The Premier League – Kicking up a legal storm

This is the fifth article in Clyde & Co’s series on sports arbitration. Alexander Stewart and Charlie Stabler explore the recent disputes involving the Premier League and prospect for further disputes in the future.

Sir Jim Ratcliffe, now minority owner of Manchester United, has recently noted the possibility that “the Premier League is going to finish up spending more time in court than it is thinking about what’s good for the league”.[1] This comment follows a season in which there have been numerous high profile disputes in the English Premier League and this trend does not seem likely to slow down any time soon.

As part of our sports law and arbitration series we have been exploring the interaction of sporting disputes and the use of international arbitration in resolving them. This article gives an insight into the ongoing disputes involving the Premier League, including Manchester City’s arbitration claim against the Premier League, the hearing of which reportedly ends today.

Profitability and Sustainability Rules

The Premier League’s Handbook provide for the Profitability and Sustainability Rules (PSR). The PSR is designed to promote financial sustainability and competitive balance within the Premier League. The rules restrict the losses that a Premier League club can have over a three year period. Inevitably, some clubs push the boundaries of the rules to try and produce the best team on the pitch. The 2023/24 season was the first season when clubs were found to have violated the rules and sanctioned as a result.

Everton FC and Nottingham Forest FC, were both found to have breached the PSR. Everton were found to have breached the rules twice and handed two separate points deduction during the season – firstly, a 10 point deduction, later reduced to six points on appeal, in November 2023 followed by a further two point deduction in April 2024. Nottingham Forest were deducted four points in March 2024.

The procedure for PSR disputes is found in Appendix 1 to the Premier League’s Handbook for 2023/24. Appendix 1 makes provision for an independent commission to be appointed to hear a PSR complaint. Such commissions determined both Everton and Nottingham Forest’s sanctions. The rules, however, provide for an appeal route for clubs in breach of the rules. The appeal route is an expedited process, and has proved to be fruitful, with Everton’s initial 10 points docked being reduced to six on appeal (although Nottingham Forest’s four point deduction was upheld on appeal). The rules also provide for a further appeal by way of arbitration under Rule X.

Appeals against any sanction seem likely to continue. The Premier League is often tightly contested both in terms of winning the title, European qualification spots and relegation (not to mention the difference in one league position can be worth over £2m in prize money). Points deductions can have a dramatic impact on a club’s financial fortunes as a result and so clubs are incentivised to contest any sanction. For example, in Everton and Nottingham Forest’s case, the potential financial costs of relegation would have far outweighed the legal costs of any appeal.

PSR disputes are set to continue into the 2024/25 season. The Premier League has already referred Leicester City FC to an independent commission with respect to alleged breaches of the PSR. Leicester City may, therefore, commence next season on negative points if they also receive a points deduction – Leicester have already indicated their willingness to contest any allegation of breaches and/or any sanction. Other clubs are believed to be under investigation as well.

Manchester City

As of the date of this article, the hearing in respect of Manchester City’s challenge to Premier League’s Associated Party Transaction (APT) rules will be coming to a close. Manchester City had reportedly commenced arbitration against the Premier League in February 2024 contesting the APT rules.

The APT rules govern transactions between clubs and companies associated with the club, or its ownership group. The rules have been designed to ensure that transactions are at fair market value, to prevent owners providing equity funding under the guise of sponsorship deals or other arrangements, in order to circumvent the Premier League’s financial rules.

It has been reported that Manchester City are claiming that the APT rules violate the Competition Act 1998. A challenge on competition grounds would be in keeping with the recent trend of sports’ governing bodies coming under increasing scrutiny on competition grounds. The tribunal’s decision in respect of Manchester City’s claim could have a dramatic impact on the financial landscape of English football over the coming years.

This is not the only ongoing dispute between Manchester City and the Premier League. In February 2023, the Premier League referred Manchester City to an independent commission in respect of 115 alleged breaches of the Premier League’s financial rules between 2009 and 2018. This followed a four year investigation by the Premier League into Manchester City’s finances, which included a trip to the Court of Appeal.[2] The hearing before the independent commission is expected to take place in November 2024. Manchester City have sought wide ranging disclosure from the Premier League ahead of this hearing.[3]

It is currently unclear what sanction Manchester City will face if found to have breached the rules. The alleged breaches are extensive and on a larger scale than any previous Premier League dispute. The independent commission has significant powers and so a sanction could range from a fine to a points deduction to Manchester City being relegated. Satellite litigation could also arise with other clubs that missed out on European qualification and/or winning the Premier League title (Manchester City won three titles between 2009 and 2018) seeking compensation from Manchester City.

More disputes in the pipeline

The PSR rules will potentially be reformed in the near future with Premier League clubs having voted to trial new rules during the 2024/25 season. The PSR rules will remain in place but Squad Cost Rules (SCR) and Top to Bottom Anchoring Rules (TBA) will be trialled. These new rules will bring the Premier League’s financial rules more in line with UEFA’s financial rules, who introduced squad cost rules in the 2023/24 season.

Whether the PSR rules will be entirely overturned following the 2024/25 season and replaced by the SCR and TBA rules is currently unknown. However, all signs indicate that whatever financial rules the Premier League implements, there will be further disputes as some clubs will, in the name of having the best possible team, overstep the financial limits and the Premier League seems intent on strictly enforcing its financial rules.

Another wrinkle is the potential introduction of an independent football regulator in the near future. The Football Governance Bill, although now shelved due to the upcoming general election, would have introduced such a regulator, for the first time in English football history, and so shaken up football governance. Given it had support from all major political parties, the introduction of a football regulator in the next Parliament appears very likely. The introduction of such a regulator could open up a whole new avenue of disputes in English football.

Conclusion

The disputes involving the Premier League have been very high profile and seem likely to continue rumbling on into the future. Further PSR disputes seem likely to be on the horizon with many clubs reportedly on the borderline of compliance with the rules. Manchester City’s arbitration claim contesting the APT rules on competition grounds may encourage other clubs to launch similar claims.

The series continues next week with a perspective from Madrid.