Why did the 20 clubs get together?
It was the follow-up to a special meeting 19 of the clubs had last Tuesday, which was to discuss their concerns about the £ 305 million acquisition of Newcastle led by Saudi Arabia and its implications for them. Newcastle was excluded from that encounter, which was extraordinary in itself. How often do 19 clubs get together to strategically talk about just one? The other clubs have been concerned that the wealthy Newcastle homeowners could strike trade deals with Saudi Arabian companies that could give them an edge. So the clubs proposed a draft rule change that would temporarily ban so-called related party transactions – in other words, agreements with companies that club owners are associated with. Monday’s meeting, which primarily involved participants connecting through conferencing software, was to review and vote on the amendment.
What was Newcastle’s response?
They had been notified of the regulatory change, which allowed them to execute it through their lawyers. Newcastle’s representation at the meeting was not Amanda Staveley, the director and minority stakeholder responsible for running the club on a day-to-day basis. It was the first shareholders meeting to which she was invited and there was surprise in some quarters that she refused to attend. Instead, Newcastle sent Lee Charnley, the managing director, and made it clear that his club, acting on legal advice, believed the rule change was anti-competitive and illegal. The inference was that voting for it could leave those who did so open to legal redress.
But did the vote still happen?
If 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, which is 14 votes. The city acted on legal advice that voting was illegal and would see the league acting like a cartel. The related party transaction ban will be in effect for the next month and applies to all 20 clubs.
What was the legal problem with the process?
At first glance, clubs can do whatever they want if they have the necessary 14 votes, but of course, if it were something open to legal challenge, it would be problematic. What cannot be a rule is discriminatory; it seems as if it was designed to attack a single club. Newcastle’s complaint could rest on this ground. But the league can say it has been investigating tighter financial controls and controls for some time, and certainly before the Newcastle acquisition was completed. The league remains involved in a long-running investigation into whether City has violated financial fair play regulations. The city denies the wrongdoing. The rule change under discussion, although temporary, is an aggressive move and not without risks. The clubs seem to have adopted a safety-in-numbers approach. It is unlikely that Newcastle would have concluded major trade deals over the next month, but its rivals wanted to make their point, to indicate a direction of travel.
What will happen when the month ends?
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 at fair market value. The league will establish a task force, comprising a representative sample of clubs, to shape a consensus vision. Newcastle has been invited to join. The worst case scenario would be if Newcastle, or any other club, ended up on the wrong side of an additional vote. Would it be the reason for a legal challenge?
Why are clubs so concerned about Newcastle and related party transactions?
Because some of them, to put it bluntly, are paranoid about the success that City has had since it was bought by Sheikh Mansour of Abu Dhabi in 2008. They have seen City negotiate with companies linked to the emirate and have decided that they have offered the springboard. towards glory, and not the many football decisions the club has made well. There is an undeniable feeling that some clubs do not want Newcastle to ‘make a City’. It should be noted that City was acquitted last year in the court of arbitration for sport of “disguising capital funds as endorsement contributions.” The city maintains that the related party or not, its sponsorships have been of fair value.
What are the prospects for Newcastle to spend a lot immediately?
It is allowed within the league’s sustainability and earnings rules that Newcastle could invest more than £ 150 million in transfers next year, starting in January (with the usual caveats that it is a difficult window). This is because the club spent little with the previous owner, Mike Ashley, who has given them a credit within the rules of at least 45 million pounds sterling. In addition, clubs can incur losses of £ 105 million over a continuous period of three years. It would be a risky strategy to spend it all at once and it would mean that they would have to be sure they could break even in years two and three.
George is Digismak’s reported cum editor with 13 years of experience in Journalism