Man City are apparently going after the PL. Basically, they're arguing that the Fair Market Value (FMV) rules are unlawful. The FMV rules are designed to maintain the competitiveness of the Premier League by preventing clubs from inflating commercial deals with companies linked to their owners. The rules dictate that those sponsorships have to be independently assessed to be of "fair market value". City are arguing that this is unlawful and discriminatory towards Gulf owners. Conveniently, they are currently under investigation for this very thing. Basically, the TL;DR of this is that City are arguing a certain set of rules are unlawful, which also happen to be the main rules they've been accused if actually breaking.
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This also probably a tactic to bog down the FA/PL legal teams and delay anything to do with the 115 charges they currently have.
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Millions are being spent on legal fees to fight this case. One senior club source says the Premier League's legal bill has more than quadrupled in the past year, from about 5million to north of 20million. They also point to the fact that since February the Premier League's own legal department has been forced to shift its focus to this claim when it is also trying to prepare for the hearing into City's 115 charges. "This is clearly a tactic," the source said.