Premier League in CRISIS as they lose legal battle with Manchester City over 'unlawful' sponsorship rules – and the verdict could have serious consequences for all clubs

The Premier League has suffered a significant setback after a tribunal deemed its sponsorship rules – which operated for almost three years – null and void.

In a bombshell verdict – that could now trigger a series of giant compensation claims and plunge the competition into crisis – an independent panel has sided with champions Manchester City and deemed that the league’s Associated Party Transaction (APT) regulations, which ran from December 2021 to November 2024, were unlawful in their entirety.

After proposed deals with Etihad Airways and First Abu Dhabi Bank were blocked in 2023, City took the Premier League to court, effectively declaring war. They claimed that the league’s APT rules, around commercial deals clubs do with parties linked to them, were unlawful.

In September last year, a tribunal agreed with City, highlighting three elements which it deemed unlawful. One was the fact that shareholder loans – where parties with stakes in clubs such as Arsenal and Liverpool often lend money at low or no interest – were not subject to the same fair market value tests included in the APT rules.

At the time, a row erupted between City and the Premier League, with the latter claiming that a number of tweaks to the rules would suffice.

Chief executive Richard Masters claimed the tribunal had actually ‘endorsed’ the APT rules, and added it had only found ‘certain discrete elements…that need to be amended’.

City chairman Khaldoon Al Mubarak pictured (left) next to club CEO Ferran Soriano in August

But in a blistering response to clubs, City legal counsel Simon Cliff warned against making hasty amendments and urged those involved to delay any further action until the tribunal had returned a further verdict on whether their previous ruling meant the whole system, rather than certain sections, was unlawful. 

Their view was that the ruling meant that the entire set-up was null and void.

City also took the seismic step of accusing the Premier League of attempting to mislead its members on the severity of the situation and raised the threat of further legal action should they press ahead.

Regardless, in November, clubs voted in amendments to APT rules by a majority of 16-4.

Now, in a verdict which underlines City’s position and which may have serious ramifications for the Premier League, the panel, featuring legal experts Christopher Vajda KC, Lord Dyson and Sir Nigel Teare, has returned its final verdict, ruling that the APT regulations were unlawful in their entirety.

That means that any deals that were rejected or reduced in value under the system, which operated between December 2021 and November 2024, could now be subject to hefty compensation claims. 

If a club believes its competitive performance was harmed by a decision made under the previous APT system, it could sue.

City have also launched a legal challenge against the amended rules voted through in November. The same panel is due to rule on their legality in the near future. Should they deem those unlawful, the league could be thrown into chaos.

City have ended each of the past four seasons as the champions of England’s Premier League

None of the above is linked to the 115 charges levelled at City by the Premier League, over alleged breaches of financial rules. While that case has been heard, a verdict remains outstanding. 

In a further blow which is unlikely to go down well across the competition, the Premier League may now have to foot not only its own legal bill, but also City’s. The figure of both combined is thought to be close to £20m. 

Premier League chief executive Richard Masters made clubs aware of the situation in an email this afternoon.

In it, he acknowledged that the ‘previous rules as a while are void and unenforceable’ but attempted to play down the development. 

‘The previous APT rules are no longer in place,’ he said, ‘and new rules were voted into force’. 

‘The league has previously told clubs that this decision was about the legal status of previous APT rules and would not impact the operation of new rules.’ That remains to be seen. Masters added that the new rules remain in force and that clubs remain required to comply with them.

The APT rules were brought in following the Saudi-led takeover of Newcastle United. Amid concerns from other clubs, they were aimed at preventing inflated injections of cash into sides from companies liked to their owners – often based in the same country – in an attempt to navigate wider financial rules and to allow them to spend big on players and wages.

City, whose case was led by Paul Harris KC and Lord Pannick KC, of Freshfields, will see the verdict as an entire vindication of their stance throughout the entire process.

City and Newcastle could strike significantly higher sponsorships agreements if the tribunal finds in the Premier League champions’ favour again

The 18-page final award, seen by Mail Sport, states: ‘In the First Partial Final Award it was declared that the APT Rules and Amended APT Rules were unlawful in three respects. 

‘There now arises for decision the question whether those three respects can be severed from the remaining APT Rules so that those remaining APT Rules are valid and enforceable. 

‘The three respects in which the APT Rules and Amended APT Rules were unlawful cannot be severed with the result that the APT Rules as a whole are void and unenforceable.’

Attention will now shift to the latest legal challenge. Should the tribunal again find in City’s favour, it may well allow the likes of City and Newcastle to strike significantly higher agreements with current sponsors.