Arsenal stance on Man City case as new FFP problem emerges amid 'seismic' worry

have reportedly inflicted a damaging defeat in their war with the after an independent panel found that the rules on sponsorship deals were declared unlawful.

report the result has been described as 'potentially damaging' for the top-flight after the Competition Act rule was adjuged to have been breached. The Premier League are reported to have been wrong to stop two recent City deals.

The rules were unlawful because they did not take into consideration interest-free loans which shareholders lend to clubs. This decision impacts City's Premier League rivals, who rely on such loans and as a result, those rules could be changed.

As well as City, other clubs could also look to pursue compensation and costs from the Premier League for abusing its position - should they believe they have been impacted. Arsenal meanwhile, have more than £200million made up entirely of shareholder loans, which is potentially a seismic development.

The Premier League's stance was also backed by Arsenal, Liverpool, Manchester United, West Ham, Brentford, Bournemouth, Fulham and Wolves. A Premier League statement read: "The decision of an Arbitration Panel has been published following a legal challenge by Manchester City FC against the Premier League’s Associated Party Transaction (APT) Rules. The Premier League welcomes the Tribunal’s findings, which endorsed the overall objectives, framework and decision-making of the APT system.

"The Tribunal upheld the need for the APT system as a whole and rejected the majority of Manchester City’s challenges. Moreover, the Tribunal found that the Rules are necessary in order for the League’s financial controls to be effective. The decision represents an important and detailed assessment of the APT Rules, which ensure clubs are not able to benefit from commercial deals or reductions in costs that are not at Fair Market Value (FMV) by virtue of relationships with Associated Parties.

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"These Rules were introduced to provide a robust mechanism to safeguard the financial stability, integrity and competitive balance of the League. The Tribunal did, however, identify a small number of discrete elements of the Rules which do not, in their current form, comply with competition and public law requirements.

"These elements can quickly and effectively be remedied by the League and clubs. In the meantime, the Premier League will continue to operate the existing APT system, taking into account the findings made by the Tribunal. While the Arbitration process is confidential, the Premier League and the Club have agreed to make public a redacted copy of the decision, withholding only confidential and commercially sensitive information."

Meanwhile, a statement released by City, celebrating their successful claim, reads: "Following today’s publication of the Rule X Arbitral Tribunal Award, Manchester City Football Club thanks the distinguished members of the Arbitral Tribunal for their work and considerations and welcomes their findings," it began.

"The Club has succeeded with its claim: the Associated Party Transaction (APT) rules have been found to be unlawful and the Premier League’s decisions on two specific MCFC sponsorship transactions have been set aside. The Tribunal found that both the original APT rules and the current, (amended) APT Rules violate UK competition law and violate the requirements of procedural fairness.

"The Premier League was found to have abused its dominant position. The Tribunal has determined both that the rules are structurally unfair and that the Premier League was specifically unfair in how it applied those rules to the Club in practice.

"The rules were found to be discriminatory in how they operate, because they deliberately excluded shareholder loans. As well as these general findings on legality, the Tribunal has set aside specific decisions of the Premier League to restate the fair market value of two transactions entered into by the Club.

"The tribunal held that the Premier League had reached the decisions in a procedurally unfair manner. The Tribunal also ruled that there was an unreasonable delay in the Premier League’s fair market value assessment of two of the Club’s sponsorship transactions, and so the Premier League breached its own rules."