There has been a lot of hullabaloo around the Manchester City trial following Monday’s “results”.
It is interesting to see different journalists and media outlets put their line in the ground over who they are going to support in the case. And their response to Monday’s findings highlight if they are backing the Premier League or Man City.
A bit of advise. Take everything said by anyone with a pinch of salt. Everyone is bias and will present the findings of the case in a way that supports their own narrative. And I include me in that.
If you want to really understand what is going on, read the findings yourself. Do not rely on others to interpret them. And certainly do not listen to those social media accounts with 100s of thousands of followers that are run by 18 year olds from around the world. You would not take legal advice from these incels if they ever ventured out to a pub, so why are you listening to their online views?
I have read the judgement. And in another life time I obtained a law degree. That does not mean that I am in any better position than everyone. But also means that I am in a better position to provide analysis than some social media account that has only read a headline. So here are my thoughts. My opinion…
What were Man City challenging
Manchester City’s challenge was around Associated Party Transfers. Or APT. These are the rules with PSR that mainly govern sponsorship deals. In plain English, they are the rules that dictate all sponsorship deals from associated parties must be at Fair Market Value (FMT)
IE, Etihad can not be paying Manchester City £100m a year in sponsorship, if the FMT for an airline sponsoring a top football club is only £60m.
Man City submitted 25 challenges to the existing APT rules. They were unsuccessful with 23.
On a whole, APT was found to be legitimate, and whilst ultimately Man City and their supporters (Newcastle, Chelsea, Everton), wanted them scrapped, the hearing has upheld them as part of PSR.
It is interesting to note fans of Newcastle, Chelsea and Everton were celebrating the findings on Monday. This highlights that fans were not really understanding what had been decided. APT is not going anywhere, it will just have some tweaking.
Burden of proof
A basic principal of law is that the burden of proof almost always lies with the accuser.
There circumstances when the evidential burden shifts to the defendant. This occurs when it is deemed easier for a defendant to prove why they had something in their possession, rather than the prosecution having to prove why they had it in their position.
In law, you are always taught about drug paraphernalia – it is easier for a defendant to prove why they have scales and loads of little clear plastic bags in the boot of their car rather than the prosecution having to prove what they were used for. My local Indian, for example, would quickly be able to prove that the little bags were to put mints in for takeaways and the scales were to measure ingredients.
The Premier League had decided that it was up to clubs to prove that deals were FMV. the challenge against this shifting burden of proof was successful, and it will likely result in the Premier League having to prove that a deal is not at FMV in the future, rather than the initial standpoint being that the club is guilty.
What has not changed, however, is the “punishment”. It is still down to the Premier League to decide what FMV is, and the ability to discount income above FMV is retained. So those Newcastle fans celebrating that they can get a “£1bn naming rates deal” are misguided.
Shareholder loans
Whilst arguing the parameters of FMV, Manchester City also questions the rules around shareholder loans.
The very valid point was made that if sponsorship deals had to be at FMV, then surely shareholder loans should be as well? And this challenge was upheld.
Under current rules, an shareholder could loan a club a chunk of money at 0% interest. These was deemed to be unfair by the board, as the loan would not be provided at a FMV. The consequence will be that when reviewing shareholder loans for PSR, the Premier League will now have to ensure that any interest paid has been at FMV.
Ironically, the two clubs who have had “interest free shareholder loans” in the last decade or more are Chelsea and Manchester City. So by challenging this ruling, they are closing a loophole that they have previously exploited.
Some in the media have written this as “City get one over Arsenal and Manchester United”, with loads of Newcastle fans (why is it always them?) now writing a narrative that Arsenal are in breach of PSR rules. But how true is this?
Firstly, Arsenal do owe £259m to KSE. This was after KSE restructured our debt back in 2020. There has been zero evidence presented that the money loaned by KSE to Arsenal was not a FMV. whislt there is lots of evidence that the loan was at FMV.
At the time when KSE loaned Arsenal the money, the Bank of England interest rate was 0.1%. A good comparator is Tottenham, who were paying 2.6% on their loan to build the stadium. At the same time, Arsenal were paying around 5.14%, as the bonds were taken out in 2007 when the Bank of England rate was 5%.
Reports are that we currently pay KSE around 2.2%-2.4% in interest. This is a tad lower than what Tottenham’s loan was at, but was also given at a time when the BoE interest rate was at its lowest.
What Arsenal do not have is an interest free loan. There might need to be a small adjustment as to the interest we declare for PSR, but it should not be a huge adjustment.
It also needs to be factored in that the loan to KSE is in relation to the stadium build and other infrastructure. And this spend is exempt for PSR reporting. These loans are not to pay wages and / or transfer fees, or to cover up for huge losses. So the loan to KSE might not even need to be declared as part of our PSR reporting.
Finally, it is unlikely that any rule implemented around shareholder loans will be retrospective. Changes will be made to new loans moving forward. So we really do not have much to worry about.
Final thoughts
It is interesting to see the likes of Everton and West Ham United fans celebrate Manchester City’s “victory” over the Premier League. My feeling is this is to deflect from their own bad owners poor running of their clubs.
Any decision against the Premier League during the case will be in the favour of “state owned” clubs. And Everton and West Ham are neither of these. So by celebrating every Man City victory, they are actually celebrating being at an even bigger financial disadvantage than they are now. Man City successfully challenging points does not favour them.
As for Newcastle, their celebrations show their delusion since their new owners came in. they really think that the Premier League are stopping PFI bank rolling Newcastle to success. I would suggest they spend more time looking at PFI business models and learning what their owners intentions are. It is also about sportswashing and having a share in English football. Not about winning.
The only challenge that benefits Newcastle is that the burden of proof on FMV now falls to the Premier League. Not, as their fans seem to think, that APT is about to be scrapped. Infact the ruling stated the very opposite, and reiterated that APT is both on the whole fair, and important.
And finally, to reiterate my guidance, DYOR. you would not take financial advice off a faceless social media account (although some do), so why would you believe what someone you do not know is presenting as “facts” around a legal case. And I include me in that.
DYOR. Make your own judgement.
Keenos
She Wore A Yellow Ribbon 