This article was originally written for The Student Lawyer and can be found here.
Winning the Premier League, Champions League and FA Cup in one season is an impressive feat. From the inception of the Premier League in 1992 to 2002, Manchester City had been in and out of the top division of the Premier League. In 2008, it was bought by the Abu Dhabi United Group (ADUG). Their ownership by ADUG is one of the reasons for their success. Availing the club with vast amounts of money in investment has been an important reason for Manchester City’s success. But City’s winning streak has not been without controversy. The most recent charges brought by the Premier League against Manchester City, if successful, could jeopardise all the accolades it has racked up over the past decade and a half. Not only could City face serious consequences, but also this is a test of the strength of the profit and sustainability rules of the Premier League (the equivalent of UEFA’s Financial Fair Play rules), and the Gulf Nations’ influence on world sport.
Unfair Fair Play?
The purpose of the financial rules of football regulators is to ensure clubs do not spend more than they make in revenues. In doing so, regulators like the Premier League and UEFA aim to prevent clubs from incurring losses that would compromise their existence. Most sectors have regulators and regulations meant to prevent overspending that could affect the competitiveness of the market. An example being the CMA that recently blocked Microsoft’s acquisition of Activision Blizzard (I wrote an article on the implications of this recently here ). The strict enforcement of these rules by the Premier League demonstrates what makes football as a business unique. In an episode of The Sports Law Podcast, Dan Jones, Football Finance & Governance specialist remarked that football is unique in that it is the only industry where the companies and consumers get frustrated by attempts made by a regulator to help them loose less money.
There has also been criticism of the rules as preserving the dominance of the clubs at the top, infringing certain EU law-guaranteed freedoms of clubs such as free movement of capital and workers as well as reducing competition and hindering competitiveness by limiting players' salaries. However, reduced competition is a risk that comes with an unregulated market. The absence of such financial rules as well would enable clubs at the top to secure investment and preserve their positions with their financial muscle. Indeed this can be seen by the dominance of Manchester City in English and European football for the past five years despite the Premier League’s profit and sustainability rules being in place. This leads some to argue that the Financial Fair Play (FFP) rules simply do not work. In an article for Linklaters’ Sporting Link, Kalin Ivanov contended that the FFP rules enable richer clubs to profit from their established brand and rely on their current revenues whereas the less well off clubs are restricted due to their revenues. In addition, he adds that these smaller clubs cannot rely on investment to hire better players from the transfer market because this could affect the calculation of the club’s break-even point, which is at the heart of the FFP rules- a club cannot spend more than it makes.
Deja vu?
The enforcement of the Financial Fair Play rules in the past has resulted in Manchester City’s name frequently feature in charges and allegations made by regulators. In 2014, following allegations that it inaccurately represented its’ financial position in breach of UEFA’s FFP, it reached a £49 million settlement with European football’s governing body. Most recently, CAS overturned a 2 year ban from the Champions League issued by UEFA after UEFA found that City was in breach of UEFA’s FFP rules. The decision of the independent commission regarding the charges brought by the Premier League will no doubt be another test of the efficacy of the financial rules and City’s reputation.
The charges brought by the Premier League against Manchester City in February 2023 are not too dissimilar to those brought by UEFA in February 2020. UEFA alleged that City improperly represented its’ sponsorship revenue concealing money received from ADUG as that received from sponsors Etisalat and Etihad. This was in breach of UEFA’s FFP rules. UEFA then dealt City a two-year ban from the Champions League. A ban that it overturned, on a procedural point albeit, at the Court of Arbitration for Sport (CAS). Both UEFA and the Premier League have their own rules, the major difference between them being a time bar on when claims can be brought in UEFA’s FFP whereas there is none in the Premier League’s financial rules. CAS ruled that the evidence for some of the allegations made by UEFA against Manchester City was time-barred, as UEFA’s FFP has a time limit of 5 years for evidence. Thus CAS nullified UEFA’s two-year ban of Manchester City from the Champions League. Although, given that the Premier League’s financial rules do not have this time limitation, the decision of the independent commission investigating the charges brought by the Premier League could amount to, de facto, a review of a Court of Arbitration for Sport (CAS) decision.
Furthermore, City’s lawyers may be arguing that this is an associated party issue not one of fraud. According to the Premier League's financial rules, an associated party is defined as “having material influence over the club or entity in the same group of companies as the club.” Should the relationship between Manchester City and Etisalat and Etihad be found to be an associated party issue, it may lead to a more lenient consequence for City. This is because the rules stipulate that sponsorship deals worth over $1.3 million should be submitted for review by the Premier League as to whether it is an “associated party transaction.” Newcastle, majority owned by the Saudi Public Investment Fund (PIF) , is also sponsored by Sela, also majority owned by the Saudi PIF. Should Manchester City be able to successfully argue that this is an associated parties issue, there may be allegations that the Premier League has not treated the club fairly. Nonetheless, City unsuccessfully made the associated parties argument before CAS.
A finding by tje independent commission against Manchester City could result in at best a hefty fine and at worst expulsion from the Premier League. Although, given that there are over 100 charges being levelled against the club, this review could take years before it reaches its’ conclusion.
Fuelling the beautiful game
It is no secret that the Gulf states have incredible financial power. And with financial power comes soft power for the state. The Saudi Public Investment Fund (PIF) owns the once notorious, now somewhat prodigal son appearing LIV Golf tournament. It also recently sold £400m worth of preference shares in F1 team McLaren to the Bahrain Sovereign Fund. Sheikh Mansour, a member of the ruling family of the United Arab Emirates and deputy prime minister of the nation owns Manchester City. Saudi Arabia’s PIF as well owns the majority of shares in Newcastle. Certainly, the Gulf states are not all the same. Nonetheless, their ownership of significant elements of elite sport is the latest part of their drive to diversify their economies away from dependence on oil. The ruling of the committee will not necessarily affect Sheikh Mansour’s stake in City, but it will certainly be a test of the limits on the way investors from these nations, all super rich investors for that matter, can operate in the sports industry.
Conclusion
The verdict of the independent commission will have ramifications for far more players than City. It may lend a bit more credibility to the much- criticised Financial Fair Play rules. Or add to calls for them to be scrapped or modified. It will certainly have an impact on the dynamics between clubs and regulators- affecting how each perceives the legitimacy or fairness of the actions of the other. By testing these rules, it will certainly have an impact on how investment into football is to be made. But this certainly will not be the final whistle for investment in sports by the Gulf Nations and in turn their increasing influence in the sector.
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