Manchester City launch legal action against the Premier League over its financial rules in move which could help club defend their 115 alleged breaches of top flight regulations

Manchester City have declared war on the Premier League - suing the competition over new financial rules in an unprecedented move that has sent shockwaves through football and split some of the game’s most powerful clubs.

Outraged bosses at the Etihad Stadium have filed a 165-page legal document claiming they are the victims of ‘discrimination’ and that regulations approved by rivals they feel are aimed at curtailing their success are the ‘tyranny of the majority’.

A two-week private hearing starts on Monday and its verdict could have wide-ranging ramifications on the 115 charges aimed by the Premier League at City for alleged breaches of its rules on accounting. That hearing is set for November and could see huge fines and even relegation should Pep Guardiola’s four-in-a-row champions be found guilty.

In an explosive development which has seen battle lines clearly drawn and some clubs pick sides, City say the league’s Associated Party Transaction (APT) rules are unlawful and are seeking to have them thrown out. They are also claiming damages which some believe could run to tens of millions. 

Under APT, introduced following the Saudi-led takeover of Newcastle in 2021, clubs are stopped from inflating sponsorship deals with firms who are linked to their owners. Instead, all deals have to be independently deemed as of ‘fair market value’ (FMV).

City’s case is that the rules are a direct attempt to bring an end to their continued success. Should they triumph, some fear it would open the door to falsely-priced deals, huge player spend and would decimate the November hearing - given many of the charges are related to sponsorship agreements.

The Premier League has asked clubs for witness statements to back their argument. According to The Times, who broke the story, between 10 and 12 have stepped forward to assist the competition while at least one has come forward to support City. Each may be asked to provide evidence at the tribunal. Others have asked the league to provide greater transparency and clarity with regards to the system and its workings.

Newcastle, majority-owned by Saudi Arabia’s Public Investment Fund, have a shirt sponsorship deal with Saudi rights company Sela while Chelsea have a similar agreement with Infinite Athlete, a company that lists the club’s joint owners Todd Boehly and Behdad Eghbali among its investors.

City have four sponsors with ties to the United Arab Emirates homeland of their owners, including longstanding stadium and shirt sponsorship deals with Etihad Airways. They say sponsors linked to owners should be allowed to decide how much they want to pay, rather than a figure set by an independent valuation. 

Deals with companies linked to Abu Dhabi are key to many of the 115 breaches between 2009 and 2023 City are accused of, with allegations they dressed up payments by their owner Sheikh Mansour, as sponsorship agreements with third parties.

Before APT was introduced there was a requirement under old rules that related party transactions must be of fair market value.

It had been widely-reported that a club, thought to be City, was considering legal action. The claim was filed on February 16 with a hearing set for June 10.

City say the Premier League’s voting system, which requires 14 of 20 clubs to agree, gives unfair levels of control to the majority. They have also accused rivals of ‘discrimination against Gulf ownership’ on the back of comments made by an unnamed senior executive at another club.

City say the amended rules are ‘restrictive and anti-competitive’. Both sides are thought to be spending millions on the case.

There is a view among some that the move is a tactic by City, aimed at forcing the top flight’s lawyers away from their work on the 115 charges.

City have enlisted no fewer than three KCs to their legal team. Citing the 1998 Competition Act, they want damages for losses they say they have incurred ‘as a result of the unlawfulness of the FMV rules’. They add that the rules were instigated by rival clubs following the Saudi takeover of Newcastle to ‘safeguard their own commercial advantages’ and used a quote from a senior executive which they say proves rivals wished to limit deals from outfits in the Gulf region.

City also say the lack of rules on spending when United were more dominant mean they cannot monetise their brand in the manner of their cross-town rivals. In what appears to be a swipe at the established elite, they also claim the rules penalise those with ‘lower-profile sporting histories’.

In what is clearly a comprehensive assault, City argue that the Premier League has failed to provide evidence that related party deals give clubs an unfair advantage and distort the playing field. They also question the independence of analytics firm Nielsen Sports, who are tasked with assessing FMV, pointing out they have been retained by the Premier League for more than two years.

Should City fail, they say the rules will stifle their ability to bring in the best talent and will have the knock-on effect of increasing ticket prices for fans. They also claim spending on community programmes, youth development and women’s football will have to be cut.

The Premier League and its clubs will meet in Harrogate on Thursday.

Both the Premier League and Manchester City declined to comment.