Does Manchester City’s new sponsorship deal represent a way of dealing with the constraints of Uefa’s financial fair play rules? As we shall see, the answer is in part legal and in part political. But what of the sponsorship deal with Abu Dhabi airline Etihad?
Does Manchester City’s new sponsorship deal represent a way of dealing with the constraints of Uefa’s financial fair play rules? As we shall see, the answer is in part legal and in part political. But what of the sponsorship deal with Abu Dhabi airline Etihad?
The deal is thought to be worth £400m. The City of Manchester stadium will be renamed the Etihad Stadium and the area around the ground will become known as the Etihad Campus. As part of the agreement Etihad could also put their name to a state-of-the-art training facility that the club hopes to develop on a 80-acre site across from the stadium. The site could also include a Etihad call centre which could bring employment to a deprived area of East Manchester.
City makes no bones about the fact that the deal is part of what chief executive Garry Cook called an ‘aggressive’ commercial strategy that will increase the chances of the club meeting Uefa’s Financial Fair Play rules. Over the three seasons from 2011-12 will allow total losses of €45m meaning that City’s owner Sheikh Mansour could exchange only €15m each year for shares to spend on transfers and wages. That sum would then be reduced to €30m a year over the three years from 2015-16.
City are currently some way off from meeting the Uefa criteria. In the year to May 2010 the club made a loss of £121.3m, an increase of 31 per cent on the previous year and the second highest loss in the Premier League history. The next set of accounts due in October are likely to make even more worrying reading as they will have to factor in £160m of spending on new players. City’s commercial revenues were 400 per cent up in 2010 but at £32.4m they are well behind the £100m Manchester United is expected to pass this year.
Uefa warned that the sponsorship deal would be closely scrutinised to see that it did not greatly exceed market value. Uefa’s Club Financial Control panel is likely to use deals struck by the most commercially successful clubs such as Manchester United, Barcelona and Real Madrid as indicators of what could be considered ‘fair value’.
Uefa is also expected to closely scrutinise deals where the company and the club are owned by the same person. Etihad was at pains to stress that it is a ‘stand alone’ company, but it is nevertheless owned by the Abu Dhabi Government, who own City.
So will this strategy work? Part of the answer is political. Having set up this complex set of rules and elaborate apparatus to enforce it, Uefa will look foolish if creative accounting is used to evade enforcement. There is a political imperative to make an example of a club and Manchester City is a prime candidate as the leading example of a club boosted by benefaction, even more so than Chelsea.
However, Manchester City could challenge any adverse decision in the courts. There are a number of unanswered questions about the relationship of the Uefa scheme to EU competition law. Many commentators think that it will preserve the status quo as middle-ranking clubs like Fulham will no longer be able to attract a benefactor to boost their standing.
If, for example, Uefa’s panel ruled that Etihad was not a stand-alone business, that would be open to challenge in the courts How would the courts rule? That would depend on the particular case. However, the European courts are becoming more respectful of the specificities of sport and the right of governing bodies to regulate their sports – but not just as they want to. As was evident from the discussions at the recent EU and Sport conference, the creation of a treaty clause on sport has changed the ground rules to some extent, but just how remains to be seen. It’s a good time to be a sports lawyer.
As for Manchester City the strategy they are following is probably the most sensible one in the circumstances. It will be interesting to see what lessons Roman Abramovich draws for Chelsea.