Why did the 20 clubs come together?
This was a follow-up to a special meeting 19 of the clubs had last Tuesday, which was due to discuss their concerns over the £ 305million Newcastle takeover by the Saudis and its implications for them. Newcastle were excluded from this meeting, which in itself was extraordinary. How often do 19 clubs meet to strategically discuss one? Other clubs are worried that Newcastle’s ultra-wealthy owners could strike business deals with companies in Saudi Arabia that could give them an advantage. And so, as the Guardian revealed, the clubs have proposed a proposed rule change that would temporarily ban what are known as related party transactions – in other words, deals with companies with which the club owners are associated. Monday’s meeting, which mainly involved participants connecting through conferencing software, was due to consider and vote on the amendment.
What was Newcastle’s response?
They had been informed of the regulatory change, which allowed them to pass it through their lawyers. Newcastle’s representative at the meeting was not Amanda Staveley, the manager and minority stakeholder responsible for the day-to-day management of the club. It was the first shareholder meeting she was invited to and there was surprise in some quarters that she refused to attend. Newcastle instead sent chief executive Lee Charnley, and he made it clear that his club, acting on legal advice, believed the rule change to be anti-competitive and illegal. The inference was that the vote could leave those who did so open to legal recourse.
But did the vote take place anyway?
Yes he did. Eighteen clubs voted in favor of the new rule, with Newcastle against and Manchester City abstaining. A two-thirds majority is required to effect the change, i.e. 14 votes. City acted on legal advice that voting was illegal and would see the league act like a cartel. The ban on related party transactions will go into effect next month and will apply to all 20 clubs.
What was the legal issue with the process?
At first glance, clubs can do whatever they want if they have the necessary 14 votes, but, of course, if that was something subject to legal challenge, it would be problematic. What a rule cannot be is discriminatory; appearing to have been designed to attack a club. Newcastle’s complaint could rest in this area. But the league can say they have been studying tighter financial controls for some time – and certainly before the Newcastle takeover was complete. The league remains involved in a lengthy investigation into whether City have broken financial fair play rules. The city denies wrongdoing. The change of rule under discussion, although temporary, is an aggressive gesture and not without risks. The clubs appear to have adopted a safety-in-numbers approach. Newcastle are unlikely to make any major trade deals next month, but their rivals have been keen to make their point, to indicate a direction of travel.
What will happen at the end of the month?
There is the possibility of a vote on a permanent rule change – surely not a ban on related party transactions, but legislation to ensure that they are transparent and paid for at fair market value. The league will set up a working group – comprising a representative sample of clubs – to form a consensus. Newcastle has been invited to join. The worst-case scenario would be for Newcastle, or any club, to end up on the wrong side of another vote. Could this be the prompt for a legal challenge?
Why are clubs so worried about Newcastle and related party transactions?
Because some of them, to put it bluntly, are paranoid about the success City has enjoyed since its takeover by Sheikh Mansour of Abu Dhabi in 2008. They have seen City make deals with companies linked to the emirate and have decided to offer the stepping stone to glory – and not the many footballing decisions the club has made. There is an undeniable feeling that some clubs do not want Newcastle to ‘make a City’. It should be noted that City was cleared last year by the Court of Arbitration for Sport of having “disguised funds in shares as sponsorship contributions”. The City maintains that related parties or others, their sponsorships were of fair value.
What are Newcastle’s immediate spending prospects?
It is permissible, under the league’s profitability and sustainability rules, that Newcastle can invest more than £ 150million on signings next year, starting in January (with the usual caveats at this subject being a difficult window). That’s because the club spent little under the previous owner, Mike Ashley, who gave them legal credit of at least £ 45million. In addition, clubs are allowed to suffer losses of £ 105million over a rolling three-year period. It would be a risky strategy to spend everything efficiently all at once and it would mean that they would have to be sure that they would be able to break even in years two and three.