If a single 2018 incident demonstrated just how disjointed Formula 1 has become, it was the Haas versus Force India protest filed late on Thursday in Abu Dhabi.
However, Force India’s victory actually represents a defeat as we outlined here immediately after verdict. The road map of the mess F1 found itself in has been detailed in these pages since Force India plunged into administration at end-July. But these are the symptoms, not the cause.
Consider the essence of the matter: In order to prove a (Liberty Media) commercial breach, Haas turned to FIA-appointed stewards to protest the eligibility of cars on sporting grounds. They disputed whether Force India held exclusive rights to its technology after plunging into an administration which was triggered by a driver’s unpaid 2017 wages.
Why this process? Because the “exclusive right” clause is demanded in the Sporting Regulations (appendix six) but detailed in a bilateral agreement entered into between Force India’s former owners and commercial rights holder Formula One Management, in turn owned by Liberty Media. All teams are party to such agreements with the commercial rights holder – the mere fact that these are not multi-lateral agreements tells its own story.
Indeed the FIA had never seen, nor been party to, any bilateral (or had sight of them individually or collectively) as the sport’s governing body is specifically excluded from involving itself in commercial matters by decree of the European Union. Yet the stewards (FIA-appointed, but independent) were required to pass far-reaching judgements on this complex matter within 48 hours, while sitting in a foreign land.
That they did so at all, let alone within that timeframe, bears testimony to their unique skills, but equally the matter illustrates just how convoluted – some say dysfunctional – F1’s governance process is. Unless that is rectified by 2021, when the bilaterals expire (see below), the entire sport risks a repeat, one with potentially costlier consequences, plus more egg on F1’s corporate face.
At the heart of the issue lies a multitude of contracts, covenants, agreements, amendments, regulations, codes and appendices. All of these have an impact on F1 by outlining the obligations of various players: the teams individually and collectively, the commercial rights holder FOM (now owned by Liberty Media, and not a party to some of the original signings) and the FIA. Yet, not a single player is a signatory to all documents!
Forget the hackneyed saying ‘the left hand not knowing what the right does’ – in this instance one F1 hand does not know another exists. Admittedly, relations are much-improved after Liberty acquired F1’s rights from venture vultures CVC Capital Partners (who one team boss accused of ‘raping’ the sport, and replaced F1-tsar Bernie Ecclestone with Chase Carey, but still…
The complexity of F1’s current structures is perfectly illustrated by this list of documents currently in force:
100-Year Agreement: Between FIA/FOM granting the latter F1’s exclusive rights for a century. This agreement originally ran for 10 years, but during a three-year rumble with the EU Commission, the Mosley-era FIA saw fit to extend it to 100 years to circumvent EU requirements, some of which would now greatly benefit the FIA. Thus the agreement was extended: 10 to 13 years, then by 100 years. It expires at the end of 2110.
Concorde Implementation Agreement: Entered into between FIA and FOM in July 2013, this document outlines the rights and obligations of the former and F1’s governance process for 1 January 2013 – 31 December 2020, given that the governing body is not party to the bilaterals (below). No teams are party to this document.
Bilateral agreements: Between FOM/teams individually, running from 1 January 2013 – 31 December 2020 and contain non-disclosure clauses. Resemblance between agreements is coincidental: Ferrari, Red Bull and McLaren’s include Strategy Group powers, but Ferrari’s includes long-standing bonuses the others don’t qualify for, while theirs provide for (varying) constructor championship bonuses.
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Mercedes deal is retrospectively the same as Red Bull. Williams holds a similar contract, but the (heritage) bonus is modest – thus the top five (at the time) contracts vary materially. Remaining contracts are basic, although Renault’s contains amendments offering similar deals to Mercedes subject to certain conditions, while Haas, as a later comer, holds a shorter contract. Force India’s was amended to pay the (disputed) Column One money. Thus the only teams to hold identical bilateral contracts are Toro Rosso and Sauber.
Technical Regulations: Running to 105 pages with all appendices, these are complied and updated annually, and administered by the FIA. Neither the teams nor Liberty are party to the final regulations, although the teams have input via the (non-executive) Technical Working Group, while the latter provides input (only) via a recently constituted technical department.
Sporting Regulations: Running to 70 pages with all appendices, these are complied and updated annually, and administered by the FIA. Neither the teams nor Liberty are party to the final regulations, although the teams have input via the (non-executive) Sporting Working Group, while the latter provides input (only) via a recently constituted sporting department.
FIA International Sporting Code: Consists of 80 pages for circuit events, plus 12 Appendices, the code is self-explanatory, and takes precedence over all regulations save where specified otherwise, as is the case with existing bilaterals…
Any wonder most folk in the paddock (and elsewhere) don’t know the difference between the sporting and the technical, between codes and regulations, between agreement and appendices, or between and amendment and implementation? Then consider that this list excludes secondary agreements such as, for example, the activities of the Engine Working Group, or F1’s Budapest Agreement, or…
The latter was entered into by six teams in the city of that name in July to provide for Force India’s monies to be paid should the team be sold as a going concern, i.e. with a continuation of the company registration number and then-current entrant license. Dissenters were McLaren, Renault and Williams, while Haas made clear it had signed on “a going concern sale” basis only.
After the sale fell through due to legal issues, the transaction was switched to an asset sale – with a new company acquiring the bankrupt team’s assets and racing under a new entrant license. Haas gave notice it was withdrawing its approval as the sale conditions had changed materially, but the other three signed.
Thereafter, Haas variously wrote to FOM voicing opposition to the (unfathomable) decision to view Racing Point Force India as a going concern and thus pay it $60m in historic revenues due to the old team. According to sources FOM initially did not respond, then provided only vague answers, which caused Haas to consider its (legal) options.
Even more unfathomable is that FOM viewed three different documents containing a total of nine signatures as unanimous agreement despite not having all signatories agreeing to the same clauses, yet (allegedly) took its (flawed) decision based on internal and external legal advice that it had unanimity…
Whatever, astute readers will note that one agreement is not mentioned above, namely the Concorde Agreement. This term is trotted out regularly by those – including team bosses, their senior executives, FOM and FIA personnel, and even the odd F1 journalist – who really should know better. The reason Concorde is not listed above is elementary: No agreement by that name is currently in force.
Why not? In its haste to list F1 and exit its most profitable (ever) investment with a massive pile of riches, CVC scrapped the only overarching covenant F1 ever had, one that pulled F1’s various elements – sporting, technical, commercial and governance – together, and clearly defined the obligations of the governing body, of the commercial rights holder, and of the teams collectively and individually.
That was Concorde, killed off after it expired at end 2012, and replaced by a series of (differing) bilaterals, and the CIA. Concorde was, if you like, F1’s constitution, and when CVC scrapped Concorde it scrapped F1’s guiding principles, its legislature.
There are folk who argue that the (Concorde) implementation agreement and bilaterals effectively replaced Concorde, but how can that be the case when every team is locked into separate provisions?
Is it any wonder, then, that teams protest sporting matters to pursue commercial interests; that teams have no clear guidelines that define a constructor; that commercial agreements state that new teams need to finish in the top ten for two years in three – with only ten teams entered – yet ‘new’ teams are suddenly ‘old’? That is how F1’s regulatory processes have become through vaguely written rules, elastically applied.
The fact is that for the 10 years CVC owned F1, it cared only about investor fund returns, and not an iota about the sport, and hence introduced the most expedient set of agreements F1 has been tied to in its 65-year existence. Liberty must do better, but the question is whether it really can, given its NASDAQ status, with investor days clearly taking precedence over track days.
Here’s a current example of F1’s dysfunctional structures: On Sunday evening I enquired as to how the sport’s masters could award a tyre tender calling for 18-inch rubber from 2021 given that no such technical regulation change had been approved by the Strategy Group or Formula 1 Commission.
I was told that as the current procedure – namely the Strategy Group to F1 Commission to World Motor Sport Council flow – expires with the bilaterals at end-2020, the ISC thus becomes the guiding code for post-2020 regulations, without provision for team input.
All fine and good, but any future regulatory process governance could well overrule incoming regulations, particularly if the teams are given a say, as they will no doubt demand. What then? Another tender? Already the existing tender proved flawed in that it expires in 2019, not the logical 2020 cut-off.
What thus needs is a long-term constitution that encompasses every single aspect of the sport, overseen by an independent individual with broad experience in all areas, in essence being the chairman of an advisory board that examines the consequences of all changes. Such advisory board run changes by all players to ensure that changes to Sporting Rule X don’t impact negatively on Technical Rule Y or Commercial Clause Z.
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Corporations have such processes, with proposals being passed through oversight committees prior to board approval. Concorde had similar provisions, with (executive) Working Groups submitting proposals to the F1 Commission, which escalated these to the WMSC for ratification, but no independent parties were involved in the flow, which was also flawed in that broadcasters – the sport’s biggest “customer” block – had no voice.
A retired team boss with no loyalties and given the authority to co-opt specialists to firstly revise and simplify current rule books, then “police” the process going forward, would be the perfect appointment.
As the Haas versus Force India matter proved, F1’s processes have ever-widening cracks, and rather than paper over the walls as has been the sport’s wont for too long, Liberty needs to underpin the foundations and strengthen the structures of the house it bought at great cost from CVC rather than roll out floral wall paper. Clearly, the ultimate owner of the building, the FIA, needs to be involved, too, as in any lease agreement.
They have two years remaining to effect the “renovations”, and given the modest overall impact Liberty has had on F1 in the past two years, that is a big ask. During a recent investor call Carey stated: “We’re focused on a larger list of sporting regulation changes to further improve the sport for our drivers and fans.
“I am often asked about the so-called Concorde Agreement [note], we’re making progress regarding the broader set of changes to cost structures, revenue distribution regulations and governance. [We’ve had] constant constructive discussions with the teams, and at the end of the day, our interests are aligned.”
Let us hope for F1’s sake that really is the case, Chase.
The Force India-Haas dispute
- Stroll deal to bring Force India out of administration
- Haas has not agreed for Force India to receive prize money
- Why Force India’s rescue deal could still unravel
- Haas lodge protest against Force India
- Steiner says Haas is seeking “equal treatment” with its Force India protest
- Stewards dismiss Haas’s protest against Force India
- Why Haas’s ‘defeat’ in Force India protest was really a win
Follow Dieter on Twitter: @RacingLines
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