Annaliese Dodds is a Member of European Parliament, representing the South East of England. Her constituency includes Oxfordshire, Buckinghamshire, Berkshire, Hampshire, East Sussex, West Sussex, Surrey and Kent. As such, she represents (at European level) a number of the Formula 1 teams. Alarmed by the failure of two F1 teams and alerted to potential problems by an article in The Times a few weeks ago that suggested that the FIA has been “neutered” by the deal to create the F1 Strategy Group, it seems that Dodds has written to the European Commission, saying that she has “grave concerns” about the governance of the sport. This has been developing at the same as a letter was sent from the small F1 teams to various parties in the sport, suggesting that there is “what is effectively a questionable cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams”.
The accusation of a cartel was rejected by those involved in Abu Dhabi. They argued that the Strategy Group was a forum to discuss ideas, but they did have to admit that decisions made by this body have to be agreed by a vote and then go to the F1 Commission and the FIA World Council, although these two bodies have no right to change the proposals. They can only accept or reject them.
FIA President Jean Todt has already admitted that the FIA’s power to make rules no longer exists, telling media in Bahrain earlier in the year that “I do not have the power to change the regulations. I am convinced that Formula 1 is far too expensive, and that something should absolutely be done, but for us, as the governing body, we have more or less zero influence as to the costs.”
There is an odd contradiction there, isn’t there? We are the governing body, but we have no influence…
On its website the FIA says that it is “the governing body for motor sport worldwide” and “administers the rules and regulations for all international four-wheel motor sport including the FIA Formula 1 World Championship”. Elsewhere there are references to it being “the sole international body governing motor sport” with the “the exclusive right to take all decisions concerning the organisation, direction and management of international motor sport” and the claim that it will “organise the FIA Formula One World Championship which is the property of the FIA and comprises two titles of World Champion, one for drivers and one for constructors. The Championship and each of its Events is governed by the FIA in accordance with the regulations”.
And yet it cannot change the rules?
How does that work? Sporting federations are allowed to do as they please if they behave in a proper way, but back in 1999 there was a problem between Formula 1, the FIA and the European Commission over governance questions. There was eventually an agreement (in 2001) which stated that the FIA’s role would be “limited to that of a sports regulator, with no commercial conflicts of interest”.
Publicly, there is no obvious answer to the question of why the FIA cannot change the rules, but the answer seems to lie in a secret deal called the Concorde Implementation Agreement, which came into effect in the summer of 2013, creating the F1 Strategy Group. This excluded the smaller F1 teams from the decision-making process, gave Ferrari a right to veto rules and regulations, established the Strategy Group structure and granted the FIA the right to purchase a one percent shareholding in Delta Topco, the parent company of the Formula One group, which exploits the commercial rights of Formula 1, for something in the region of $450,000. One percent of the F1 Group is currently reckoned (on paper) to be worth $66 million and we believe that there was a further deal that granted the federation about $35 million in loan notes. On top of that the FIA received a one-off payment of $5 million, as a signing bonus.
This was all very convenient for Todt as he was facing an election at the time and this financial windfall pretty much guaranteed that no-one dared to stand against him. The problem is that the money that should one day come to the FIA is largely tied up until CVC Capital Partners – the owner of the Formula One group – decides to sell its shares, which would mean that the FIA could tag along or be dragged along in the sale process. It cannot do anything until that happens. One can only presume that the FIA, being cautious by nature, went to the Commission and asked if this deal was acceptable to the competition department.
Todt’s remarks in Bahrain set alarm bells ringing, but for those who wanted to get people digging into the problem, the timing was bad. The last European Commission was just coming to the end of its term of office and was winding down. A new Commission was put together in the autumn under Jean-Claude Juncker and this began work on November 1. It is interesting to note that The Times article was published on November 3, so whoever was stirring up trouble was not slow to go into action. Juncker’s Commissioner for Competition is Denmark’s Margrethe Vestager and it is believed that she has or will shortly meet Dodds for a discussion. There are even suggestions (that cannot be verified) that some of the teams have been summoned to talk to the Commission.
If the Commission decides that the deal is not acceptable, it could lead to the unstitching of the arrangements and perhaps to fines for the parties involved if they are deemed to have been in the wrong. In these matters, the commission is generally happier if deals can be struck without things needing to get hot and heavy, but if any of the parties involved offer too much resistance it could get ugly. The FIA does not really have the resources to pay big EU fines and while the Formula One group might have that kind of money, they are not going to be keen to spend it. The other problem is that the Commission is notoriously slow in its activities and although there may be many rumours it is unlikely that there will be any official movement for a year or two, if the last investigation is anything to go by. Perhaps the Commission is now more efficient…
Having said that if there are hints of trouble in the media, floating the Formula One group is not going to be easy (although that is pretty unlikely already given the mess that F1 is in at the moment) and this may also mean that the trouble coincides with the next FIA Presidential Election at the end of 2017, which would make life difficult for Todt and those who supported the decision to do this deal.
I hear from the Strategy Group meeting today that there was barely a discussion (and no agreement) about how to help the small teams which will not do anything to get them to stop whatever they are doing. And there are suggestions that the trouble may not be coming from the teams but rather from dissident elements within the FIA that do not like the way that Todt does business.
Time will tell if there is any meat in this potential barbecue…