Why F1's cost cap now faces key test despite FIA all-clear

After weeks of Formula 1 paddock whispers about a looming cost cap decision, Tuesday's announcement that all 10 teams were in the clear brought relief to many.

Mechanics and marshals clear the grid as the drivers prepare to start the race

The longer the FIA delayed announcing its findings from the 2022 spending reviews, the greater the prospect was of one or more teams to have been found to be in breach. After the controversy triggered by Red Bull's 2021 overspend, and unease about the nature of the penalty handed down, more rule-breaking this time around would have been explosive.

The ongoing wait in getting an FIA decision meant it was hard to get a consensus in the paddock about what was going to happen. Some teams were leaning towards the FIA giving the all-clear to everyone. Others were predicting a scenario where everyone got pinged for a breach, while a few thought that the matter would again revolve around one or two squads having broken the rules.

The increased level of probing from the FIA this year over the submissions, which had included many follow-up questions and thorough factory inspections, meant none of the major squads that operate right at the limit of the cost cap were taking anything for granted. Team bosses were left nervously checking their phones for calls from their Chief Financial Officers to try to get a clearer picture of just when they would get the FIA Certificates of Compliance so they could relax a bit.

The FIA's confirmation then, that all teams complied with the regulations, will have made everyone happy that their own squads were all good. But it will almost certainly not put an end to suspicions that some teams may still be finding ways around the rules. And it is that lingering doubt, no matter how small, that remains the biggest challenge for the cost cap going forward.

There is an acceptance in the paddock that the cost cap can only succeed if teams have total trust that it is being policed in the correct manner. If that faith is not there, then the whole thing collapses as a useful tool to reign in spending.

As F1 CEO Stefano Domenicali said at Monza last weekend: "We are in the second year of the financial regulation, and I want to be positive because I see positive elements.

"Financial stability has greatly increased the valuation of the teams, but, as always happens when a new and complex variable is introduced, the system needs to be equipped to manage it, and all the parties involved must be able to do this.

Domenicali maintains that faith in the financial regulations are vital

Domenicali maintains that faith in the financial regulations are vital

Photo by: Mark Sutton / Motorsport Images

"Credibility passes through the guarantee that everything is controlled down to the smallest detail. And, in the event of an infringement, there must be an exemplary sporting punishment, a sanction that definitively discourages [teams] from breaking the rules."

Keeping faith

That element of trust over the cost cap all-clear is important on two fronts: the first because teams do not get access to all their rivals' accounts, nor the reasons for the FIA's verdict on other teams' cost cap submissions.

Just as it would be unfair for the governing body to release technical information on what individual teams are up to in complying with that set of regulations, it would be nonsensical for the governing body to release confidential insight into the spending of competitors.

Furthermore, teams also have to trust the system because we are now past the point of no return if there are complaints. The decision of the FIA to issue Cost Cap Compliance certificates is non-reversible. While the technical regulations allow a team still to protest a part whose design the FIA has declared conforms to the rulebook, the financial rules are different.

There is a process for teams to submit reports to the FIA if they believe a rival has committed a Cost Cap Breach. However, the timeframe for this is 1 January to 30 April (inclusive) immediately following the reporting year, meaning the window of opportunity has long gone for 2022.

Furthermore, as Article 6.11 of F1's Financial Regulations states: "There shall be no right of appeal against any decision by the Cost Cap Administration to issue a compliance certificate to an F1 Team."

The only potential change beyond this moment is if a whistleblower comes forward and reveals that there have been breaches that mean the FIA has good reason to open its own investigation. In the regulations it is stated: "The Cost Cap Administration may grant partial or total immunity to any natural person who discloses facts that are likely to constitute an infringement…and/or who provides evidence allowing such facts to be prosecuted and penalised."

That needs to come within a five-year window – which is a big deterrent in itself because few teams could guarantee holding on to any staff member that long. It would be a dangerous game to deliberately flaunt the rules and risk your bad behaviour getting out.

Teams have been under pressure to ensure they comply with the rules

Teams have been under pressure to ensure they comply with the rules

Photo by: Simon Galloway / Motorsport Images

Increased scrutiny

But while suspicions may still remain about what some are up to, teams should at least take heart from the fact that the FIA probe into the cost cap this year has been so much more thorough than it was 12 months ago. 

As well as the FIA increasing the number of full-time staff in its Financial Regulations Department from four to 10 for this year, the level of scrutiny that it put each team through was immense. Team bosses revealed that their CFOs had been handed multi-page questionnaires demanding more than 100 points of clarification to clear up grey areas in their own submissions.

Furthermore, the factory visits included interviews with personnel, checking on parts, the FIA getting access to IT systems, WhatsApp messages and all the data they wanted to check that nothing untoward was taking place. It was a level of detail that many team bosses welcomed, even if the effort to complete all the requests was quite intense at times.

It is also fair to say that the FIA process is constantly evolving too, as the governing body learns from the many clarification requests it gets from CFOs and responds to areas of concern.

And while this year may have delivered a green light for all teams, one area of intrigue into 2024 could be the influence of non-F1 activities – especially since an FIA directive was issued several months ago on the matter. The infamous TD45 effectively outlawed the passing of an IP from teams' non-F1 activities back into their grand prix operations outside the cost cap, but only came into force from January 1 this year.

So, while the FIA claimed on Tuesday that the current submissions included an 'extensive check' on this area for 2022 submissions, the probing on this front will likely be even more intense going forward.

Catching the cheats

The ultra-competitive nature of F1 means paranoia about what rivals are up to is constant – whether it is about clever car components, trick systems or sneaky spending – and suspicions about exploits will never stop.

Wolff is confident that the process will weed out any illegality

Wolff is confident that the process will weed out any illegality

Photo by: Simon Galloway / Motorsport Images

But in the end, the fact that the FIA's probing left few teams totally confident that they were in the clear, says much about the thoroughness of the compliance checks – which should at least provide some assuredness that any nefarious activity would have been found out.

As Mercedes boss Toto Wolff said earlier this year: "If someone has been cavalier or has cheated, then they're going to find out."

Such trust that any rule breakers are caught is critical for the cost cap to succeed.

As perhaps the most important rule change that F1 has made to ensure long-term survival for teams, everything must be done to ensure it stays in place and works.

It's why the response from teams over the next few weeks – in welcoming or questioning the FIA's cost cap verdict – will be fascinating to see and could shape F1's political landscape for months to come.

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