The APT Rules require that, where a transaction is identified as an APT by the relevant club, details of the APT must be submitted to the Board for assessment as to whether that APT is for FMV.  Importantly, the APT rules prevent a club from receiving consideration under the relevant APT until the PL issues a determination on FMV.

FMV is defined in the APT Rules as:

"The amount for which an asset, right or other subject matter of the Transaction could be sold, licensed or exchanged, a liability settled, or a service provided, between knowledgeable, willing parties in an arm's length transaction".

An important part of this definition, as pointed out by the Tribunal, is "could". The Board must therefore assess what the subject of the transaction "could" be sold for at arms' length, rather than what it "would" be sold for.

When conducting its assessment, the Board must consider three main pieces of information:

1. An independent assessment of the value of the APT;
2. Representations and information provided by the relevant club in respect of the APT being assessed; and
3. Comparable evidence of similar APTs by other PL clubs.

The Board must conclude its FMV assessment and communicate its decision to the relevant club within 10 clear working days of receipt of the APT notification, or of its own determination that the counterparty to the transaction was an associated party. This time limit does not apply in circumstances where further time is required due to exceptional circumstances or the requirement of further information from the relevant club.

Where, after completing its assessment, the Board considers that an APT was "evidently" not for FMV, it will provide a provisional determination to the relevant club, along with written reasons for its determination. The club may then make additional representations, which will be considered by the Board before a final determination is made. If the final determination of the Board is that the APT is not for FMV, it will restate the APT such that it is for FMV, and the relevant club may not receive more than that restated value. 

City made a total of 20 challenges to the APT Rules. Broadly speaking, City argued that the APT Rules were both anti-competitive and procedurally unfair. City also challenged three specific decisions of the PL board made in relation to City APTs, namely:

1. A sponsorship agreement with First Abu Dhabi Bank (the "FAB APT");
2. A sponsorship agreement with Emirates Palace (the "EP APT"); and
3. A sponsorship agreement with Etihad Aviation Group (the "EAG APT").
   (together, the "APT Decisions")

City asked the Tribunal to rule that the APT Rules had the object or effect of preventing, distorting or restricting competition, and that the APT Rules gave rise to an abuse of a dominant position by the PL. In respect of the procedural fairness of the APT Rules, City argued that clubs could not properly make representations as to the FMV of APTs because they did not have access to the repository of information used to compare the relevant APT to other similar APTs. City also specifically criticised the exclusion of shareholders loans from the APT Rules, the ability of the PL to restate the value of an APT following its FMV assessment, the lack of objective and transparent criteria of the APT rules, and the lack of an effective right of review to eliminate the risk of competition distortions.

City made a number of challenges in respect of the APT Decisions, including that the PL had misdirected itself as to the appropriate test to apply when conducting a FMV assessment, and that it fell afoul of its own rules with regard to the timescales within which a final decision would be reached.

FMV Benchmarking

The Tribunal found that, in broad terms, the APT Rules are an essential component of the PSRs and that the PSRs serve a legitimate purpose. However, the Tribunal also found issues relating to the wording of the Amended APT Rules, namely:

1. The substitution of the word "would" for "could" and the insertion of the term "normal market conditions" in the definition of FMV;
2. The removal of "evidently" as a threshold for intervention by the PL board in a FMV assessment; and
3. A shift in the burden of proof so that the burden of proof is on a club submitting an APT to show that it is FMV, rather than on the PL board to prove that it is not.

The Tribunal found that the change of the wording from "could" to "would" materially increased the risk of false positives in FMV assessments, which could consequently distort competition. The Tribunal also noted that the FMV of a sponsorship deal is often bespoke to a particular relationship between the sponsor and the club and that it may depend on factors specific to that particular sponsor, noting that "there may well be a subjective element […] that might not be wholly captured by a benchmarking exercise". The Tribunal concluded that the inclusion of the word "evidently" reduced the risk of false positives and raised concerns as to whether "normal market conditions" was the appropriate test in the context of a sponsorship agreement. The Tribunal therefore decided that wording changes in the Amended APT Rules removed the buffer which ensured that only obviously abusive transactions were prevented, and that there was no unintended collateral impact on competition. As such, the Tribunal found that these changes constituted a restriction of a competition by object.

The Tribunal also found that, because clubs do not have access to the databank of historic transactions used by the PL to determine FMV (the "Databank"), member clubs could not make effective and informed representations as to the FMV of APTs due to their inability to review or make comment on the comparable transaction data relied upon by the PL before it made its final determination. This lack of opportunity to make informed representations was found to be procedurally unfair.

Shareholder Loans

The Tribunal found that the exclusion of shareholder loans from the APT Rules constituted an object restriction of competition and an abuse by the PL of its dominant position. The Tribunal agreed with City that the exclusion of shareholder loans could effectively permit one form of owner subsidy which was not at FMV, whilst subjecting other types of ownership funding to a FMV assessment. The Tribunal noted that "a difference of treatment between shareholder loans and other APTs is […] an obvious distortion of competition".

This has a significant impact on the APT Rules going forward. For the rules to continue, they will inevitably need to incorporate shareholder loans within their remit, given that they are, in the eyes of the Tribunal, "equally injurious to the objective of the PSR" as APTs. This raises interesting questions for the reported £1.9bn of the £4.8bn borrowed by PL member clubs which derives from shareholder loans and how these will need to be dealt with both on a backward and forward-looking basis in light of the Tribunal's findings. More generally, some PL clubs will have narrower opportunities for exploiting shareholder relationships, though this may come as welcome news to others.

The Tribunal further agreed with City that, were the APT rules to be limited only to APTs from Gulf states, that would be discriminatory, adding "we can see no difference in principle between that situation and limiting the ambit of the APT Rules to excluding shareholder loans".

The APT Decisions

As set out above, the APT Rules dictate that the PL must make a final decision as to all APT applications within a specific timeframe. City claimed that the PL had exceeded this limit in respect of the APT Decisions. The Tribunal decided that, in two of these instances, the PL had exceeded the time limit due to a lack of resources within their regulatory team, whilst the PL accepted that it had created a delay in the third instance.

The Tribunal decided that there was no evidence that City had been unable to make any APT transaction because of these delays, and that no potential sponsorships were compromised by them. However, the Tribunal also found that the PL had created an "unreasonable delay" in respect of the FAB APT (by three months) and the EP APT (by two months). City may seek damages because of these delays, although given the findings of the Tribunal, the loss suffered is not immediately apparent. It is noteworthy that the PL here was found to have broken the APT Rules rather than the rules themselves being found to be deficient, and that the Board subsequently revised its decision in respect of the EP APT following representations made by City.

The Tribunal also found that the Board's decisions relating to the EAG APT and the FAB APT should be set aside on the grounds of procedural unfairness. In relation to the EAG APT, the Tribunal found that procedural unfairness arose because the Board did not give City an opportunity to respond to the FMV benchmarking analysis before reaching its decision. Regarding the FAB APT, the Tribunal ruled that, prior to the Board's final determination, it did not give City access to the Databank transactions completed by other clubs to which the Board referred in its final determination.

Price fixing

City argued that the APT Rules were "inherently incapable of capturing the specific features” of some deals and that the PL's restatement of the value of APTs amounted to price fixing, which unfairly restricted clubs' earning potential. The Tribunal disagreed that they were "distortive of competition", deciding that under the APT Rules, any restatement of a price only arises where the price is not the result of a competitive process, and therefore was evidently not at FMV.

The Tribunal drew parallels between the APT Rules and the EU rules pertaining to state aid, agreeing with the PL that "owner funding, like state aid, is subsidisation. That is particularly so when other sources of external funding are not permitted". It further noted that where a subsidy is found to exist, the refixing of the price is necessary to ensure that the PSRs are effective, and to avoid unsubsidised or undistorted competition between clubs, adding "it is difficult to see how the PSR can be effective without such a mechanism".

FMV rules do not themselves constitute abuse of dominant position.

The Tribunal rejected City's contention that the FMV rules do not contain "objective, transparent, precise criteria, including as to time limits and with an effective right of review". Although it accepted that the determination of FMV involved an element of discretion, the Tribunal remarked that the PL's discretion was "clearly defined, transparent and non-discriminatory".

The Tribunal did however make a significant conclusion concerning the dominance of the PL. The PL had resisted City's characterisation of it as a dominant entity, submitting that it could not be in a dominant position as it is controlled by clubs. The Tribunal disagreed, noting that the PL wears "two hats" in that it is both a quasi-regulator of the league and an undertaking engaged in economic activity (for example when negotiating its own sponsorship) for competition law purposes. The Tribunal concluded that, whilst the PL required a two-thirds majority of clubs to change its rules, such rules are then contractually binding on all clubs, regardless of whether a club had voted in favour of them. The Tribunal therefore concluded that the PL was dominant in the market for the organisation, promotion and commercialisation of the PL. This victory is therefore likely to give very limited comfort to the PL and will raise concerns for other competitions both in football and other sports. If a sports competition is dominant, then very significant compliance concerns arise in relation to their dealings both internally with their members but also with third parties in respect of commercialisation. Sports competitions (including the PL) will need to play within the lines, thinking carefully about issues such as discrimination, self-preferencing, margin-squeezing and foreclosure.

Bias

The Tribunal found that City had not been the victim of any anti-Gulf bias when the PL conducted the Databank benchmarking exercise and confirmed that the PL's regulatory team can be "relied upon to conduct [fair market value tests] competently and fairly without any perception of bias" and that "the APT rules were [not] targeted specifically at clubs in the Gulf region".

General construction of the APT Rules

Although City was successful in some of its challenges to the APT Rules, all other challenges failed. The PL's subsequently released statement welcomed the Tribunal's findings, stating that the Tribunal had "endorsed the overall objectives, framework and decision-making of the APT system". However, in an email to fellow PL clubs, City claimed that this was "misleading", and that City's position was that "all of the APT Rules are void and have been since 2021". It is unclear whether City will maintain its stated position. The Tribunal did not declare that the APT Rules in their entirety were unlawful, and it seems unlikely that City's position will be shared by many of its fellow PL clubs.

1.    Although some of their arguments were rejected, City's victory on shareholder loans does expose frailties in the PL's rulebook. Considering that the PL has been seen to have made errors in the second consecutive award after Leicester City's recent successful appeal, the soundness of the PL's regulatory framework has been called into question. Considering the wider political context of regulation in football and ongoing plans for an independent regulator, the PL risks reputational damage in future disputes with clubs. It is also possible that this award encourages other clubs to raise disputes in relation to the PSRs and APT Rules, especially clubs involved in other recent high-profile disputes, such as Everton, Leicester City and Nottingham Forest.  

2.    Whilst City sought declaratory relief, injunctive relief and damages, the Tribunal did not hear submissions from the parties regarding the two latter remedies. The Tribunal noted that before doing so, the parties should "have the opportunity to consider what, if any, further relief is appropriate". Each party will undoubtedly be preparing their submissions as they digest the Tribunal's decision.  

3.    Clubs could be given additional access to benchmarking data to allow them to maximise deals under the APT Rules but, given that the mechanism for determining FMV was judged to be mostly fair, it does not appear that there will be a flurry of high value sponsorship APTs. This element of the decision could be particularly significant for the PL clubs which are best placed to sign sponsorship deals with associated parties close to the upper reaches of potential earnings.

4.    More generally, sports clubs and competitions across the sporting world will be taking note of this decision. If a competition regulator is dominant for the purposes of its own competition, Clubs may have an open goal to challenge their regulator in both commercial and sports regulatory decisions that apply competition law. Competition regulators could also have a much wider regulatory burden in their transactions and dealings both with clubs and third parties. Challenges in respect of third-party rights, commercial arrangements and even consumer claims now have a well-reasoned competition law decision to turn to for support. Whilst the Tribunal's decision is not binding on any court in the UK (or globally), this line up of arbitrators and counsel have produced an arbitral decision which is likely to be highly persuasive to courts and competition regulators.

5.    As a result of this decision, there will likely be one major rule change to the PL rulebook: to integrate shareholder loans into the APT Rules. The stage is set for further arguments on whether and how this is implemented. Whilst the PL insists that its rules can be amended "quickly and effectively" to incorporate the findings of the Tribunal, it may find that some member clubs, given the nature of their ownership and reported levels of interest-free shareholder loans, will be difficult to get onside in respect of any vote on changes to the PL handbook. Incorporation of shareholder loans to the APT Rules could limit the spending power of such clubs and compromise their ability to meet PSR requirements. Others, however, may view such a change as an opportunity to narrow the financial gulf between elite clubs and the rest of the league. The Tribunal's decision presents an opportunity for the PL to conduct a thorough consultation with its member clubs, where it can expect to see clubs raising pragmatic considerations, and arguments as whether the rules continue at all.

6.    The Tribunal's findings also raise questions as to the PSRs and football regulation in general. There is little doubt that the PL will be required to improve its regulatory practices because of these proceedings, both in terms of drafting and resourcing. There is widespread agreement that some form of regulation is required to govern the finances of English football. The PL is currently considering introducing plans to replace the PSRs with a UEFA-style spending cap, whilst the UK Government recently reintroduced plans for an Independent Football Regulator. Meanwhile, challenges in the European Courts (FIFA v BZ ("Diarra")) have resulted in further competition law findings against player compensation rules. In short, the old days of deference to the 'specificity of sport' appear to be numbered. As a result, fans are likely to continue to see their favourite clubs fighting their battles in the courts, as well as on the football pitch.