Manchester City’s success in their associated party transaction legal case is set to have a knock-on effect for Newcastle United.
The reigning champions decided to challenge the Premier League over the associated party transaction rules and a verdict was reached on Monday.
The rules were introduced by the Premier League after the PiF takeover of Newcastle in 2021 and were designed to stop clubs from striking inflated commercial deals in order to evade the Profit and Sustainability Rules.
City decided to challenge the rules after deeming them “unlawful” and they have succeeded in their legal case against the Premier League with some of their complaints upheld by a tribunal.
Newcastle found themselves hamstrung by PSR in recent years, resulting in a terrible summer transfer window. The Tyneside club have been trying to grow commercial revenue since the takeover but have had to tread carefully because of the APT rules.
Finance expert explains Newcastle benefit after Man City ruling
Newcastle will have been keeping a keen eye on City’s legal challenge knowing that if they were successful it could help accelerate the club’s commercial growth.
Now that a verdict has been reached, GRV Media’s football finance specialist Adam Williams has exclusively told Geordie Boot Boys how it will affect Newcastle.
“Newcastle’s strategy to circumvent PSR so far has focused almost entirely on commercial income,” said Williams.
“Yes, there are plans to improve St James’ Park or perhaps move to a new stadium entirely, but we are talking long-term there.
“Player trading will also have to feature more prominently in their PSR strategy, with the last-minute sales of Minteh and Anderson before the PSR cut-off on 30th June the only major departures under PIF.
“Commercial income has less of a concrete sealing that those two income streams, which is why upwardly mobile clubs like Newcastle see it as the key to unlocking more wriggle room under PSR.
“They have been prevented from doing that to an extent by the APT rules which were introduced in the wake of PIF’s takeover in October 2021.
“The rules were introduced to prevent clubs from signing artificially inflated commercial deals with owner related entities in order to bypass PSR.
“This new ruling appears to show that elements of those rules need to be rewritten.
“Currently, clubs have to demonstrate that commercial deals struck with related entities have been agreed at fair market value.
“Clubs were not given access to the database of commercial deals across the division as part of this process, which City argued was unfair because it meant they could not benchmark against other deals to determine ‘fair market value’. It looks like that will have to change.“
Man City ruling will be ‘celebrated’ by Newcastle chiefs
With City successful in their legal challenge, the Premier League will be forced to rewrite the rules around commercial sponsorships.
Williams believes that the boardroom at St James’ Park will be pleased with the verdict.
“Significantly, I think the fair market value pillar of the rules itself will remain in situ but there will be greater flexibility for clubs like Newcastle in this department,” Williams added. “In theory, that might allow them to sign bigger commercial deals, but I don’t think it will unlock Saudi Pro League levels of spending.
“The biggest story here looks like the fact that the exclusion of soft shareholder loans – which are interest-free loans from owners with a flexible repayment date – from the APT rules has been deemed unlawful.
“So clubs like Arsenal, who have up to £200m in soft shareholder loans, will need to include those in their PSR calculation.
“But my instinct is that is not quite as big a story as it is being made out to be, as I don’t see why clubs couldn’t capitalise those loans.
“That is unless I’m missing something, which is entirely possible given the legal and procedural minefield that is Premier League governance at the moment.
“It should also be noted that we have been reminded a lot recently not to necessarily take statements of ‘victory’ at face value.
“The Premier League are claiming victory here, as are Man City. As I’ve seen pointed out by several journalists, that was going to be the case either way.
“The reality is that these arbitration cases are not black and white and there is rarely a definitive winner and loser.
“But with that said, I think this will be celebrated in the boardroom at St James’ Park almost as much as it has been at the Eithad.“
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