highlighting a range instances where rival clubs have continued to benefit at the expense of Manchester City.

City’s argument, shared with clubs by the Premier League, is broadly two-fold. The original rules were branded unlawful thanks largely to the fact that shareholder loans – funds typically lent to clubs at favourable or zero interest rates by owners – were not subject to the same ‘fair market value’ (FMV) test as commercial deals.

The amended APT rules attempt to deal with that issue by allowing clubs that have benefitted from shareholder loans to see them converted into equity during a ‘grace period’ which ended in January. 

Those not converted are subject to an FMV test which City say continues to be discriminatory because clubs can retain the loan, are not required to pay interest at FMV and only have to account for figures received for the first time in this season’s accounts – which they claim means up to three years of interest expenditure could be excluded.

City say such ‘differential treatment’ means the rule changes ‘do not eliminate but on the contrary perpetuate the discriminatory and distortive treatment previously found by the tribunal’. 

They also highlight the fact that shareholder loans can be paid in full before any FMV assessment is carried out, unlike the 30-day waiting period a deal with an associated party is subjected to offers ‘a substantial cashflow advantage and cost reduction to the club receiving the shareholder loan’. They add: ‘This continued preferential and discriminatory treatment of shareholder loans has the object and/or effect of distorting economic competition between Member Clubs on affected markets.’

In a comprehensive attack, City say the rules as they stand ‘fail to meet the requirements of transparency, objectivity, precision and proportionality … and are liable to distort competition’.

The Premier League interpreted the tribunal’s initial findings as verification of the majority of the APT rules and believed they could simply make a small number of amendments. City urged them not to do so and were supported by others including Aston Villa. 

They asked the Premier League to hold fire until the tribunal had ruled whether all the rules – rather than just certain sections – were null and void. In February, the panel did just that, branding the rules ‘void and unenforceable’ in their entirety. The Premier League claimed the ruling did not impact the amended rules, which they believe are still ‘valid and enforceable’.

But lawyers for City – who issued their first challenge after a wide-ranging deal with Etihad was blocked by the Premier League – say in the second half of their argument that this is not the case and that the amendments are invalid.

‘This voidness means that the amendments are themselves void, because it is not legally possible to amend rules that are themselves void,’ they add.

One of the shareholder loans City cite as an example of this issue is the interest-free £450M shareholder loan Everton accepted from Farhad Moshiri in 2022-23. This was converted to equity by new Everton owners, The Friedkin Group, when they completed the takeover last December.

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