Why Formula 1 is hanging in limbo

For the past three decades, a document known as the Concorde Agreement has maintained the status quo in Formula 1 by outlining the obligations players have to each other and the sport.

In the beginning there were two - the FIA on the one side, and the teams collective known then as FOCA on the other - with the bounty being television revenues and promoter contracts. But ultimately Concorde came to define the sport by specifying its financial, governance, technical and sporting parameters.

The Agreement is said to have drawn its headline title from the governing body's Parisian address at 8 Place de la Concorde 75008, where the document was eventually signed on January 19 1981, although its roots lie in paddocks and legal chambers across the world.

However, the title also facilitates rather mischievous play on 'concord' (or 'concorde' in French), which has as synonyms words such as 'consensus' and 'unity' - nouns generally in short supply in F1...

The first Concorde was a bipartite document agreed between a Jean-Marie Balestre-led FISA (as the motorsport division of the FIA was then known) and FOCA, chaired by Bernie Ecclestone, who was ably assisted by former barrister/team owner Max Mosley - with Mosley, who would later become the FIA president, generally accepted as the father of Concorde. The first Agreement reduced the boiling hostility raging between the two factions to a simmer.

It was scheduled to expire on December 31 1987, but was superseded during that year by a fundamentally unchanged replacement that ran through to the end of 1991. The 1992-96 covenant was again unremarkable save for the fact that it marked the final bipartite Concorde Agreement after Ecclestone and the FIA (under Mosley) agreed a 14-year commercial-rights lease that ultimately changed the face of the sport. Few without vested interests would disagree that the change was not for the better of F1.

The stillborn 1997-2002 Concorde (signed September 5 1996), which Tyrrell, McLaren and Williams refused to sign in protest against clauses contained within the commercial-rights deal, was eventually replaced by a 10-year (1998-2007) tripartite Agreement signed by all competing teams on August 27 1997, plus Ecclestone on behalf of commercial-rights holder (CRH) Formula One Administration (later Formula One Management) and the FIA under Mosley.

This Agreement endowed the FIA with almost dictatorial powers of governance while providing for just 23 per cent of the sport's annual revenues (at that point in excess of half a billion dollars and rising), to be paid to the teams as Ecclestone's family trust trousered the rest. Spot the potential for massive dissent?

Jean-Marie Balestre © LAT

Various aspects of Ecclestone's deal - which then included the full spectrum of FIA sports, from F1 through rallying to sports/touring cars - attracted the attention of the EU Commission, which in turn directed that Ecclestone divest himself of all non-F1 rights.

Crucially, in its directive the EU Commission stated: "The [Concorde] Agreement sets out terms for the organisation and running of the FIA Formula 1 World Championship and the voting structure for its control, by reference to other agreements, contracts, FIA rules and regulations." Thus it can be deduced that some form of acceptable Concorde Agreement is fundamental to the EU Commission's ratification of the commercial-rights deal, and the relationships between governing body, CRH and teams.

Midway through the 1998-2007 Concorde's 10-year shelf life the sport found itself swamped by manufacturers, namely Fiat/Ferrari, Ford/Jaguar, Renault, Honda, Toyota, BMW and Mercedes - with the last-named having little direct influence through (then) being solely engine supplier and significant but minority shareholder in McLaren - all of whose boards pushed for greater slices of the financial action, initially firmly resisted by Ecclestone.

But when the teams in the early noughties threatened to set up their own breakaway series unless their demands (75 per cent of revenues) were met, CVC Capital Partners - which had acquired the rights from a trio of banks that had inherited the rights from the (liquidated) Kirch Media Group, which had in turn bought them from the (bankrupt) EM-TV organisation, which had acquired them from the Ecclestone trust - agreed to a broad fifty-fifty split.

Simultaneously, though, the car companies demanded a greater say in the rule-making process - resisted equally firmly by Mosley, who was utterly determined to hold the whip hand...

Mosley not only forced through the infamous $40m-budget and cost-cap regulations - aimed at attracting independents to counter the overwhelming financial firepower of manufacturers banded together under the Formula One Teams' Association umbrella - but ran all FIA and F1 matters with an iron fist from pads in Monaco or London, but seldom Place de la Concorde. Neither he nor Ecclestone seemed fussed when Concorde expired at the end of 2007; to them it was business as usual.

War was inevitable, and it came to a head during the 2009 British Grand Prix with the announcement by FOTA that it would be promoting a breakaway series. After arguably the most acrimonious month in F1 history, FOTA agreed to drop its plans, Mosley agreed to not seek a fifth presidential term come FIA elections in October of that year and, crucially, all agreed to craft a replacement Concorde, one with an equitable governance structure providing the teams with greater input into the rule-making process.

Max Mosley © LAT

The 2010-12 Concorde provided for a restructuring of the Sporting and Technical Working Groups, with all teams represented equally under the chair of a non-voting FIA delegate. Decisions passed by a 70 per cent majority were escalated to the (revised) F1 Commission before being ratified by the FIA's World Motor Sport Council - an unwieldy process, yes, but inherently more equitable than what had gone before.

But the biggest difference was that Ecclestone's chum of 30 years - Mosley - was gone, with former Ferrari manager Jean Todt sliding into the presidential chair.

The Frenchman adopted a more conciliatory approach, thus TWG/SWG and F1 Commission meets were less gladiatorial; the downside was decisions took an age, as they tend to do in democracies (and don't in dictatorships).

All in, though, F1 was more peaceful than at any time in the past 30 years, and for that Concorde's revised governance provisions could take most of, if not all, the credit; this despite its hurried and short 2009 gestation ensuring it was more short-term solution than long-term covenant. That said, the exits since 2005 of Jaguar, Honda, BMW, Toyota and Renault massively shifted the manufacturer:independent (im)balance, further fostering harmony.

The recurring theme in the foregoing is the crucial role successive Concorde Agreements played in keeping arguably the most complex pastime on earth on the (almost) straight and narrow.

Having been continually recrafted over a period of 30 years, its 11 schedules making up 120-odd pages of legalese are the product of expensive legal minds burning much midnight oil in law offices across London, Paris, Bologna, Brussels and Munich. Only the foolhardy (or seriously myopic) would ditch such a vital document.

Yet, if information reaching this column is correct, a Formula 1 without an all-encompassing Concorde is indeed a possibility, and sooner rather than later. Even before Concorde expired on December 31 2012 it had been virtually cast aside, with no F1 Commission meetings held for over six months, while TWG and SWG were effectively toothless, for in the absence of a functioning F1 Commission decisions could not be approved nor passed upwards to the WMSC for ratification.

To cater for the post-2012 period, Ecclestone one year ago agreed preferential commercial terms with the top four teams, thereafter making six (of the then-remaining eight) progressively reduced offers and totally shunning Marussia and HRT. The last-named has since folded, leaving the Russian-owned squad out in the cold.

In its 2013 scene setter this column spoke of the challenges of getting a replacement Concorde Agreement - containing the heavily revised governance procedures demanded by Ecclestone and the top four - sorted, and of how three key dates had been missed, including Todt's September pledge of "end of [last] year". Saliently, the demanded governance procedures effectively sideline all but the top four, who would effectively decide regulatory changes in conjunction with Ecclestone.

Jean Todt © XPB

It has since been alleged by sources in the loop that during the WMSC meeting in early December in Istanbul, Ecclestone told the assembly that signing was a matter of days away, but that Todt has since become frustrated with the lack of progress by the CRH, writing an agitated letter to Ecclestone in early January demanding action "or else..."

Ecclestone believes he is in the pound seats (literally) by dint of having greater financial power than the governing body - primarily off the proceeds of the commercial-rights deal struck with the Mosley-era FIA - and, knowing the FIA's severe budgetary constraints, had previously proposed a skewed Concorde with financial inducements, with 50 per cent paid by his organisation, and the balance paid collectively by F1's competitors in the form of massively inflated, points-based entry fees (teams) and hiked superlicence charges (drivers).

Although Todt initially had little choice but to accept, it seems the FIA has now established it can survive if it cuts its cloth according to licence/entry-fee income, and therefore has no need for Ecclestone's payoff - and hence the demanding tone of Todt's letter.

This column understands that a retaliatory meeting of the top four (Ferrari, Red Bull Racing, Mercedes and McLaren) was called by Ecclestone on Wednesday, with the main discussion point being the need for a Concorde Agreement; whether F1 without Concorde - and, by extension, without FIA involvement - is viable.

Thus the FIA could effectively lose control of its own championship, which would in future be known not as the 'FIA Formula 1 World Championship', but simply as the 'Formula 1 Championship'. Would punters know the difference?

Under such circumstances, the FIA's only involvement would be circuit safety and integrity of lodged regulations, with the governing body having no further input. Thus, should Ecclestone and his coterie decide on six-wheeler, diesel-fuelled Wankel-powered cars as being the way forward, then the FIA would be forced to sanction the category, assuming, of course, that all safety regulations are complied with. Equally, the group could can the 2014 regulations in their entirety...

Could it come to this? Absolutely, although in the process the EU Commission is sure to get wind that all is not well in the house of F1, and that by implication audiences, teams, F1 employees and sponsors are potentially being marginalised. The Commission could in turn order an investigation on the basis that such developments could run counter to their original approval of the CRH deal.

Is Formula 1 hanging in limbo? © XPB

That Formula 1 is hanging in limbo just seven weeks ahead of its 2013 opener is best illustrated by two recent developments: the subject of entry fees, and the SWG.

On Wednesday a meeting of all sporting directors was called in a Heathrow hotel to discuss unresolved matters carried over from last year. In the absence of an official Sporting Working Group, the meeting referred to itself as the Sporting Working Committee... but now has no F1 Commission to refer its recommendations/decisions to.

Thus convenor Charlie Whiting, the FIA's Safety Delegate/Race Director, suggested that matters be referred directly to the WMSC for ratification. Given that this runs counter to established practise, any such ratifications could well be challenged in court and deemed illegal, plus no WMSC meet is scheduled for another two months.

On the question of entry fees, this column understands that at least three - possibly four - teams have not paid the second tranche of entry fees. In terms of the revised structure - enshrined in the Sporting Regulations - teams receive two invoices: one for the basic fee ($500,000), and a secondary fee of $5000 per point scored ($6000 for the constructors' champions).

"We were advised that the increased entry fees formed part of the Concorde Agreement negotiations [see above]," one team boss told this column, "yet they are outlined in the Sporting Regulations. So, no Concorde, no deal - and that's why we have not paid. I understand we are not alone."

Thus F1's status just seven weeks ahead of the 2013 opener is: no firmed-up calendar; only 10 of the 11 teams hold commercial agreements; no Concorde Agreement (with seemingly none in the offing); at least three teams yet to lodge entry fees; and Ecclestone and four teams potentially formulating what would ultimately be a breakaway series.

All the while talented drivers are being dropped to make way for pay drivers, with at least half the grid finding itself under severe financial pressure - as does the FIA. Quick call to the EU Commission, anyone?