There is a reason why Newcastle United are watching legal developments ‘carefully’. APT2 is a case that could have huge consequences if it goes Manchester City’s way. Simon Leaf, a partner at Mishcon de Reya, is well-placed to explain why.
“In the medium to long-term, it could also potentially benefit Newcastle as the Premier League would then need to return to the drawing board to come up with a set of rules that not only garner the support of 14 clubs but, also, comply with the law,” he told ChronicleLive. “This could either mean a more relaxed set of rules that may allow Newcastle’s owners to spend more or a set of rules that, if applied retrospectively, mean that their rivals with larger shareholder loans must now spend less in order to comply.”
Such a prospect reflects the enormity of this particular case – and that is saying something while we wait for a separate verdict on the 115 charges Manchester City are facing. Manchester City have even claimed that the amended APT rules, which Newcastle also voted against, ‘fail to meet the requirements of transparency, objectivity, precision and proportionality…and are liable to distort competition’.
The champions have argued that shareholder loans, where owners lend clubs money, have not been treated in the same way that other APTs like sponsorship deals with companies linked to club owners have. This ‘differential treatment’ means the rule changes ‘do not eliminate, but on the contrary perpetuate the discriminatory and distortive treatment previously found by the tribunal’ in Manchester City’s eyes.
“This continued preferential and discriminatory treatment of shareholder loans has the object and/or effect of distorting economic competition between member clubs on affected markets,” the club’s legal team have argued.
The Premier League have maintained the updated rules are still ‘valid and enforceable’ but, given how the original regulations introduced after Newcastle’s takeover were found to be ‘void and unenforceable’, lawyers acting for Man City have said ‘this voidness means that the amendments are themselves void because it is not legally possible to amend rules that are themselves void’. Still with me?
This line of attack should not necessarily come as a surprise. Stevie Loughrey, a partner at Onside Law, who specialises in commercial litigation and arbitration, previously outlined to ChronicleLive how it could be argued that those clubs who had shareholder loans at zero or close to zero percent interest had an ‘unfair sporting advantage during that period’. If those clubs had their shareholder loans recalculated at commercial rates of interest, they may have had significantly less money to spend within PSR rules.
It is also worth noting that while shareholder loans entered into after November 22 last year – i.e. after the Premier League vote – must now be submitted as an APT and be subjected to a fair market value assessment, that does not tell the full story. Any shareholder loan that was entered into before this date and which was replaced with other forms of financing, such as conversion to equity or repayment, within 50 days, was not required to be submitted as an APT or assessed for fair market value.
These have not been insignificant sums over the years. Manchester City have claimed that Arsenal and Everton benefited from shareholder loans of approximately £259m and £450m respectively in 2022-23 and that Brighton and Leicester City also had the advantage of £406.5m and £265m in shareholder loans in 2021-22. It won’t just be these clubs who will be watching on with interest to see what happens next.
“Like much of the Premier League, Newcastle United must now wait to see where Manchester City’s latest legal battle leads,” Leaf added. “If City prove to be successful with this latest challenge, which, based on the previous decision of the same panel, seems like they have more than a good chance on achieving, this will in the short-term cause a significant headache to not only the Premier League but also Newcastle’s rivals that have historically relied more heavily on shareholder loans as a source of finance.”
Learn more
View news Source: https://www.chroniclelive.co.uk/sport/football/football-news/newcastle-united-learn-bombshell-prospect-31400316
