Is this really the golden ticket Newcastle United have been waiting for? Is it now shackles off and spend, spend, spend?
Monday marked the third anniversary of Newcastle’s Saudi Arabian-led takeover and, for some of their supporters, celebrations intensified in the afternoon as the verdict of Manchester City’s independent arbitration case against the Premier League, relating to their associated-party transaction rules (APT), was published.
City had claimed a victory, leading some Newcastle fans to view this as a success for their club. Yet the Premier League also insisted it had emerged triumphant, creating a confused picture.
So was this a positive for Newcastle? Will they benefit from this case? And perhaps, most importantly, is this a game-changing moment? Can the Saudi Public Investment Fund (PIF) now channel limitless funds into Newcastle via lucrative commercial deals?
The simple answer is that, while Newcastle are likely to welcome the verdict, nobody at St James’ Park believes it will transform their blueprint.
The Athletic explains Newcastle’s pre-existing relationships with PIF companies and analyses what this verdict means for the club.
What is this case?
In June, champions City took the Premier League to independent arbitration, claiming the existing APT rules were unfair.
City’s argument is that existing financial fair play (FFP) regulations — which are called profit and sustainability rules (PSR) in the Premier League — unfairly hinder their ability to strike lucrative sponsorship deals because they limit relationships with partner companies with which they share owners.
Such potential sponsorship deals with ‘associated parties’ (APTs) must conform with ‘fair market value’ (FMV), which sees clubs submitting their costings to the Premier League to analyse whether the mooted deal complies.
Newcastle’s front-of-shirt sponsor is PIF-owned Sela (Jan Kruger/Getty Images)
City believe the regulations in their new guise — hardened shortly after the takeover of Newcastle in October 2021 — are anti-competitive and unlawful.
The judgment was a “partial award” to City, meaning some of their complaints were supported. While the panel was supportive of the concept of APT laws, believing them to be a necessary part of PSR, it did rule that three areas of the rules were unlawful and found procedural issues in how two of City’s applications were handled.
The panel also ruled that interest-free shareholder loans should also fall under APT laws.
For the full ins and outs, Jacob Whitehead has provided an explainer.
In simple terms, why is the City case relevant to Newcastle?
It was the Newcastle takeover on October 7, 2021, that rapidly accelerated the introduction of far more stringent APT and FMV rules.
Premier League rivals feared that, given PIF’s wealth, Newcastle could emulate City’s rapid commercial expansion under their Abu Dhabi-based owners. If PIF ploughed money into Newcastle via sponsorship deals, then it could massively expand the club’s spending within the PSR limits, with some members worrying about an apparent circumnavigation of the rules.
The tightening of APT legislation in late 2021 was a direct response, an attempt to prevent Newcastle from doing what City have done since being taken over 16 years ago with their Etihad agreements and deals with other companies linked to their owners.
From the start, Newcastle always insisted this was not their plan, yet they were surprised and affected by the rush to change the regulations.
City’s case is relevant to Newcastle because they were the very club others had in mind when trying to limit the rise of APT deals.
Newcastle are mentioned 15 times in the verdict. Why?
Across the 175-page arbitration verdict, Newcastle are named 15 times across nine separate references.
The first of these relates to a meeting of the ‘Legal Advisory Group’ (LAG), which features in-house lawyers from some Premier League clubs, on October 18, 2021. In the minutes of that meeting, it is essentially confirmed that Newcastle’s takeover “accelerated” the tightening of PSR rules, which the Premier League had been exploring since 2018.
The second mention confirms that, on November 11, 2021, Newcastle were the only member club to vote against a motion to suspend new APT deals until November 30 of that year, while City abstained and the other 18 teams were in favour. Then, at a shareholders’ meeting, also on November 11, 2021, Newcastle were the only club to abstain on a vote about FMV, with City and the other 18 in favour.
The 2021 takeover prompted celebration in Newcastle — but concern among rival clubs (AFP/Getty Images)
City also cited “fear-mongering about the takeover of Newcastle United at the end of 2021” for the rush to bring in stronger financial controls, given that Richard Masters, the Premier League’s chief executive, first sent an email to clubs regarding a discussion about PSR on October 15, 2021, just eight days after the PIF-led takeover.
The panel then “accepted” the Newcastle takeover itself was “the catalyst” for consultation over the hardening of the rules. It rejected the suggestion APT rules were “targeted specifically at clubs owned by companies in the Gulf region”, however, insisting the timing of the takeover, rather than the actual identity of the new majority owners, was the crucial factor in speeding up reform of the regulations.
The final two references to Newcastle relate to the club being called as “witnesses of fact” by City, and also in providing “written statements” for the claimant.
Although the specific identity of those who provided evidence is redacted and Amanda Staveley is not actually named, she was asked to do so as she was a co-owner of Newcastle and her company had the management contract to run the club at the time the rules were introduced. Staveley departed her position as a 10 per cent co-owner of Newcastle in July this year.
Why did Newcastle act as a witness for City?
With Newcastle not commenting, it is hard to provide a definitive answer here.
For part of it at least, Newcastle were merely called a “witness of fact”, which suggests they may have been providing clarification on specific facts or events. But given Newcastle were also the only club to provide written evidence on behalf of City — while West Ham United, Manchester United, Liverpool, Tottenham Hotspur and Arsenal all did so on behalf of the Premier League — then they were at least cooperative.
Although it would be a stretch to conclude that Newcastle were supporting City’s claim, it does imply partial backing. If that is the case, self-interest is surely a motivating factor for Newcastle, given they can arguably benefit most from it.
One club source — speaking on the condition of anonymity to protect their position — described Newcastle as “interested onlookers” when news of City’s case first broke. It is easy to understand why.
What APTs do we know about at Newcastle?
Two PIF-owned brands feature on Newcastle’s kit. Another is their “official airline partner”, and they even released a video this year of striker Alexander Isak “driving” a Formula E car through their home city.
Yet there is no equivalent of City’s Etihad Stadium or broader Etihad Campus. St James’ Park, the Benton training ground and their training kit all remain without dedicated sponsors.
This helps explain why, in Newcastle’s most recent accounts, for 2022-23, as commercial revenue increased 66 per cent from £26.5million ($34.7m at present exchange rates) to £43.9m, the club “recognised” annual income totalling £6.71m “from fellow subsidiary and associated undertakings” of PIF.
That only accounts for 38.5 per cent of their year-on-year commercial uptick.
That is almost exclusively covered by their Noon shirt-sleeve sponsorship deal, which has been in place since 2022. Noon is the Gulf’s largest online retailer and the subject of a special report by The Athletic into allegations of serious worker mistreatment in its supply chain. But Newcastle also featured in the Diriyah Cup played in Saudi Arabia in December 2022 while the World Cup was taking place in neighbouring Qatar. Saudia was their “official tour airline operator”.
Interestingly, for the 2021-22 season, Newcastle did not declare anything in sponsorship from associated parties. That can partly be explained by the takeover only being completed two months into that campaign, meaning pre-existing commercial deals — including with Fun88, which was the front-of-shirt partner, and Kayak, the sleeve sponsor — were already in place, while Peter Silverstone, the chief commercial officer, was only appointed in October 2022.
Yasir Al-Rumayyan, pictured playing golf at an event in Scotland last week, is governor of the PIF and Newcastle’s chairman (Richard Heathcote/Getty Images)
However, for the 2023-24 accounting period, Newcastle should show a significant increase in APT revenue.
Sela, a PIF-owned events company, has replaced Fun88 as shirt-front sponsor and that deal brings in approximately £25million a year, a significant uplift on the previous £7m-a-year deal that was due to run until 2025 but was terminated early. Their relationship with Saudia was also expanded and extended last October, so that the company became the club’s “official airline partner” in a “multi-year” deal.
Then, for 2024-25, further income from the Stack — the fan zone located on Strawberry Place behind the Gallowgate End of St James’ that opened in August — will be present, given it is “powered by Sela”, in the words of the club. Further deals with PIF-affiliated companies could also be announced during this season, with suggestions some are already being worked on.
Newcastle have benefitted from their majority owner’s vast portfolio of companies, yet none of these partnerships have been straightforward to conclude. Each one has been arduous — and not only because of PIF’s “process-driven” approach, which means nothing happens quickly.
More challenging has been the fact Newcastle have needed to conduct shadow negotiations with other non-PIF companies to prove FMV, so that their deals would be ratified by the Premier League. Given Newcastle were facing relegation before the takeover, the FMV of their potential deals was initially significantly lower than it would have been once they qualified for the Champions League in 2022-23.
In the Amazon Prime documentary We Are Newcastle, Newcastle made contact with 1,193 companies, met 65, and got to advanced negotiations with multiple firms, before settling on Sela. Explaining the decision, Silverstone said: “It’s about what it’s going to do for our fan growth in Saudi. I want us to be the most supported club in Saudi. Having a Saudi brand will grow that fanbase, which means more commercial revenue.”
Newcastle recognise the value of PIF-related deals, but those partnerships only account for a portion of their rapid revenue growth.
What is the club’s stance on their links to Saudi-owned companies?
Let’s take a step back.
When Newcastle’s takeover was ratified, it came as a shock. After months of limbo, the new owners did not have a detailed plan ready, whether that was replacing manager Steve Bruce or bringing in lucrative sponsorship deals. In many respects, they were starting from scratch.
The Premier League’s initial blanket ban on all APT deals and then a swift changing of the rules were in direct response to Newcastle’s new-found (theoretical) wealth, yet — from the club’s perspective — it represented a misunderstanding of their model. In the same way they were never going to make blockbuster signings of big-name players, gaming the system with Saudi commercial partners was never on the agenda, they say.
“Initially, there was a lot (of hostility),” Staveley told The Athletic two years ago. “But I’m on the (Premier League’s) financial fair play committee and I said, ‘You won’t find a raft of related-party transactions, because this was not our business plan’.
“We said, ‘We’re not what you think we are’, and other clubs are getting to know that. We want to be transparent about the way we do business.”
Back then, Staveley said the Premier League had devised a “set of rules that we can work with”. She continued, “I’ve always known we will be able to show fair market value for our sponsorship rights. We’re getting offers for sponsorship that are probably outbidding potential Saudi sponsors.”
Mehrdad Ghodoussi, Staveley’s husband and then fellow co-owner, said: “There’s nothing specific telling us it has to be Saudi. We wanted to do it the right way. Did we plan to bring in a ‘dodgy’ deal for £100million? Not at all.”
When the couple left the club this summer, Staveley’s stance was unchanged. “It was important to do what was right, fair and legal,” she told The Athletic. “I can always see things from other clubs’ points of view, and we wanted to build relationships with them. I never thought we should just rely on related-party deals, because the only way to build a really successful brand is to attract global partners.”
Ghodoussi and Staveley were thanked by fans after their summer departure (Alex DoddCameraSport/Getty Images)
Yet Staveley indicated she would give evidence in Newcastle’s favour if asked to in this case, which she subsequently did. Even if there was no quick fix available to them post-takeover and even if it was not their big idea, there is little doubt that the APT changes hemmed them in further after a decade and more of little growth and minimal investment.
“I’m leaving Newcastle, but it is important that we support that wonderful place as much as we can,” she said.
“The Premier League are in a difficult position because they’re lobbied by so many clubs, but it was hard on Newcastle. We were in such a tough hour and we’d come from nowhere and didn’t have a huge amount of revenue anyway. It wasn’t as if we had a load of valuable players to sell. So this was important.”
Will the City case change Newcastle’s strategy?
Newcastle had received no advanced notice of the outcome and, for some at the top of the club, there was a combination of surprise and no immediate sense of what it might mean (officially, the club declined to comment).
If their initial response can be boiled down to a simple phrase it would be this: good news, but probably not a game-changer in terms of revenue.
With both sides claiming victory from a nuanced, complicated, 175-page judgment, the full ramifications are unclear. The upshot may not come until the tribunal panel provides further clarity on their ruling, which City’s legal counsel, Simon Cliff, said both the club and the Premier League agree needs to happen.
Theoretically, though, there are a few ways Newcastle could benefit from the areas City made headway in, even if PSR and APT are not set to be struck down in total, with the judges concluding that the FMV regulations, as written, were “clearly defined, transparent and non-discriminatory”.
“The restrictions on having to show there were other bidders for every commercial deal have gone, and that’s a big thing,” claimed one source with knowledge of the situation, who was granted anonymity to speak freely about sensitive topics.
In other words, if Newcastle wanted to do a deal with a Saudi company, they would not have to hold parallel discussions with other businesses to prove FMV. This would save time and effort and perhaps bump up the numbers, albeit there would still be “checks and balances”.
While Staveley and Ghodoussi said in 2022 that they did not have a raft of Saudi-based deals ready to go when the takeover was ratified, there is also the potential for Newcastle to claim compensation on deals they missed out on. City may seek damages following the rejection and delayed approval of their deals, so Newcastle could do likewise if they feel that has happened, but that is unlikely to bring in tens of millions.
Perhaps of greater significance is how the Premier League responds to the tribunal’s ruling that shareholder loans should count as APT.
While this does not affect Newcastle directly — six injections of capital by the owners post-takeover, totalling £302.9million, have been in the form of equity rather than loans — it does affect plenty of their rivals and theoretically will make it more difficult for them to hit their PSR targets. Perhaps this would serve to level the playing field.
Newcastle’s takeover was always going to be a huge moment for their fans after the disharmony and inertia of the preceding Mike Ashley era. It was always going to be a huge moment for the Premier League, given it meant the arrival of a huge, controversial sovereign wealth fund that had the potential to disrupt everything.
As supporters everywhere get to grips with more legalese and familiarise themselves with yet more abbreviations — FFP, VAR, PSR, FMV and APT — three years down the line, there has been an unintended consequence, one that Newcastle have been on the periphery of.
It has led the English top flight towards civil war.
Additional reporting: Jacob Whitehead
(Top photo: Manchester City manager Pep Guardiola and Newcastle counterpart Eddie Howe; Stu Forster/Getty Images)
