Newcastle United will have no issues pushing through a sponsorship deal with Saudi Arabia based company Sela if they agree the £25million a season offer that is on the table.
United have been around the table with a number of worldwide brands after a bidding process got under way earlier this year as firms battle it out to become the new sponsors. The deal will be the biggest in club history with Fun 88 about to end their agreement one year early.
Despite suggestions of scrutiny, one of the country's leading sports lawyers Stephen Taylor Heath, head of sports law at JMW Solicitors, told Chronicle Live: "The first thing to appreciate with regards to Newcastle United’s potential deal with Sela is that this will not receive the same type of scrutiny the current owners of Newcastle United encountered from potentially taking ownership in the first place.
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"A sponsorship deal with an ‘associated party’ to an ownership group is permitted within the rules and regulations of the competition, however the Premier League will not just accept any type of deal value – this is owed to the Premier League's Profitability and Sustainability Regulations.
"These rules have been implemented to avoid an owner seeking to circumvent financial rules by pumping money into a team with seemingly legitimate commercial partnerships. The Premier League initially placed a ban on connected deals in the wake of the Newcastle United takeover and this was widely seen as a compromise solution.
"If a club accepts that the commercial partner is an associated party or the league discovers that is the case, then the agreement has to be submitted for approval and will only be permitted to proceed at ‘fair market value’ upon assessment."
The sports lawyer added: "If the test applies and the Premier League adjudges that the deal value exceeds fair value, a club must either cancel the agreement or adjust the numbers involved which will be used for the purpose of assessing compliance with sustainability regulations.
"Any team will ultimately need to therefore make a commercial deal subject to Premier League approval."
There has been suggestions from rival clubs that Newcastle's ownership should be revised. But Taylor Heath says the Premier League have already ruled there are no extensive links to the Saudi government.
He said: "All deals over a certain value – known as a ‘threshold transaction’ – will have to be submitted to the league for scrutiny as to whether they have been agreed with an associated person or not at ‘arm’s length’.
‘Arm’s length’ refers to having not been negotiated properly and fairly, but if the Premier League is satisfied, the deal can proceed and the value does not need to be assessed. There is a three-part process for assessing ‘fair value’ which will then be used for the purpose of assessing a club’s compliance with the sustainability regulations.
"Such an assessment is potentially not without difficulty given the subjective nature of any review, even when it is based on an expert opinion and a large database of existing deals.
"It is also worth noting that certain elements of a commercial agreement might be difficult to value, while the assessment of whether a commercial partner is an ‘associated party’ may also not be straightforward.
"In the case of Newcastle United, the league will be mindful that it ruled the current owners were not linked with Saudi Arabia's government, while also noting that any inquiry may be extensive and require examination of ownership and business connections."
Taylor Heath also says the deal will aid Newcastle's challenge in the transfer market, he said: "If it is ruled that the sponsor is an ‘associated person’, the fair value of the deal for the purpose of assessment by the Premier League will be significantly inflated by Newcastle United qualifying for the Champions League.
"Once the deal is approved, this income then raises the bar for legitimate expenditure including, perhaps most notably, player acquisitions. Commercially it also raises the tariff value of other partnership deals and the overall market pricing of licensing a team’s Intellectual property and formal association.
"Securing a well-paid commercial deal can therefore have a snowball effect on future agreements – both those yet to be negotiated and those due for renewal."
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