Manchester City have scored a legal victory over the Premier League after an arbitration panel said that some of the competition's sponsorship rules are unlawful.
A verdict from three retired judges said that new regulations designed to stop clubs from inflating deals with companies linked to their owners breach the Competition Act - specifically citing two deals that the four-in-a-row champions had rejected by the Premier League.
And the decision - which is separate to the case of City's 115 charges against alleged breaches of the league's financial rules - is set to cause huge concern for many rival clubs.
The tribunal, whose decision was communicated to clubs in a 175-page report on Monday, say that the Premier League's Associated Party Transaction Rules are "in breach of sections 2 and 18 of the Competition Act 1998 because they exclude from their scope shareholder loans."
It ruled that the Premier League was wrong to reject a new deal with City's lead sponsor Etihad and the First Abu Dhabi bank. The verdict described the Etihad decision as "procedurally unfair" while ruling that the rules do not take into consideration interest-free loans which shareholders lend to clubs.
Several rivals, including Manchester United, provided evidence supporting the league regarding regulations that were introduced when Saudi Arabia's Public Investment Fund became owners of Newcastle United in 2021.
“ Manchester City Football Club thanks the distinguished members of the Arbitral Tribunal for their work and considerations and welcomes their findings,” the club said in a statement.
"The club has succeeded with its claim: the Associated Party Transaction (APT) rules have been found to be unlawful and the Premier League ’s decisions on two specific MCFC sponsorship transactions have been set aside.
"The Tribunal found that both the original APT rules and the current (amended) APT Rules violate UK competition law and violate the requirements of procedural fairness. The Premier League was found to have abused its dominant position."
The APT system must now be changed to meet competition law. However the Premier League say that "the Tribunal upheld the need for the APT system as a whole and rejected the majority of Manchester City’s challenges."
In a statement recognising the tribunal decision, the Premier League added: "Moreover, the tribunal found that the Rules are necessary in order for the League’s financial controls to be effective. "
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