Manchester City Faces Uncertain Future as Arbitration Hearing Starts

A private arbitration hearing that could lead to the expulsion of Manchester City F.C. from the Premier League has begun as the league accuses the defending championship club of violating financial fair play regulations and refusing to cooperate in investigations. 

The hearing, which is being held in an undisclosed location and is governed by strict confidentiality provisions commonly found in arbitration proceedings, began on Monday. It is expected to last about three months, and the decision—which is not expected until 2025—could trigger an appeal and subsequent legal challenge. 

A three-person panel will review purported evidence, which reportedly includes emails authored by club executives in which funding sources are mischaracterized to circumvent league rules, that call into question City Football Group (CFG) Limited’s ownership of the club. CFG is primarily owned by Abu Dhabi United Group, which itself is owned by United Arab Emirates vice president and Abu Dhabi Royal Family member Sheikh Mansour bin Zayed Al Nahyan.

The 115 charges against City involve allegations of deceptive accounting and spending practices, with the insinuation that the club is breaking financial competition rules to gain an unfair advantage over other teams in the league. 

The purported evidence against City was first highlighted in email leaks and other materials published by German news company Der Spiegel in 2018. Der Spiegel wrote that with Manchester City “costs and debt” do not matter since any shortfalls are covered by sponsors who “simply send more money over,” with payments portrayed as legitimate.

Among other allegations, City is accused of misreporting financial information regarding its payments to players and coaches. There are also allegations of the club cloaking unreported direct investments by investors as legitimate sponsorship income. As with teams in U.S. leagues, clubs in the Premier League contractually assent to follow procedures and policies that restrain how each club can compete. 

City not only denies wrongdoing but has also separately challenged the Premier League on the legality of its rules limiting competition. In the U.S. that type of argument would be raised under antitrust law, in that competing businesses (clubs) agree to restrain how they compete in ways that are arguably detrimental to players, coaches, fans and businesses that vie for commercial relationships with clubs and associated entities. In Europe, the rough equivalent to antitrust law is competition law. 

Complicating the analysis is how rules that limit intraleague competition sometimes make a league more competitive as a whole. Consider, for example, a salary cap. It anticompetitively prevents a team owner who wishes to spend more on their team than an agreed-upon level, but it procompetitively means the owner can’t essentially buy a championship every year—and, in turn, deflate fan, media and broadcast interest in rival teams, bringing the league commercially down with it. Also, whether a league’s rules harm or help competition on balance, clubs contractually and voluntarily agree to follow those rules.

City specifically objects to so-called associated party transaction rules which—like they sound—restrict the use of associated businesses to funnel money into a club’s finances. City allegedly uses sponsorship deals in ways that run afoul of rules, but the club maintains the rules themselves are legally problematic. An arbitration hearing on that challenge was heard over the summer.

City’s expulsion from the league would be a worst-case, and perhaps unrealistically severe, penalty. Lesser punishments would include a points deduction that interferes with the club’s attempt to remain the league’s champion, a status it has enjoyed since 2021. 

Depending on the outcome, the arbitration’s loser could petition an appeal panel to review. Afterward, the losing party could petition a court in hopes for further review. But courts are generally deferential to arbitration proceedings involving disputes among sophisticated businesses. The underlying logic: The parties knowingly and contractually accepted the use of private dispute resolution and to honor the resulting decisions.

The underlying accusations and legal issues are not new. Four years ago, the Court of Arbitration for Sport (CAS), an arbitration body that is based in Switzerland and has jurisdiction over sports disputes, removed UEFA’s ban on City, which was imposed for similar reasons now raised by the Premier League. CAS’s decision was primarily based on the fact that most of the allegations were time-barred.