Manchester City's alleged PSR breaches: what are the options for other clubs if there has been a breach?

Dispute resolution and football are increasingly natural bedfellows. The amounts at stake at the top end of the English game are such that, in addition to traditional on and off field tactics, well advised clubs are considering their legal rights as part of their overall strategies.

With this in mind, many clubs (and football fans and pundits) are keenly awaiting the determination of an independent Commission on the question of whether Manchester City breached the Premier League's Profitability & Sustainability Rules (PSRs), among various other breaches alleged by the Premier League.

We do not know when the outcome will be communicated, but given that the 12-week hearing now concluded over four months ago, it is reasonable to expect a decision in the near future.

If the Commission finds that Manchester City did breach the PSRs, the club could face sanctions ranging from fines to points deductions - and even expulsion from the league. Could they also face claims for compensation from rival clubs and how would those claims work?

The contractual framework

Each of the Premier League's clubs agrees to be bound by and to comply with the Premier League Rules (the PL Rules). The PL Rules serve as a contract between the Premier League and its clubs, and also between the clubs themselves.

Section X of the PL Rules provides that all disputes arising between clubs, including those arising from decisions of the Commission, are to be submitted to arbitration. So, unless the potential claimant clubs can find a reason why their claims fall outside the scope of the PL Rules, any dispute would be heard before an arbitral tribunal constituted under the PL Rules, avoiding the public scrutiny and wider disclosure obligations inherent in High Court litigation.

It has been reported that four clubs – Manchester United, Liverpool, Arsenal and Tottenham Hotspur – formally registered potential claims under the PL Rules in November 2024¹. In doing so, they have (wisely) taken a conservative approach to potential limitation arguments in circumstances where the substance of the alleged PSR breaches first surfaced six years prior with Der Spiegel's 'Football Leaks' publication. 

The factual background

The Premier League alleges that Manchester City breached the PSRs in each of the seasons between 2015/16 and 2017/18 (inclusive). In those Premier League seasons, Manchester City finished:

• 4th in 2015/16, level on points with Manchester United in 5th but ahead on goal difference, meaning City qualified for the following season's UEFA Champions League but United did not. Southampton finished just three points behind in 6th, and West Ham United four points behind in 7th. Liverpool finished six points behind, in 8th, and did not qualify for European competition.
  
  
• 3rd in 2016/17, three points ahead of Arsenal in 5th who, as a result, did not qualify for the following season's UEFA Champions League.

• 1st in 2017/18, 19 points ahead of Manchester United in 2nd. Chelsea finished 30 points behind in 5th.

Among Manchester City's numerous signings in those seasons were Kevin De Bruyne, Raheem Sterling, John Stones, Leroy Sané, Aymeric Laporte, Kyle Walker, Bernardo Silva and Ederson.

Later seasons – in which Manchester City are not alleged to have breached PSRs, but in respect of which rival clubs might say City benefitted through the use of players signed (in alleged contravention of the PSRs) in previous seasons – were similarly close. City won the Premier League in 2018/19, finishing one point ahead of Liverpool. Fans will remember – with fondness or abject horror, depending on allegiances – the goal-line clearance by John Stones in that season's fixture at the Etihad Stadium.

In other words, the seasons in which Manchester City are alleged to have breached the PSRs (and the seasons that followed) were, for the most part, very tight. Rival clubs lost out on Premier League titles and European qualification by extremely fine margins.

What remedy would rival clubs be seeking and what would they need to prove?

The general rule in contractual claims is that an award of damages should place the claimant in the same position as they would be in if the contract had been performed properly. If Manchester City are found to have breached the PSRs, the question would be: What position would Club X be in if Manchester City had complied with the PSRs? The position of claimant Club X would be, put simply, that they would have finished in a higher league position – above Manchester City – and would have earned more through, at the very least, Premier League prize money and European qualification. 

There are, however, various stumbling blocks for a potential claimant.

Causation

First, there must be a causal connection between the alleged breach of contract and the claimant's loss. Moreover, the breach of contract must be the effective or dominant cause of the loss. The fundamental question would be: Is Manchester City's alleged overspending the dominant reason for Club X finishing the season below them?

The position of the claimants might arguably be one of simplification: sport is decided by extremely fine margins – an offside toe here, or a goal-line clearance there – and it goes without saying that better players, paid for by higher transfer fees and salaries, provide a significant competitive advantage. If Manchester City had complied with the PSRs, they wouldn't have been able to sign players of the quality that they did – and wouldn't have finished with as many points as they did.

For Manchester City, the opposite is probably true: the more complicated, the better. Money doesn't necessarily translate to on-field success; the Premier League is littered with examples of expensive signings who flopped, and bargain-buys that became world-beaters. Indeed, in the first season in which City are alleged to have breached the PSRs – 2015/16 – the Premier League title was won by Leicester City, with Jamie Vardy, signed from Fleetwood Town for a fraction of the price of Kevin De Bruyne, scoring the bulk of their goals.

Depending on the available factual evidence, there may be further arguments available to Manchester City on causation: for instance, in a counterfactual scenario in which they complied with the PSRs, would they have made cost savings in other areas of the business, thereby minimising the effect on transfer fees and player salaries? Do the slip-ups of their rivals during the seasons in question effectively break the 'chain' of causation? (Football-loving members of the bar would, we are sure, relish the opportunity to cross-examine a pundit, on oath, as to whether Sadio Mané has got to score there in the seconds preceding Mr Stones' goal-line clearance. This is perhaps not an outlandish suggestion when one considers that there is precedent: former Arsenal goalkeeper Bob Wilson gave expert evidence on Bruce Grobbelaar's performances in goal during libel proceedings against The Sun).

Remoteness and quantum

A claimant would also have to satisfy the test for remoteness: was the particular loss within the reasonable contemplation of (i.e. foreseeable to) the parties? In other words: at the time of contracting, on the assumption that the clubs in question foresaw the PSR breaches in question, was the type of loss claimed within their reasonable contemplation as a "not unlikely" result of the breach?

That might be obvious in respect of Premier League prize money, sums of which vary according to final league position, or even European qualification, which results in huge financial rewards for participating clubs. But what about money from sponsors? Would it have been foreseeable to Premier League clubs that if one finished lower in the league as a result of another's PSR breaches, that club would lose out in respect of upcoming sponsorship deals or bonus payments from existing deals? Would those higher payments be offset by bonus payments that the club would have been obliged to make to its players for finishing in a higher league position, or for qualifying for European competition, or for winning the Premier League?

Conclusions

These are difficult issues and – compounding the complications of legal analysis – there is an absence of case law that might assist our understanding of how they might be determined by a tribunal. We know that similar issues of causation and remoteness would have been considered by the arbitration tribunal in proceedings between Sheffield United and West Ham United relating to the latter's illegitimate 2006 signing of Carlos Tevez, and their Premier League survival at Sheffield United's expense. That was a confidential arbitration which resulted in a settlement between the parties, and in any event the findings of that tribunal would not be binding in future proceedings. It is also reported that Burnley have commenced proceedings against Everton concerning Everton's PSR breaches and Burnley's relegation in 2021/22. Again, those proceedings are confidential.

However, in the event that Manchester City are found to have breached PSRs, there are good arguments available to Premier League clubs seeking compensation for losses caused by those breaches, and it would not be at all surprising to see proceedings commenced. As referred to above, this is also reflective of the more litigious culture that has emerged in sports, and football in particular, over recent years. Whether or not Manchester City are found to have breached PSRs, we can expect to see more legal proceedings between clubs, and between leagues and clubs, in the coming years.