English Premier League clubs held an emergency meeting where they proposed the draft of a rule that would temporarily ban related party transactions.
The move which will put a ban on deals involving existing business relationships will prevent Newcastle United from striking lucrative sponsorship deals with companies linked to their new Saudi ownership, according to The Independent.
It is believed that the clubs did so on the basis of legal advice that the process was unlawful.
Why the clubs gathered for the vote
Following the £300 million takeover of Newcastle United by Saudi Arabia Consortium which ended the 14-year ownership of the club by Mike Ashley, Premier League clubs gathered for the vote amidst fear that Newcastle wealthy owners would strike sponsorship deals with companies in their owner’s kingdom (Saudi Arabia) that could give them an advantage.
According to The Guardian, Premier League clubs are concerned Newcastle United will utilise friendship sponsorship deals with parties related to their owners to help it comply with the Financial Fair Play (FFP) rule that are in place to prevent rich clubs from spending unchecked.
Under league rules, clubs are allowed to make losses of £105million over a rolling three-year period.
How they voted
The meeting which took place online saw 18 clubs that voted in favour of the new rule to put a temporary ban on related party transactions for a month while the possibility of it being a permanent one is in discussion.
Newcastle United represented by their incumbent managing director, Lee Charnley voted against the rule and made it clear at the emergency meeting that such rule should be considered anti-competitive. He also made it clear that his club had legal advice to say that the rule was unlawful.
Manchester City-owned by Abu Dhabi United Group abstained from voting for or against the rule. It is understood that they didn’t vote on the basis of a legal advice that the process was an unlawful one. It is also believed that such rule won’t be in their favour as they have benefited from related party transactions in the past. An example is when the Abu Dhabi government-owned carrier, Etihad Airways sponsored them.
The rule will be in force for the next month – and it will apply to all 20 clubs – but many of them want it or something similar to become a permanent feature.
