Manchester City, compensation and the limitation clock

An independent commission has found Manchester City guilty of breaching the Premier League's financial rules over nine seasons, from 2009-10 to 2017-18, and of most of the charges of failing to co-operate with the League's investigation. City denies wrongdoing and has said it will appeal.

Most of the coverage has focused on points deductions. Martin De Ridder, Managing Director of Ansons Law, who works in our Dispute Resolution team, looks at a different question: can rival clubs sue City for lost titles, lost European places and lost revenue, and are they still in time? Martin handles commercial, shareholder and insolvency disputes, where limitation is often the first battleground.

Key takeaways

• The verdict decides City's guilt under the rules. It does not decide whether any rival club can recover compensation. Each club has to prove its own claim.
• The breaches date from 2009 to 2018, so the ordinary six-year limitation period for breach of contract has expired.
• Clubs will have to rely on section 32 of the Limitation Act 1980, which delays the start of the clock where facts have been deliberately concealed.
• Arsenal, Liverpool, Manchester United and Tottenham are reported to have lodged formal notices in November 2024 to preserve their position. Other clubs may have left it too late.
• A club that is in time still has to prove that City's breaches caused its loss, which is a hard exercise over nine seasons.

Can one club sue another for breaking league rules?

Yes. Clubs sign up to the league's rules, and those rules operate as a contract between the clubs. A breach of the rules can therefore be a breach of contract owed to every other club.

The leading example is Sheffield United v West Ham. In 2007 West Ham survived relegation after fielding Carlos Tevez in breach of the rules on third-party ownership, and Sheffield United went down. An arbitral tribunal chaired by Lord Griffiths held in September 2008 that Sheffield United was entitled to damages for breach of contract (Sheffield United Football Club Ltd v West Ham United Football Club plc [2008] EWHC 2855 (Comm)). The clubs settled in March 2009 for a reported £20 million.

More recently, Burnley is reported to have been awarded £35 million against Everton, on the basis that Everton's breach of the profitability and sustainability rules contributed to Burnley's relegation. The principle is established. The question in City's case is whether the clubs can still use it.

Why does limitation matter so much here?

Under section 5 of the Limitation Act 1980, a claim for breach of contract must be brought within six years of the breach. The latest breaches found against City were in the 2017-18 season. On the ordinary rule, the last of those claims expired in 2024.

These claims are likely to be heard in arbitration under the league's own rules rather than in court. That does not avoid the problem. Section 13 of the Arbitration Act 1996 applies the Limitation Acts to arbitration in the same way as to court proceedings. Under section 14, time stops when the arbitration is commenced in the way the parties have agreed.

The practical point is that a letter reserving your rights does not stop the clock. Only commencing proceedings, or a signed standstill agreement, does that. Whether the notices lodged by the four clubs in November 2024 were enough to commence proceedings under the league's rules is likely to be the first argument in any claim they bring.

How does section 32 help the clubs?

Section 32(1)(b) of the Limitation Act 1980 provides that where a fact relevant to the claimant's right of action has been deliberately concealed by the defendant, time does not begin to run until the claimant has discovered the concealment, or could have discovered it with reasonable diligence.

Section 32(2) adds that deliberately committing a breach of duty in circumstances where it is unlikely to be discovered for some time counts as deliberate concealment.

The Supreme Court considered both provisions in Canada Square Operations v Potter [2023] UKSC 41. It held that a defendant can conceal a fact without being under any duty to disclose it, and that "deliberate" means intentional. Recklessness is not enough.

The Court of Appeal in Arcadia Group Brands Ltd v Visa Inc [2015] EWCA Civ 883 confirmed that a concealed fact must be essential to pleading a complete cause of action, rather than merely evidence strengthening an existing claim. If the source of City's funding was an essential fact without which a club could not plead its cause of action, the commission's findings may support an argument under section 32(1)(b). That would depend on what those findings revealed, and when the club discovered or could with reasonable diligence have discovered it.

When did the clock start?

This is where any claim will be won or lost. The Court of Appeal held in Gemalto Holding BV v Infineon Technologies AG [2022] EWCA Civ 782 that time runs once the claimant knows, or could with reasonable diligence know, enough to have a reasonable belief that it has a claim, sufficient to justify taking the first steps towards proceedings. The test comes from the Supreme Court's decision in Test Claimants in the FII Group Litigation v HMRC [2020] UKSC 47. It does not require certainty, and it certainly does not require a verdict.

The timeline is:

• November 2018: Der Spiegel publishes leaked internal City emails.
• February 2020: UEFA bans City from European competition for two seasons.
• July 2020: the Court of Arbitration for Sport lifts the ban, finding some allegations time-barred under UEFA's rules and the allegation of disguised owner funding not established.
• February 2023: the Premier League brings its charges.
• September 2026: the commission finds City guilty.

The four clubs' notices in November 2024 came six years after the Der Spiegel publications. That suggests their advisers treated November 2018 as the latest point at which time could have started.

A club that did nothing will argue the opposite. After the Court of Arbitration for Sport rejected the disguised funding allegation in 2020, no reasonable club could have believed it had a viable claim until the Premier League charged City in 2023, or even until the commission ruled. City will reply that the leaked emails were detailed and public, and that the test is reasonable belief, not proof.

Can a club prove City cost it a title?

Even a claim that is in time must prove causation. Where loss depends on what would have happened in a world that never existed, the court assesses the loss of a chance. Under Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602, the claimant must show a real and substantial chance of a better outcome, and damages are reduced to reflect the percentage chance.

Sheffield United and Burnley each argued about a single season and a single outcome: relegation. A claim against City covers nine seasons, dozens of transfer windows and a squad built over a decade. A club would need to show how City would have performed on a compliant budget, and then where it would itself have finished. That is expert evidence on a scale no tribunal has yet seen.

What should businesses take from this?

The same rules apply to any commercial claim, not just football.

• Reserving your rights does not stop time running. Issue proceedings or get a standstill agreement signed.
• Do not wait for a regulator, an investigator or another party's case to finish before protecting your own position.
• Work out limitation from the earliest date you had reasonable grounds to believe you had a claim, not the date you could prove it.
• If you may need to rely on section 32, keep a record of what you knew and when.

How we can help

Our Dispute Resolution team, led by Jason Alcock, acts on commercial, shareholder and insolvency disputes. Limitation is the first question we ask on any new claim, and we regularly put standstill agreements and protective proceedings in place for clients.

If you need advice on a commercial dispute or a claim that may be running out of time, please fill out the contact form on this page, email info@ansons.law or call 01543 267988 and a member of our Dispute Resolution team will get back to you.

This article is for general information only and does not constitute legal advice. Specific legal issues always require the advice of a qualified legal professional.