Following the publication of Formula 1’s sporting, technical and financial regulations during a joint FIA/Liberty Media press conference on Thursday in Austin, two further components of the sport’s 2021 transition remain outstanding.
“The money distribution: it’s more fair than it was before,” opined Franz Tost, team principal of Toro Rosso, the following day when asked about the commercial offers received by the teams a fortnight ago. Taken in conjunction with the financial regulations, these are designed to level the economic playing field, although it will take at least two years before the full effects are felt.
Nailing down the commercial agreements is a straightforward bargaining process based on forecast income and value perceptions. And, while some to-ing and fro-ing is expected, the bottom line is that Liberty can only push so far, where after the commercial rights holder teeters into the red, which would be absolutely disastrous for the listed NASDAQ entity. The boundaries are therefore defined – so far and no further.
But Formula 1’s governance – simply put, the way the rules are written – is a thornier topic. On one hand, over-regulation by the FIA, the sport’s administrative and governing body, could lead participants to race elsewhere, either in protest or because that F1 no longer serves their objectives. On the other hand, granting Liberty carte blanche may well result in over-concentration on exploiting ‘the show’ to the detriment of sporting principles.
Finally, let the teams decide the way forward, and a techno-borefest is the likely outcome, for the logical conclusion would be autonomous, zero-emission racing on sterile tracks closest to the biggest markets of their benefactors, primarily the major motor manufacturers. Indeed, consider how many car makers currently contest Formula E.
While there can be no perfect governance procedure in an activity as inherently complex as F1, attaining the optimum process, one that ticks most boxes for the three primary stakeholder groups, is a question of achieving a balance between their disparate priorities while placing the welfare and growth of the sport at the centre.
Apart from the FIA, Liberty (F1) and the 10 current teams – who, just to further complicate matters, all operate to vastly differing business models, and draw on distinctly different budgets – there are additional players to consider: those who are fundamental to the continued functioning of the sport. Namely: technical partners, tyre/engine suppliers, sponsors and, last but not least, the race promoters and broadcasters who ultimately pay the bills.
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F1’s current governance process, which has been in place since 2013, is arguably the worst in the history of the sport. Introduced by Liberty’s predecessor, CVC Capital Partners, as a sop to the major teams in return for their eight-year commitments to F1 ahead of a planned (but ultimately aborted) listing of F1’s commercial rights, it has proven to be utterly dysfunctional.
Clearly the vulture fund knew and cared little about the sport. At the time CEO Bernie Ecclestone was pre-occupied with other matters such as fending off multi-million-dollar bribery charges. Thus six teams were granted disproportionate voting powers, the rest left out the cold. Worse, the need for unanimity for even minor technical/sporting rule changes after April for the following year often leaves the sport paralysed.
The second-worst system prevailed from 1998 to 2007 and, in the absence of an agreed alternative, was extended to the end of 2009. It granted the FIA excessive powers in the name of ‘safety’. A prime example is the expedited 2006 introduction of V8 engines after the governing body, then in dispute with motor manufacturers, decreed that V10s were too powerful – and thus ‘unsafe’ – and ordered they be scrapped.
Another aberration was the introduction of grooved tyres in 1998 on the basis that cornering speeds were too high. Under the clause, virtually any rules change could be introduced at short notice on the basis of safety.
That changed with the 2010-12 Concorde Agreement, which stipulated that the ‘safety card’ could only be used where there was a demonstrable issue. This made for a relatively stable period, albeit only for three years, after which CVC’s greed came into play to bring us to the present.
It is a truism of Formula 1 is that even the best set of regulations – sporting and/or technical – cannot fix a broken governance process, whereas a merely average regulatory system can readily fix even the worst regulations. Hence it is crucial that the 2021-25 governance process is absolutely fit for purpose, for so sweeping are the changes to the technical regulations that unintended consequences are likely to arise.
A robust governance system without roadblocks of the type currently in place will enable any clarifications or amendments to be introduced with minimal delays and a reduction in the trifling (and stifling) horseplay that has epitomised the present process.
“[We need] to confirm all details of the governance, because in order to make changes as we develop the cars and as we face some unknowns or some loopholes, we need to see how we can fix what is missing from the regulations,” said McLaren Racing CEO Zak Brown during Friday’s FIA press conference in Austin.
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Given that the financial regulations (enforcing the budget cap) are entirely new, there are bound to be hiccups and teething issues with regulations designed to be all things to all teams. The need for unanimity prior to an early cut-off date would kill off any chance of meaningful introduction and successful implementation of the regulations.
Finally, although the 2021 sporting regulations published on Thursday are little changed from 2019’s set; however, these are likely to be subject to substantial tweaking as the technical regulations bed in. For proof how energy-sapping the present governance process is, consider the protracted wrangle over whether to introduce reverse-grid qualifying races at three rounds in the 2020 F1 season, a plan which, rightly or wrongly, remains on ice.
“I think what will be important is the process of discussions, the process of [regulations] modifications – which means [governance] as well – we need to put in place. That will be key from now to the start of 2021 and the earlier we do that the better it will be,” Ferrari team boss Mattia Binotto added during the conference.
His words were echoed by Cyril Abiteboul, managing director of Renault F1, who added the sport must “confirm all details of the governance, because in order to make changes as we develop the cars and as we face some unknowns or some loopholes, we need to see how we can fix what is missing from the regulations.”
So where does F1 stand in this regard at the moment? An outline governance process was presented to the teams in June. Little or nothing of substance has changed in the interim, mainly because the FIA and Liberty believe it ticks all their boxes while being all-inclusive rather than excluding half the teams.
That said, a worrying aspect is that ‘external players’ – promoter, broadcast and technical/commercial partner delegates – are now excluded from the reconstituted Formula 1 Commission as proposed. However, a specific process has been devised for the power unit regulations, while a number of ‘working groups’ will be established to for promoters and broadcasters.
The key objectives of the revised governance process are as follows:
- Simplified structure with only one level below the World Motor Sport Council (the current structure has two lower tiers: the (much-derided) Strategy Group and full, 24-member, F1 Commission)
- Number of representatives within the F1 Commission reduced from 24 to 12 members, namely the teams plus FIA/Liberty representation, with each group having 10 votes
- Fairer representation of all teams within the F1 Commission – all teams to hold full votes, rather than half the grid being members of the Strategy Group, which is currently the initial legislative body
- The influence of the FIA, the F1 CRH and teams in the decision-making process is secured via the treble voting-block system (above), with (the four) power unit suppliers having one vote each where on relevant votes
- Ensure a certain degree of stability in key regulations of the championship via a restructured voting process
- Maintain the FIA discretionary power on safety – self-explanatory, albeit may only be applied in instances of bona fide safety issues after consultation with relevant bodies.
In order to achieve the stated objectives, the Formula 1 Commission will be totally revamped to prevent the gridlock of the recent past – where previously a simple majority was required for motions tabled before 30 April for the following season and unanimity thereafter, an additional category will apply from 2021: super majority.
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In addition, four Advisory Committees – sporting, technical, financial and power unit – will be established; however, these will hold consultative and advisory status only, with no executive powers conferred upon them as was the case with the technical/sporting working groups of the past.
The following time frame will apply for changes to sporting/technical regulations:
- Until the end of April for the following season – simple majority
- After April until end of December of the preceding year – super majority
- ‘In-season’, namely 1 January to end-December of the corresponding year – unanimity
However, where the financial regulations are affected, different timeframes will apply:
- Until the end of September for the following season – simple majority
- After September until end-December for the following season – super majority
- ‘In-season’, namely 1 January to end-December of the corresponding year – unanimity
Given the number of teams could conceivably vary from eight through to 12 during the 2021-25 ‘stability period’ (below), the votes required to carry motions by either simple or super majorities will be adjusted according to grid numbers, but where a simple majority (50% +1) is currently required in the Strategy Group and 70 per cent majority in the Formula 1 Commission, the following will structure applies for ten teams:
- FIA – 10 votes
- Liberty – 10 votes
- Teams – 10 votes, cast individually
- Simple majority – 25 votes
- Super majority – 28 votes
Thus, using the example (above) of the ‘mini race’ qualifying format, the motion would have been carried as only two teams voted against the change.
A ‘stability period clause’ guarantees that the DNA of F1 – essentially open-wheel, single-seater race cars; designed as manufactured through use of certain specified components of the cars as outlined in the technical regulations – will be respected for a minimum of five years, with the same timeframe applying to the power unit regulations, save that these are subject to on-going discussions with power unit suppliers.
Finally, Ferrari’s veto, or ‘protection right’ is a cornerstone of the governance process, although the sweeping rights the Scuderia enjoyed in the past have been diluted, and any dispute needs to be referred to the FIA International Court of Appeal rather than a civil court as was previously the case.
Further, the protection right will apply only to changes to the power unit regulations, any impact on the DNA of F1 and the financial regulations, while the traditional values of the championship and Ferrari’s legitimate interests would need to be affected adversely for any to be heard.
What happens next? RaceFans understands that lawyers are shuttling proposals and counter proposals back and forth, but sources are confident that the governance process will fly largely as proposed. Indeed, some speak (somewhat optimistically) of agreement before testing starts next year. Certainly, it would have to be in place for 2021 in April next year, or it will be too late for immediate changes.
Is the proposed governance structure perfect? No – but, as outlined, that is a utopian ideal in F1. It is, though, a vast improvement on the current process by including all teams every step of the way while not alienating the majors. That is, in itself, a massive achievement.
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