Man City case has just raised big question about Everton and £300m compensation claim

Everton and Manchester City have become somewhat unlikely allies in recent years, united by their mutual distaste for the Premier League.

Man City are currently in the middle of their hearing with the Premier League for 115 alleged instances of financial misconduct, which they have always denied in the strongest possible terms.

In what is widely seen in the world of football finance as a counter attack, City also challenged the Premier League’s Associated Party Transaction rules in the arbitration courts recently.

The APT rules were introduced after the Saudi Public Investment Fund bought Newcastle United in 2021 and are designed to stop club signing inflated commercial deals with owner-linked entities to bypass PSR.

Everton gave evidence in the APT case in favour of City.

Their issues with the Premier League are well documented, with the Toffees becoming the first team to be sanctioned under the Profit and Sustainability Rules (PSR) that have been in place for over a decade.

Everton are set for a third PSR hearing later this year, which will see an independent commission rule on whether the interest on loans that were taken out to build their new stadium are exempt from PSR.

If not, Everton could be looking at a third points deduction in two seasons.

So while they have lived in different universes in terms of performances on the pitch in recent seasons, Everton and City have been front and centre of the regulatory civil war that has gripped the league.

Position	Team	Played MP	Won W	Drawn D	Lost L	For GF	Against GA	Diff GD	Points Pts
1	LiverpoolLiverpool	11	9	1	1	21	6	15	28
2	Man CityManchester City	11	7	2	2	22	13	9	23
3	ChelseaChelsea	11	5	4	2	21	13	8	19
4	ArsenalArsenal	11	5	4	2	18	12	6	19
5	Nottm ForestNottingham Forest	11	5	4	2	15	10	5	19
6	BrightonBrighton	11	5	4	2	19	15	4	19
7	FulhamFulham	11	5	3	3	16	13	3	18
8	NewcastleNewcastle	11	5	3	3	13	11	2	18
9	Aston VillaAston Villa	11	5	3	3	17	17	0	18
10	TottenhamTottenham	11	5	1	5	23	13	10	16
11	BrentfordBrentford	11	5	1	5	22	22	0	16
12	B’mouthBournemouth	11	4	3	4	15	15	0	15
13	Man UtdManchester United	11	4	3	4	12	12	0	15
14	West HamWest Ham	11	3	3	5	13	19	-6	12
15	LeicesterLeicester	11	2	4	5	14	21	-7	10
16	EvertonEverton	11	2	4	5	10	17	-7	10

And the latest developments from Premier League HQ might suggest that the fight is not over for either team – not by a long shot.

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Are Everton still facing PSR compensation claim from rivals?

This week, The Times reported that Liverpool, Man United, Tottenham and Arsenal have reserved the right to seek compensation if Man City are found guilty of 115 charges.

Essentially, if City are deemed to have gained an unfair sporting advantage as a result of breaching PSR, the quartet will argue that it has impacted their prize money, commercial income and so on.

They would be entitled to under Premier League Rule W.51.5, which reads: ‘The Commission may order the Respondent to pay compensation unlimited in amount to any Person or to any Club.’

While Everton’s strained relationship with the Premier League means they will likely be backing City in the fight, the citing of Rule W.51.5 also raises what could still be an outstanding issue on Merseyside.

When it emerged that Everton had breached PSR in 2021-22 and 2022-23, some of the clubs relegated across those seasons used W.51.5 to file a compensation claim against them.

The claim itself was confirmed in publicly available documentation, while reports at the time said that it could be worth up to £300m in total.

Some suggested that the threat of sending Everton into administration with the claim had deterred the clubs, but experts, including former Man City adviser Stefan Borson, said that clemency was very unlikely.

There has still been no update and, until Everton release their 2023-24 accounts early next year and clarify whether it is still a going concern, the outcome of the case will continue to be unpublicised.

• READ MORE: Everton’s Mario Balotelli talks disclosed as Farhad Moshiri ‘wanted to pull out his wallet’

PSR overthrown? The significance of the APT case for Everton and Man City

While such cases rarely yield a decisive outcome, both the Premier League and City claimed victory in the APT case.

The consensus among legal experts is that City are the happier of the two parties with the outcome – but that is far from a universal view.

What is certain is that the Premier League needs to rewrite its APT rules as a result, with clubs set to vote on the amended rules next Friday, 22 November.

The databank – the private database of all commercial deals signed by clubs, previously used by the Premier League to assess fair market value – will likely now be accessible by all Premier League clubs.

That could theoretically give clubs like City and Everton the insights needed to strike the very biggest deals possible within the ambit of fair market value.

Soft loans – interest-free loans from shareholders used as an alternative to equity investment – are also likely to change, with the funding mechanism now considered a subsidy under PSR.

A commercial interest rate will probably be applied for PSR purpose from here on out.

Everton have more soft loans than anyone else in the Premier League with £451m, but they are treated as equity investment in their accounts.

In any case, Dan Friedkin’s imminent takeover will likely make soft loans a non-issue for Everton, with the decks set to be cleared upon the club being sold by Farhad Moshiri.

Ultimately, the APT case does represent a sea change in the Premier League civil war and was a PR win for City, but it will not be the end of PSR as we know it.