Saudi Salvation! Premier League Lifts Ban On ‘Related Party’ Club Sponsorship Deals

Saudi Arabia Investment CompassWhile their team flounders on the pitch, Newcastle United’s new Saudi owners can rejoice after the Premier League lifted the ban on ‘related party’ commercial deals.

It means that the Public Investment Fund, who own a controlling stake in the Magpies, can now strike partnerships with other cash-rich firms in the Middle East – or even dip into PIF’s existing pool of investments, which include Boeing, Facebook and Disney.

It’s something of a controversial move, given that these sponsorship deals have been accused of ‘massaging’ financial fair play positions in the past – Manchester City got into hot water with FFP when they tried to hide an overspend on transfer fees and wages behind an increased sponsorship payment from Etihad.

Those rules dictate that a club cannot lose more than £105 million over a three-year window, although some have been accused of keeping on the right side of that figure by securing greater investment from commercial partners – often from firms associated with the owners.

But now, after a meeting between representatives of each of the 20 Premier League clubs – including Magpies chief executive Amanda Staveley, the temporary ban on ‘related partner’ deals has now been lifted following a vote – if sponsorship agreements can be agreed in the next couple of weeks, Newcastle boss Eddie Howe could be given an almighty war chest to spend in the January transfer window.

Fair Market Value

Magnifying Glass on Business Chart

Prior to the ban being lifted, Staveley had commented:

“This moratorium was so difficult for us. We’ve really taken a big battering. And so I’m hoping that we’ll get this lifted as quickly as possible.

“The moratorium was a shock. We did not expect that to happen. How could you imagine that all commercial deals would be off?”

That veto had been in place since October, when 18 clubs voted to ban such agreements – a direct response to the Saudi takeover of Newcastle. But now such deals will be allowed again, but only after they have been approved by the Premier League as representing ‘fair value’.

The actual parameters for what constitutes value have not been revealed, however it’s believed that a baseline figure will be calculated around what a club would likely be able to generate in sponsorship revenue from non-related partners. A database will be created with similar deals, and the Premier League may even call upon independent adjudicators to decide on sponsorship deals that breach the fair market value calculation.

Another new rule will ensure that clubs have to volunteer information about any extra payments to players and managers that come from companies that sponsor the club – closing another loophole that enables higher wages to be paid without adding to the FFP calculation.