Manchester City have launched legal action against the Premier League, a source has confirmed to ESPN.

City are challenging the Premier League's Associated Party Transaction rules (APT) claiming they are unlawful. A private arbitration hearing is scheduled to begin next week.

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City have accused the Premier League of "discrimination against Gulf ownership" and are also suing for damages, according to a report first published by The Times. City have been owned by the Abu Dhabi United Group since 2008.

ESPN has approached City and the Premier League for comment.

The Premier League's ATP rules, originally introduced in 2021 following the Saudi-backed takeover of Newcastle United, were tightened in February in an attempt to further regulate clubs signing sponsorship deals with companies linked to their owners.

All 20 Premier League clubs were informed at a meeting in February that one club had threatened to launch legal action in response to the rules.

Man City, who have deals in place with Etihad Airways, argue that sponsors should have the freedom to decide how much they want to pay rather than have a figure independently verified as offering fair market value. City, who have won the past four Premier League titles, believe the Premier League rules contravene competition law.

City have launched their legal action as they prepare to defend themselves against allegations that they have breached Premier League financial rules. The club was hit with 115 charges in February 2023 following a four-year investigation.

The hearing is set to start in November and, if found guilty, City could face punishments including a fine, points deduction or expulsion from the Premier League. Pep Guardiola's team has been crowned champions of the Premier League in six of the past seven seasons.

City have maintained their innocence since the charges were made public, with the club saying it will be backed up by "a body of irrefutable evidence."